Calnex Solutions Share Discussion Threads

[hew] 24/11/2021 10:27

Double post.

[hew] 24/11/2021 10:27

A few thoughts re Jack Brumby’s Edit comment - thanks Rivaldo - re TC being “focused on the business of network testing, much more interested in new product development than the share price, for example.”

With his 21% holding I believe that Tommy Cook is as well coupled into the financial performance of CLX as any other such holder would be, but his background in the skills and fundamentals of and his ongoing involvement in the business clearly shows in his communications re CLX – very much his own creation.

Hence for me its major attraction: the successful building of a business that is thriving on its capabilities and its fit with the needs of - and clearly the respect gained from - its top ranking customers. “The numbers” re investment market norms are not at this relatively early stage what CLX is primarily about, or form the drivers of its development. (As opposed to plenty of other companies where “the numbers”, even quarterly, are supreme - don’t ask much about how and why they “emerge”. For a while.)

As CLX develops, ditto TC will have to. Or not, as the case may be. With such development appropriately should/will also his emphases in communications.

From the H1 Results I see a strong pointer. To me, a new “VP Operations” is a title embracing considerably more than that say “Manufacturing Manager” would do, whatever the initial tasking. Is that recruitment step 1 in TC’s own growth programme? I take it as so - but in any case I’m relaxed about expecting to be a long term investor, largely irrespective of the share price fluctuations.

[jimmywilson612] 24/11/2021 09:57

Good Management never will come cheap

[1nf3rn0] 24/11/2021 09:42

I realise that. The only reason I am "kicking the tyres" of Calnex while I ponder buying in is that someone mentioned it on another thread. Whilst I dislike ramping of any old dross, I do think the genuine sharing of under the radar prospects with real substance to them amongst PIs can only be helpful. Whether you bother to DYOR on MRL or not is up to you.FWIW CLX seems a good company in a good market at the right time, I just question the valuation.

[petewy] 24/11/2021 09:39

Thanks Riv. (a recurring phrase)
Off topic. Calnex dropped yday despite results along with two/thirds of my portfolio yet FTSE went up, again today.
I can understand the FTSE boys having a shakeout or dropping a share price if an II wants to buy 5 million...
I don't mind taking a hit but yday was a biggy for no reason.
FTSE is overvalued at 7300 should be under 7200?

[1nf3rn0] 24/11/2021 09:23

A different industry and a bigger beast but you guys may also be interested in fast growing Marlowe (MRL). Check out their trading update today. Maybe the next Halma? Would be interested in any thoughts.

[rivaldo] 24/11/2021 08:50

Jack Brumby on Stockopedia is a CLX shareholder and summarised the results yesterday in his daily Small Cap round-up.

Overall he concluded that CLX is "a good long term growth prospect, with multi-year drivers", but the interesting info is from an edit he made following a call with management, which extract I hope he won't mind me sharing:

"Edit – call with management

A brief catch up with CEO Tommy Cook and CFO Ashleigh Greenan. Impressions are that they’re very down to earth and focused on the business of network testing, much more interested in new product development than the share price, for example. I mentioned the high ROCE figures and it doesn’t seem to be how the company thinks – rather it just identifies areas for improvement or growth and the good metrics follow common business sense. From the notes:

It all boils down to new things to sell to people, building them, and investing in teams where there is more opportunity to accelerate business growth.

No surprises in the period, business has been strong. The update spends time on the new products (which are being well received) and opportunities, but the established customer base has also been doing well. Calnex has now seen an extended period of good growth and the sales funnel fills nicely, with new deals coming through and underpinning confidence.

The group is excited about the new applications for its products. When asked to elaborate, Cook talked about how time is an increasingly important consideration. It wasn’t always the case but a shift has occurred and this increasing importance was Calnex’s big ‘lucky break’, appearing at just the right time to capitalise.

The emphasis on time and the new applications come from data communications and finance. Datacomms – accurate time syncing is important as it requires less ‘handshakes217; (an automated process of negotiation between two participants through the exchange of information) and enables greater throughput in data centres. Financial – this is to do with high frequency trading and MIFID.

Are there any big trends beyond the stated ones (Cloud, 5G, Data)? Can you quantify these trends in terms of scale and persistence?

It keeps changing. Hard to quantify, but it’s promising. The catalyst for the testing world is change, and there is a huge amount of evolution. Cook sees 5G as more of a euphemism for the future networks of smart cities, which suggests a huge implicit demand for increased levels of data. Networks will have to innovate to meet this demand, and as the picture keeps shifting, demand for testing should continue to grow. The cloud migration is also a strong driver.

Where do you see the industry heading over the next 10 years?

The challenge is to always find something new – mentality is to continually enhance the product and assume a need for new products every two years (even if that’s not the case). They’re always looking for the new emerging opportunity and keep close to the industry and market thought leaders.

ORAN network (the bit behind the radio towers) is a good example as it has been opened up. It was dominated by three big players, but five big networks have cracked it open, leading to new entrants and a disrupted market structure. More competition should be a good thing for the market and Calnex.

Mamp;A

The company has form here, but the list of likely candidates is not huge (‘in the tens’) so the group is ready to act if an opportunity comes up. But there’s nothing immediately on the horizon and management seems focused on internal investment and organic growth."

[1nf3rn0] 23/11/2021 16:24

Yes you are correct, had my H1 and H2 profit figures in the wrong order for last year

[rivaldo] 23/11/2021 16:11

Underlying EBITDA and PBT increased from H121 to H221, then decreased in H122 due largely to the investment previously explained - and also decreased from H221 due to seasonality.

Assuming CLX are happy with the new forecasts, then they'll make around £3.3m PBT in this H2 - that's well up on last H2's £2.75m.

The headline figures may have brought about some profit-taking, but the momentum indicates that this is a growing business.

[1nf3rn0] 23/11/2021 15:58

Rivaldo, I understand the point on increased investment potentially having a short-term impact on profitability, and hopefully for shareholders it is just that and there is worthwhile payback to come in 2022. But if you are looking for a reason for why some are selling today I reckon it is down to the 18 month profit trend. Underlying EBITDA and adjusted PBT are all down sequentially over the last three 6 month periods too, which is not explained by higher number of shares in issue.

[rivaldo] 23/11/2021 15:44

1nf3n0, as previously stated this last 6 months' EPS were heavily impacted by (1) increased investment which is now tailing off and (2) the additional IPO shares now in issue.

The important figure here imo is revenues, which are up 20% year on year, alongside the high confidence in such growth continuing.

With 5p EPS forecast to March that's a P/E of 24 - strip out the 15.5p per share of the £13.6m cash pile and that P/E reduces to 21.1. Pretty good value these days for a high-tech sector leader with likely good news for years to come.

[masurenguy] 23/11/2021 15:32

caucic - 505: Why the sell off? No logics.

Well there is a logical explanation. On current forecasts the shares are valued at a PER of circa 29x next years earnings. Some people would view that as a bit rich for a small AIM listed company, particularly short term PI investors and traders. Furthermore Otus Capital Management reduced their holding by nearly 40% some 3 weeks ago when the share price was around 145p.

I view CAL as a long term investment and having invested here over a year ago I'm happy to sit on my holding, at an average cost price of 65p, and ignore the short term vacillations in the shareprice. I may even add further if the price should dip much lower.

[1nf3rn0] 23/11/2021 15:12

Adjusted EPS:H1 FY21 3.02pH2 FY21 2.81pH1 FY22 2.05pIs this not the trend the market is reacting negatively to? Bearing in mind this latest half year was also the least affected by lockdowns of the 3 and they state that travel (costs) will increase going forwards.Increasing revenue is nice, but it needs to be shown to hit the bottom line eventually.

[rivaldo] 23/11/2021 14:34

Agreed. I particularly liked:

(1) Last year the CEO wasn't ready to call CLX's excellent results more than a single good trading period. Now he's happy to call the continued strength a trend which is unlikely to stop any time soon
(2) He emphasised a few times that more and more different markets are now looking at and buying CLX's products, i.e the finance sector for one.

Given the confidence shown in the presentation I suspect the share price will bounce soon after this initial profit-taking.

[hew] 23/11/2021 14:14

A good IMC presentation session. No call for reassurance IMO but plenty provided for any needing it. Great to hear some A's that exceeded the Q's!

[caucic] 23/11/2021 14:07

Why the sell off? No logics.

[doctor888] 23/11/2021 14:05

Worth noting that revenues typically have a 45%/55% split between H1/H2, so we should beat forecasts again, if this recurs.

[caucic] 23/11/2021 10:37

Analyst presentation

Tommy Cook, Chief Executive Officer and Ashleigh Greenan, Chief Financial Officer, will host a presentation for analysts on Tuesday 23 November at 11:00am. Any analyst wishing to attend should email [e-mail] to register their attendance.

Investor Presentation

The management team will provide a live presentation for investors via the Investor Meet Company platform at 1:00pm on Tuesday 23 November.

Investors can sign up to Investor Meet Company for free and add to meet Calnex Solutions plc via:

[caucic] 23/11/2021 10:26

Why the big drop?

I understand "sell on the news" but this looks oversold to me.

Presentation at 1:00 pm will boost the price back