Finseta Share Discussion Threads

[chatchat] 26/6/2024 19:43

still not very specific!

[purchaseatthetop] 26/6/2024 19:40

They are all getting handsomely rewarded for doing something that is legal. In the end the PIs will pay the price and everybody will walk away to the next payday.

[chatchat] 26/6/2024 19:34

PATT - please clarify

You posted "I think O’Brien is doing Eco Global Markets Ltd mark 2 right now."

That is a serious allegation to make.

When I query exactly what you think they are up to and whether you think the Board are complicit the reply seems to be somewhat generic

"Lots of companies are set up to fleece PIs snd reward the insiders. I think there is a decent chance that exactly that is happening right now. Nothing illegal. It is a legal skim."

Exactly what do yo think they are up to and do you think the Board are complicit?

[purchaseatthetop] 26/6/2024 19:31

Dorian.

Note 15 to the accounts.

“The non-convertible loan notes comprise £2,000,000 issued to Robert O'Brien (repayable on 31 July 2026) and £172,578 of deferred consideration in relation to the acquisition of Pangea FX Limited (repayable on 31 August 2024)”

If you don’t pay salaries and bills but issue loan notes instead then your cash balance goes up. But sometime it must be paid. It is pretend cash generation.

[dorian12] 26/6/2024 19:04

Finseta is now a thriving, profitable company.

[purchaseatthetop] 26/6/2024 18:38

Lots of companies are set up to fleece PIs snd reward the insiders. I think there is a decent chance that exactly that is happening right now. Nothing illegal. It is a legal skim.

[chatchat] 26/6/2024 18:34

That's sounds to be a very serious allegation to make. Execatly what do you think he is up to?

Do you think the Board is complicit?

[purchaseatthetop] 26/6/2024 17:11

Robert has 16% of the company so has been instrumental in its set up and development.

I have major issues with him because of him scamming UK pensioners out of £8m minimum and escaping to Dubai. None of that has been disclosed to shareholders.

What has been disclosed is

“Cornerstone FS plc (AIM: CSFS), the cloud-based provider of international payment, currency risk management and electronic account services to SMEs, announces that it has expanded into the Middle East with the opening of an office in Dubai. The new office will be led by Robert O'Brien who has joined Cornerstone, as General Manager APAC and Middle East. Mr O'Brien was previously at Vorto Trading Ltd ("Vorto"), where he was the largest revenue generator and built a business line based on inward investment into the UK from Asian clients.”

Vorto Trading is a tiny little FX company and cannot have any real levels of business
The last accounts filed on 7/8/23 for years to 30/9/21 (when O’Brirn left) showed fixed assets of nil. Debtors of £30,065 and creditors of £38,009.


I am sorry but the RNSs do not make sense. I think O’Brien is doing Eco Global Markets Ltd mark 2 right now.

[adamb1978] 26/6/2024 16:29

We've had a full years' trading (2023) since his LTIP was resolved! Therefore you have a set out audited accounts with just the normal cash costs of his team and there arent many ways of accounting for costs - they're, well, costs! If this was a software company there would always be discussions around capitalisation vs expensing but the info is there in software cos accounts. For this sort of co, its all through the P&L and no other ways to argue differently.

Their average daily volume is c.£100k so it doesnt take much to move the market but with £17.8m market cap roughly 1% of the company changed hands today.

My guess is that an institution has sold down a bit. I believe a major shareholder or director has 3 days to announce a change in their shareholding so given the price started to weaken a couple days ago, I suspect we'll see a RNS in the next day or so.

[chatchat] 26/6/2024 15:21

I don't think so - the market was informed about his team costs ages ago. We have had broker notes since etc etc. It's hardly new news!

[66fingers] 26/6/2024 15:08

Anyone have any idea why the share price has dropped over the past few days? Could it be the concerns about O'brien and how the company has accounted for the costs of his team?

[adamb1978] 26/6/2024 14:31

He owns 16% of the company. As CCO, he'll get further equity incentivisation as will the CEO, CFO etc but he's pretty nicely incentivised to grow Finseta. Moreover, given that shareholding it would be hard for the board to make him much more incentivised to grow the company as its hard to move the needle on that 16%

This scaremongering really has no basis

[purchaseatthetop] 26/6/2024 14:07

Adam. No more contracted ones at the moment. That will change I think.

[adamb1978] 26/6/2024 13:37

All arrangements with him have been settled. As per the 2022 annual report:

"Accordingly, there is no further share-based compensation to be recognised in future periods in respect of Mr. O’Brien and the Asia team."

Therefore if you look at the 2023 financials its entirely clean.

So when you say "Now no costs in P@L till 9/24", that is incorrect. There are no more full stop

[purchaseatthetop] 26/6/2024 13:17

27/9/21 RNS
“Cornerstone FS plc (AIM: CSFS), the cloud-based provider of international payment, currency risk management and electronic account services to SMEs, announces that it has expanded into the Middle East with the opening of an office in Dubai. The new office will be led by Robert O'Brien who has joined Cornerstone, as General Manager APAC and Middle East. Mr O'Brien was previously at Vorto Trading Ltd ("Vorto"), where he was the largest revenue generator and built a business line based on inward investment into the UK from Asian clients. His appointment is in line with the Group's stated acquisition and expansion strategy set out at its IPO in April 2021.”

And

“As part of his remuneration package over the first two years he will be entitled to receive share-based incentivisation based on a multiple of revenue generation and contribution to profit.”

His and his teams three year deal was worth in total $6.1m over three years. All taken to P@L in the period 9/21 to 12/22. Now no costs in P@L till 9/24. So all 2023 snd H1 24 have vastly inflated EBITDA. Plus cashflow looks better because $2m of that $6.1m is a loan from O’Brien.
The package was not purely revenue driven. It was both revenue and profit.

This looks like figure management to me. There is no reason to take all the cost into the first 16 months of a 36 month deal.

[mtyl1993] 26/6/2024 12:41

Hello PATT!

Good questions you have right there. To your first question, I did went through the same thought process as you do, but I neither have any good answers, nor did I openly question Hickman during our call. Nonetheless, what went through my mind was firstly, the scam cases took place a long time ago and for all you know, O'Brien had turned over a new leaf. Second, if O'Brien is incentivized, and has successfully turn the Dubai office into a major revenue driver and especially a profitable one, I'm just thinking why would the employer want to name and shame him by telling investors of his past and throw him under the bus? Doesn't reflect well on O'Brien, doesn't reflect well on Finseta as an employer as well. Which is also why it's good that such platforms like Advfn exists so that sharp investors like you can bring up the due diligence you have done. This will help us cover our blindspots and be fully aware of all risks involved.

To your second question, SBC payout is accelerated because in an earlier notice put out by Finseta, there's a change in O'Brien's compensation structure. His compensation used to be purely revenue-driven, but with the revision there's lesser focus on revenues, and more emphasis on the profits of the Dubai office. Since performance target is surpassed and beyond expectations, SBC payout is accelerated. If management can be trusted (which I believe current management can be given their strong execution), then further dilution from SBC should be very minimal. Also, recall that all-in compensation = SBC + cash salary. So personal costs (i.e. cash salary) remains all these while for the Asia team regardless SBC is accelerated or not.

Hickman also told me that Finseta "will continue to invest into the Sales and account management part of the business" so I'm expecting to see higher salary expenses (not SBC) in the next few semiannuals / years. That being said, Hickman is good at cost control so I believe margins should remain at current levels.

[chatchat] 26/6/2024 12:25

hxxps://www.investorschronicle.co.uk/ideas/2024/05/08/exploit-this-high-growth-fintech-opportunity/


Having upgraded its forecasts multiple times in the past six months, house broker Shore Capital is pencilling in at least 18 per cent annual revenue growth for each year in its 2024-26 forecast period. It looks a conservative assumption given that Cornerstone is delivering double-digit growth in customer numbers and increasing their revenue contribution, too. Moreover, even without any further upgrades, the combination of rising revenue on a relatively fixed cost base is set to drive gross profit, cash profit and pre-tax profit materially higher.

Although analysts expect current-year cash profit to rise from £1.7mn to £1.9mn (5 per cent upgrade) on 20 per cent higher revenue of £11.5mn, it’s a conservative estimate that is below the board’s internal budget. Furthermore, with this year’s expected increase in overheads (staff account for three-quarters of operating costs) easing in 2025, an even greater proportion of incremental gross profit will be converted into cash profit next year. This explains why cash profit could increase by 69 per cent to £3.2mn in 2025 to deliver pre-tax profit of £2.5mn on 22 per cent higher revenue of £14.1mn. On this basis, expect adjusted earnings per share (EPS) of 3.1p (2025), implying the shares are rated on a prospective price/earnings (PE) ratio of 12.4 for 2025.

The shares also offer a prospective 2025 free cash flow yield of 11.4 per cent that supports a trebling of net cash from £1.4mn (2024 forecast) to £4.2mn (upgrade from £3.1mn) by the end of 2025. Cornerstone only has a market capitalisation of £22mn, so it is being valued on a modest 6.9 times 2025 cash profit to enterprise valuation. That’s a harsh rating for a high-growth business, hence why Shore Capital raised its target price from 50p to 70p following the results, above the 50p fair valuation I outlined when I suggested buying the shares at 36p (Alpha Research: ‘Tap into undervalued fintech growth’, 8 April 2024). I feel a fair valuation of 60p is now more appropriate given that the strong momentum in customer acquisitions and transaction volumes shows no sign of abating.

[dorian12] 26/6/2024 12:12

I get them via research tree with a subscription.

[purchaseatthetop] 26/6/2024 12:09

If anybody has a link please post it. Would be interesting to see the value drivers.

[thepopeofchillitown] 26/6/2024 12:03

No link but they appear to be Shore Capital's numbers.

[purchaseatthetop] 26/6/2024 11:41

Dorian. Can you post a link to the broker forecast please. Thanks.

[dorian12] 26/6/2024 11:31

It’s now looking very cheap. The market cap is now only £17m and it’s producing a lot of cash and growing rapidly.

[purchaseatthetop] 26/6/2024 11:05

On non O’Brien things they RNSd this

“As announced on 19 April 2023, the Group generated exceptionally high levels of revenue growth in the first quarter of 2023, and entered the second quarter with strong trading momentum. This strong momentum was sustained through to the end of Q2 2023 and accordingly, the Group expects to report total revenue for H1 2023 of approximately £3.6m, representing an increase of 89% over the first half of 2022. As a result of the strong revenue growth, combined with gross margin being maintained, the Group expects to report a maiden positive adjusted EBITDA for the H1 2023 six-month period.”

They didn’t reference this…

“In the second half of the year, the Company reached an agreement with Robert O'Brien, the General Manager APAC and Middle East, and the Asia team to vary the terms of their incentivisation agreement, as a result of performance being ahead of expectations. As a result of the agreed settlement, the Group recognised an accelerated charge for the year ended 31 December 2022 such that the full value of the total charge estimated upon initial recognition of £6.1m has been cumulatively expensed (£4.3m for the year ended 31 December 2022 and £1.8m for the year ended 31 December 2021). Accordingly, there is no further share-based compensation to be recognised in future periods in respect of Mr. O'Brien and the Asia team.”

So they took the entire three year cost of the Asian team and charged it all in the 18 months to 31/12/22. This means there are no personal costs from 1/1/23 so about a year and a half. Of course it is not difficult to go EBITDA positive if you do that.

Bit smoke snd mirrors to me. Why break the matching concept for accounting by accelerating the cost allocation unless you have a reason to do so. Which is to be able to report artificially good numbers.

[purchaseatthetop] 26/6/2024 10:40

MTYL.
Therefore why not inform the shareholders? The point is that it is very relevant information for investors to know. They rather tapdanced round it in the RNS about his appointment. I think he is both the brains and money behind it all.

[qs99] 26/6/2024 10:29

Early July trading update last year, are we expecting another one? DYOR