Flowtech Fluidpower Share Discussion Threads

[varies] 28/5/2008 23:24

eagle eye
Congratulations on and many thanks for your excellent report of the AGM.
I was there too but picked up much less info than you did. Perhaps I should have stayed on for coffee but I needed to return to Central London. Hampton Court is not a convenient place for most of us.
It will be very interesting to see the rate of acceptances at the first closing date but I like to hope that it will be far short of 50%.
One can. of course, obtain a list of shareholders from Companies House for a modest fee and I plan to do so next week. These lists are hard to interpret as so many of us hold through nominees but one might learn something.

mudbath
I don't think I can add anything useful to what eagle eye has told us about the AGM. I am inclined to agree with you that, barring a much more generous offer, FLO would do us better on its own.

[cockneyrebel] 28/5/2008 19:36

Not much to say is there, but wait. It's a bidding war or 104p underpin as I see it.

CR

[welsheagle] 28/5/2008 19:27

Thanks for the info, Eagle eye.

[battlebus] 28/5/2008 19:16

Great posts Varies ,Eagle eye .Waiting this out is the only option.

[mudbath] 28/5/2008 18:25

eagle eye-it is a pity that Mentor were able to defeat the resolution concerning FLO's proposal that our company be authorised to buy back its own shares.It does appear that FLO is doing its very best to frustrate Mentor's ambitions.It would be most interesting to ascertain just how many acceptances Mentor have received.This figure is critical to shareholders.Mentor will inform the market in due course,at which stage they will either,claim victory,extend the offer if they are close to obtaining sufficient acceptances,increase the offer or of course,withdraw.A knockout bid of £1.45 might assuage all parties,maybe.Thanks e.e. or your summary.

[psolomons] 28/5/2008 17:59

Adding my thanks Eagle. Excellent post.

[dave88] 28/5/2008 17:24

Great posts Eagle eye and varies,thank you very much for keeping us all informed !

[eagle eye] 28/5/2008 17:20

I have just returned from the AGM. Here is my take for what it is worth. I am a shareholder, so you might consider my view biased, but this is what I consider an honest view.
There was no open presentation as per usual. Once formal businiess was done, the meeting was wound up. There was a small delegation of Mentor advisors present. The interaction between them and the Flomerics board was 'frosty' at best. Mentor objected to three of the motions proposed, one of which was allowing Flomerics to buyback their own shares.
Make no bones about it, this is no friendly approach.
I took the opportunity to speak to the CEO of Kozo Engineering, who appears supportive of the FLO board. I also spoke with Mr Odintsov, one of the Russian founders of NIKA.
So Mentor hold just under 30% of FLO. The staff and directors own around 25%, so a large proportion of shares are still held with private shareholders. Therefore the ability to motivate this shareholder base could determine weather Flomerics remain an independent company. It appears there is all to play for, and it is certainly not just a done deal.
So onto valuation.
In terms of earnings, Oriel's forecasts are 7p for 08 and 10.8p for 2009. PER's are x15 and just under x10 for 2009. For my mind, more critical are the turnover potential and profitability over the next 3 to 5 years. Flomerics is no longer isolated to electronics, its target markets are large and expanding. Secondly the software is considered the best in class (why do you think Mentor what to own it) and the average software licence cost around £15K. One of the plusses of this business is it will not only be more widely spread across many market sectors, but it will be spread across many small customers. I'm only guessing but if t/o growth was to double over the next 5 years (based annual compound growth of 15%)and margins were to edge towards 20% (a long term target quoted in a recent Flomerics presentation) then £40m t/o x 20% margin = pretax profit of approx £8 million. Less 30% tax, divided by 23m shares = eps 24p.
In more rational times, a PER of 12 to 15 would apply giving a share price target of between £2.88 and £3.60. This is without any acquisitions along the way. Perhaps this is why Mentor are so happy to offer shareholders £1.04 pence a share, and so keen to take control.
There is also £5.9million in cash,and a £1.2 million freehold property, valued at cost less the 500k mortgage.
Shareholders should obtain a copy of the defence document now it is available.
Mentor's valuation is far from generous in relation to current forecast earnings, but seriously undervalues it over a 3-5 year timescale. Providing management deliver ,(and don't get taken over), the business has the potential to give shareholders an exciting and very profitable ride.
Eagle Eye

[littlemadam] 28/5/2008 16:28

so what percentage does Mentor need for an agreed takeover? Is it over 50%?

[psolomons] 28/5/2008 15:11

Excellent stuff varies. Thanks v much for posting.

[littlemadam] 28/5/2008 14:16

yet another rns from FLO board. They clearly feel very strongly about the Mentor undervaluing the company. If the Board just had their own interests at heart they would just sell ot & pocket the cash. Well done to them.

Mentor not getting my shares either!!

[mudbath] 28/5/2008 13:32

Don't wait for the "others" to post varies;just update us (please)with the most salient features of your excursion.Well done for making the effort-mark me down for more northern jaunts.

[battlebus] 28/5/2008 13:18

The median enterprise value/revenue multiple from comparable peer group public and private transactions in the CAD/CAE simulation market over the last 2 to 3 years is approx 4 times which translates to a per share value for Flomerics comfortably over £2.50. Mentor graphics is only offering a multiple of 1.2 which seriously undervalues Flomerics.Put that in your pipe and smoke it Mentor you a'int getting my shares.

[battlebus] 28/5/2008 13:10

Got the document Flomerics rejects mentor offer this morning, quite impressed even a telephone helpline for those undecided. DON'T LET MENTOR GRAPHICS UNDERVALUE YOUR SHARES.

[varies] 28/5/2008 13:08

Just back from the AGM which I enjoyed.I was pleased to see Mr. Tatchell there looking well.
We were handed copies of the defense doc : all in beautiful colour and persuasive.
Others may soon report in more detail but, of course, the directors were inhibited from telling us about negotiations with Mentor or others if there are any or making a profit forecast.
The standard extraordinary resolutions authorising directors to issue 5% more shares were defeated on a poll by a surprisingly large margin of 57% to 43% if I remember rightly. All ordinary resolutions were passed.
I certainly intend to hold on even at the risk of missing the 104p cash.
I agree with Mudbath that our shares are worth nearer 200p than 104p provided always (as lawyers say) that nothing horrid happens. I might feel differently if the Dow Jones suddenly fell 20% !

[psolomons] 28/5/2008 11:46

Fair enough, we await with interest then. I wonder if any of the flo posters on this thread have gone to the AGM.

[mudbath] 28/5/2008 11:23

Here is a link to the FULL STATEMENT from Flomerics yesterday in which they do state that a "response" to the Mentor bid will be provided and that no 2008 forecast has yet been issued.

[psolomons] 28/5/2008 11:15

Perhaps the so called 'defence document' was published yesterday and the FT didnt notice !

[mudbath] 28/5/2008 11:10

So where is "the defence document" bungler?The AGM is under way I believe.Lets hope it takes the form of a profits forecast for 2008-at THE TOP END of the most optimistic projections(mine).This would serve to put a rocket under the share price and preclude Mentor from acquiring Flomerics at the exising derisory 104pence bid.

[bungler] 28/5/2008 10:58

Fair enough mudbath - quality not quantity is always the way to go.

On a more important point - this from the FT this morning:



Flomerics

Today - Source: Financial Times
Flomerics to issue defence
Flomerics , the engineering software group, will release its defence document ahead of its AGM on Wednesday as it bids to fight off a hostile cash bid from Mentor , its larger US rival that owns a 30 per cent stake.

No wonder the mms have tried to drop the price this morning - they really are the limit aren't they? Anyway here we go.

[mudbath] 28/5/2008 10:50

bungler-definitely a "he".Hotels,for me,are just like shares.Its the size(THE SMALLER THE BETTER), quality and value that one perceives and enjoys-not some over hyped pile of bricks full of chavs.

[littlemadam] 28/5/2008 10:25

so, they had clearance for bid. does it mean much? like mudbath i too have been mulling around the figures and in a year or so, on fundamentals alone, we could be looking at a share price of at least 150p. Mentor know this and clearly want to pounce asap on a company with big upside for profits.

One thing, how many shares (%) does Mentor need to support their bid before it becomes a done deal? another 21% to take their 'catch' to over 50%. I think chances of that are poor now, in the light of trading and directors' statements

[bungler] 28/5/2008 09:45

Good morning mudbath yes I am indeed a dissenting shareholder - hoping for much more. 1.04 seems very tame now that we've had a few weeks to get used to the idea. I trust your holiday was fine - although I was slightly concerned to see your room was so cheap! I expected 5 star at least from a man/woman? of your stock-picking skills and financial means!

[mudbath] 28/5/2008 09:36

If revenues continue to increase at 42% throughout 2008,then T/O WILL exceed £20million and adjusted profits should come in at well above £4million whilst CASH will continue to PILE UP.....PLEASE PLEASE do not accept the £1.04 offer from Mentor.

[mudbath] 28/5/2008 09:20

All FLO has to do to fight off Mentor is to sanction a share buy back at above the "bid" price.Shareholders who wanted to bail out could then sell into the market,whilst Mentor,if wishing to accumulate additional stock would have to increase the current offer.Come on Carter-get your finger out!!