From the article I posted above this is quite revealing - indicates they have an eye on valuation, after moving to production as well as design:
“Because there are long revenue streams that you can see out into the future, these type of businesses get valued on a multiple of revenues, rather than profits, adding value for shareholders,” explains Mark.”
Hence the PR in the US perhaps. |
What odds ?? (if everything goes to plan) How often have we seen brokers top guestimates ever be achieved? |
Most notable in the Allenby note was the observation that if everything goes to plan an aspirational valuation based on its global peers would indicate a 600p a share price
Current price 40p IPO price 50p
Bottom drawer |
When asked about the US consultants they hired to onboard US investprs they said it was early days but that there was significant interest.I think the share price has been manipulated down so they can get a decent entry point |
Uk investor magazine
the long-term outlook is positive. Chip supply revenues should start to build up from this year and that will sharply boost profitability. It can take two years or more for chip supply to begin and then production is built up to its peak, so there is built in growth for many years.
Singer forecasts a 2024-25 pre-tax profit of £2.7m, doubling to £5.5m next year
Singer
A string of material contract wins has started to show this potential.
We initiate with a 100p TP.
nb aAt conference cal,they said the expect another 3 deals to be signed by yr end and that would give further confidence they will not need additional funding.I guess as a result of the upfront payments
When asked about putting themselves up for sale they said the Bod believed the business has great potential on its own. |
Found this filled in a few gaps in my knowledge: |
hpcg
"VC should fund and they know the value of up rounds, whereas for small listed companies it is the fear of the placing that drives the price."
I'd agree with VCs for start-ups, but Ensilica was started in 2001 and had a good track record when it listed. VCs have their problems and the worst (from a new investor perspective) sort of new issue is usually where the VCs unload all their shares with minimal new funds being raised.
"Companies should be growing much larger before listing and then use listing to be able to offer share-based payments and incentives well down the org chart."
Getting a listing just to gain the ability to offer share based payments and incentives is a rather expensive way to sort out a staff remuneration package!
You are right when you say the UK stock market is dying - the decline in new issues demonstrates that as well - and it will continue to be like that until we get back to its purpose of raising capital. |
Valhamos - I disagree. The UK stock market, which to all intents looks like in its dying days, is about the worst place for a small company to look for funds. Companies should be growing much larger before listing and then use listing to be able to offer share based payments and incentives well down the org chart. This is how many US companies grow. VC should fund and they know the value of up rounds, whereas for small listed companies it is the fear of the placing that drives the price.
Margins - these dramatically increase for the production element. The design phase is done at a lower margin in order to win the business. Allenby make the point by labelling the NRE as a lead indicator for supply.
What the company needs to be doing, if it can, is to raise the cost of the design phase element so that each project covers its own cost and share of SG&A and interest. I don't know what the competitive situation is like for them to be able to do that. |
Hallelujah |
It would be interesting to be a fly on the wall during float conversations, to find out if other funding routes are unlikely or not possible or not sufficient, or just too hard work.
Unfortunately the area is badly tainted by financial “operatorsR21; who have the contacts and the BS to get away with floating unproven and uninspiring business models, dressed up in kings new clothes to convince new investors that their amazing opportunity is a once in a lifetime chance.
The story will always be that the opportunity will go missing unless they move fast. |
Cheers, multibagger.
Actually there were other comments by Anthony Miller that were either mischievous or indicated he doesn't really understand the business. So much unwarranted negativity! |
In the good old days, companies used to prove their business models, become profitable and then float for big expansion.
Although I may have old rose tinted pre-AIM glasses on.
Actually they still do and often take a dive as the float price was 50% too high - probably because profit projections were.
Actually in the good old days you had 5 years to get your business going, without instant global competition, so I guess a prompt float is often necessary now if the opportunity is good. Although opportunity is in the eye of the beholder! |
A very well made point Valhamos ! |
I'm going to have to disagree with the idea that Ensilica IPO'd too early. The company wanted funding for its planned growth in its design and supply business. If it waited until it didn't need the funding what would then be the point of an IPO? And where would it have got the funding to grow if not from the stock market? Surely that's the primary purpose of the stock market? I guess too many private investors think the stock market is there just so they can watch share prices moving up and down. |
looks like there's an overhang to clear. |
Yump,
You'll find him on LinkedIn: |
SG
Slightly worrying changes on those figures. Just have to wait to see if their capturing of contracts in what is a growing market will give them a higher rating in one way or another. Shame they went to market too early (for the UK anyway). Net debt wouldn’t matter in the US if a business was rapidly getting market share. |
Who is Anthony Miller ? Seems quite a balanced article. |
Tic toc Pug. |
memo self at 38.5/39.9 Keep finger off buy button - Only time will tell if a correct gut-feel. |
I recall when IQE was one of the stock-market darlings ('the next ARM') - look at that one now ... |
Net cash expectations:
Sept 2024
2024: £1.9m
2025: £3.9m
2026: £8.2m
November 2024
-2024: £1.1m actual
-2025: £2.7m net debt
-2026: £2.4m net debt
That is a drastic change in expectations. |
Interesting to see the difference in the thinking between paid advisor and private investor. Both I suppose have different biases - cannacord getting paid vs PIs using (or at the moment losing) their own cash.I don't think the story has changed, cash spender for a bit longer but (extremely) cash generative in the future. You rather believe the story or you don't. |
 Anthony Miller - 5/11/24
I worry that Abingdon-based ‘fabless’ ASIC (Application Specific Integrated Circuit) designer EnSilica could become a victim of its own success.
Today’s FY results came with a guarded warning that EnSilica could run out of cash within the next 12 months without additional financing.
Cofounder and CEO Ian Lankshear attributed the problem in part to customer order and payment slippage, and in part to ‘complications’ in the global semiconductor supply chain exacerbated by the deteriorating relationship between the US and China.
The latter was already evident and beyond EnSilica’s control.
The former leans towards overoptimistic forecasting (see my recent post on Substack at In fact, EnSilica now has a new CFO.
In truth I think the problems are of a more fundamental nature.
First, EnSilica is both a semiconductor design and a supply business. The design is done in-house, the manufacturing by partner foundries.
While this business model has the advantage of long-term, recurring revenues (8-10 years is not unusual), it is also hostage to changing demand in customer delivery schedules, as has already happened.
Second, as I have said many times before, management chose to IPO far too early, in my opinion.
EnSilica listed on AIM in May 2022 when its revenues were under £10m and was losing money. Since then, management has had to go back to investors and lenders multiple times – all, of course, in the unforgiving spotlight of a public market. EnSilica’s shares currently trade around 4p below the 50p IPO price.
EnSilica is growing fast on the back of an impressive order book. Revenues last FY (to 31st May 2024) exceeded £25m, though the company is now back to a (small) net loss.
However, this rapid growth – along with the aforementioned challenges – means that the business spends more cash on capex than its operations generate. And this gap risks widening the faster EnSilica grows.
I would not want EnSilica to suffer the same fate as its ‘neighbour’, semiconductor design startup, Sondrel, which listed on AIM a few months after EnSilica.
Never having made a profit, Sondrel quickly ran out of cash, its shares crashed and Sondrel delisted from AIM in August at a fraction of its IPO valuation (see
For now, EnSilica is in a much better position than Sondrel ever was.
But Lankshear and new CFO Kristoff Rademan need to take a long, hard look at the best capital structure that will help the business achieve its proven potential in the long term.
EnSilica should be cherished as a jewel in the UK semiconductor industry crown. Personally, I think it will be in the best interests of its customers, employees and backers for EnSilica to go private on its own terms while it still can.
-Source: LinkedIn |
"they are clearly going to need more external finance, as they make clear."
Actually no, they made it clear they do not need more finance (with the possible exception of a very large contract win which would require substantial upfront funding for development). |
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