Kinovo Investors - KINO

Kinovo Investors - KINO

Stock Name Stock Symbol Market Stock Type
Kinovo Plc KINO London Ordinary Share
  Price Change Price Change % Stock Price Last Trade
0.00 0.0% 33.50 08:00:09
Open Price Low Price High Price Close Price Previous Close
33.50 32.50 33.50 33.50
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Top Posts
Posted at 06/12/2022 13:33 by dyor2
For those of you who didn’t dial in, I thought Kinovo’s investor presentation this morning was pretty encouraging. Key takeaways: Growth momentum continuing into the second half, very confident of meeting market expectations of £62m turnover and £5.3m operating profit this year; expect to be net cash positive by the end of 2023/4 despite the anticipated £4.3m cost of completing the DCB contracts; growth prospects underpinned by sharply increased funding for zero carbon and electrical safety regeneration projects for local authority building stock; proving able to pass on cost inflation pressures in increased pricing; currently bidding on £340m of new contracts, of which they normally expect to win a third. Re the cost of completing the DCB projects, they went into some detail of how third party QS firms have come up with the £4.3m estimate on a project by project basis, and the two contracts that have already re-started are so far coming in within those estimates. They expect only one contract to be still uncompleted by this time next year. Also, MCG (the DCB buyer) has now dropped all legal claims against Kinovo.

All in all, it re-affirmed my view that the shares are seriously undervalued. Either the market will start to recognise this in due course, or a bidder will.

Posted at 30/11/2022 18:24 by masurenguy
Tipacs2 are not institutional investors, they are a Liechstenstein based family shareholder. Valuation is in the eye of the beholder but I've yet to see the known, let alone the unknown, financial consequences of the DCB disaster being realistically reflected in the current KINO accounts.
Posted at 30/11/2022 17:21 by sooty snipes

"it should also be pointed out that there have been no institutional investors increasing their existing positions. In fact Northern Trust have completely exited their 9.93% position"
Correct me if I'm wrong here but Tipacs2 Ltd have increased their holding from 12.22% on the 25/05/22 to 25.70% on the 27/07/22 in doing so they purchased all of the 9.93% that Mi Sterling (Northern Trust) disposed of. Apart from that I agree with what you say regards the sale of DCB. Having said that does this element of doubt not reflect in the current SP?

Posted at 30/11/2022 16:17 by masurenguy
While the company has apparently made good progress on the expansion of the current core business, there are still significant financial liabilities relating to DCB that have yet to be finally quantified plus legal matters arising from the disposal deal that have still to be resolved.

Furthermore, their complete failure to explain why they did not disclose the ongoing financial liabilities inherent in the original disposal agreement, and also why their apparent DD approval on MGC was considered to have been satisfactory at that time, must raise ongoing credibility concerns regarding full disclosure and credibility in relation to their public announcements.

Following critical comments relating to the above, which appeared after the results statement in August

- for example - "Difficult to ever put your confidence in a board that sells a material business with open ended working capital support and parent company guarantees untransferred when they sold to a £1 company. Shows a complete lack in ability to do things properly. It's difficult to trust their judgement on anything now. Extreme caution still warranted." topvest #658

- two subsidiary executives suddenly registered with ADVFN to submit posts #698 & 699 expressing their total support for the Board and specifically the CEO. I questioned at that time what prompted these subsidiary directors to register in order to make these supportive comments, especially when these posts suddenly appeared within 10 minutes of each other and created the impression of having been orchestrated from within the company. I consequently directed specific questions to these two posters - # 701 - but they did not respond and neither have subsequently posted here again.

"Have we really gotten to a point where a publicly traded company gave permission to the subsidaries' directors to make some positive posts about the CEO on a random message board? All I see is red flags. By the way...Rooney family and mr Lord...I have not seen you make a notification of buying KINO shares when shares were down 75% the last couple of months. How confident were you that the DCB debacle would be resolved? Actions speak louder than words." jj3483598 #703

Bear in mind that the year end results were qualified by their auditors due to the ongoing DCB scenario and it should also be pointed out that there have been no institutional investors increasing their existing positions. In fact Northern Trust have completely exited their 9.93% position and Premier Milton and Miton both reduced their positions by 40% and 14% respectively over the summer. Also in September, the Chairperson Sangita Shah, announced her intention to resign and depart as soon as a successor was appointed.

As far as I am concerned there is a credibility issue here and the uncertainty over the financial consequences of DCB still remains unresolved. Consequently I have been downsizing my position
and finally completed my exit last week.

Posted at 29/11/2022 09:02 by dope007
dyor2 I agree 100%. It is that uncertainty in larger investors minds that allows private investors to buy at a discounted price today
Posted at 28/11/2022 18:06 by dyor2
So I think the issue here is that it will take some time to regain investors’ trust in the company following the DCB debacle. In particular, potential investors may be sceptical of Kinovo’s £4.3m estimate of the cost to complete the remaining DCB construction contracts. There are 9 such contracts, work has re-started on 2, 3 are due to recommence in January 2023 and discussions “are at an advanced stage” on the others. I’ve no particular reason to doubt Kinovo’s estimates, but I can see that new investors might want the completion process to be further along before they take the £4.3m figure at face value!

I think any potential bidders might also want to wait to see how the DCB project completions go. But by this time next year the greater part of completion works on these contracts should have been done, and at that stage (assuming the £4.3m estimate proves broadly correct) I would expect the shares to be much higher. Kinovo seems on track to make at least £5m operating profit in the year to March 23, and probably £6m in 2023/4. The key to valuing the business to me is its very attractive rate of cash generation, because Kinovo has consistently turned 100% or more of operating profit into cash. It currently has virtually no net debt, and whilst most of the cash generated by the core business over the next twelve months will be swallowed up in completing the DCB contracts, looking ahead to a year’s time hopefully by that time we’ll have a “clean” business generating £6m of annual profit and £6m plus in annual cash, with no debt and a huge forward order book, operating in a growth market. What might that be worth? At the current 36p share price Kinovo is valued at £22m. A bid at anywhere near that price seems like a no brainer. For example a 50p a share bid would cost £31m, and with £6m+ of annual cash generation the cash return to a bidder would be almost 20% p.a.! My best guess is that a bid this time next year would have to be 70p+ to have any hope of success, though of course it depends on the attitude of Tipacs2, who have 26% of the business. It could be substantially more.

So in sum, I suspect it will take time to regain investor confidence but I’m happy to wait with my 1% or so because there looks to be very substantial upside from here.

Posted at 15/9/2022 20:06 by jj3483598
I hope the new director will have skin in the game, someone related to Western Selection would be my preference. They are aligned with minority investors and take an active approach to investing.
Posted at 15/9/2022 06:48 by masurenguy
Hmmm.....the announcements are all positive but so was the January 12th announcement about the DCB disposal. At the same time you have to wonder why institutional investors Northern Trust have completely exited their 9.93% position and Premier Milton and Miton have both reduced their positions by 40% and 14% respectively.
Posted at 20/6/2022 07:51 by ddt sprite
I hope for the sake of the investors, employees and supply chain as a whole, that Kinovo can rescue something from this car crash.
Lets not forget that Kinovo (previously called Bilby) closed a failing subsidiary before (P&R), from which the group finances never did recover. I hope that this isn't a reoccurring theme from this organisation where they let one company fail to save the remaining, hiding losses in the failing company to maintain confidence in the group as a whole.
Either way, the silence needs to end & so does the employment of David Bullen and his board.
Lets also not forget that if they are able to rescue something from this mess, that it is their mess that they are resolving and it should not be rewarded financially or otherwise. This has cost us investors ££££ not to mention the potential job losses (you can probably count the 80+ DCB employees that lost their jobs here too) that could result here.

Posted at 19/5/2022 13:16 by dyor2
I’ve been trying to look past the anger and mystification we’re all feeling at the DCB debacle, and the resultant collapse in the share price, to work out what Kinovo might out actually be worth in enterprise value. And my overriding feeling is that the underlying core business is worth very substantially more than any potential liability under the DCB guarantees. The core business made EBITDA of £4.2m in the year to March 22 and generated cash of over £500,000 per month. Kinovo had net cash of £0.4m at the end of April, despite having paid out £3.7m to DCB. Cash generative, and operating in a growth market, I’d say the core Kinovo business is worth a minimum £30m (7x EBITDA) to a private equity buyer, and possibly significantly more to the right trade buyer. Set against this, I can’t see the DCB guarantees resulting in a further liability of more than £10m, and possibly significantly less. It depends on the nature and enforceability of the guarantees and the state of the underlying DCB contracts, but the outstanding contracts can’t be much more than £20m now at original contact value, so even if it costs the end clients up to 50% more to get them completed and they can reclaim all of that from Kinovo in due course (both big “ifs”), that’s not more than £10m.

So I just can’t foresee circumstances in which the value of the underlying business doesn’t very substantially exceed any potential liabilities relating to the DCB guarantees - to an extent that makes the present £7.5m market cap seem way too low. But getting that value reflected in the share price is another question. There’s also the problem that the year end audit is underway, and the auditors will want comfort that Kinovo can fund any likely DCB contract liabilities, as will Kinovo’s bankers. Capping the DCB liabilities would be a good start, even if it requires a share issue to fund a pay out to the DCB end clients. But with multiple end clients and complex contracts it might not be practicable to negotiate a cap in the short term, even if the liability ultimately turns out to less than investors currently fear. So what about soliciting a bid for the whole of Kinovo? The problem there is I can’t see anybody bidding for the whole of Kinovo while the DCB liabilities are uncertain, much though they might want the underlying business. Selling the underlying business? Not really a solution, because you’re left with a £30m+ cash shell which can’t distribute the cash until the DCB liabilities are sorted out. Hmm… best guess is that they’ll provide for a substantial (say £5m) potential DCB liability sum in the forthcoming full year figures, say that they hope it’ll be less than this, and do a quick ordinary share placing to raise £2m or so to give the bank and auditors comfort (£2m or so is the maximum they can raise at the current share price from a quick ordinary share placing without getting shareholder approval). This won’t be ideal, because it won’t give investors certainty on the DCB liabilities, but hopefully they’ll be able to give enough information on the potential liabilities and how they got into this mess in the first place, for investors to support it. Particularly if it’s accompanied by a strengthening of the Board, which I imagine the major shareholders will be insisting on.

But I do have an alternative suggestion, which Kinovo and their advisers can have for free if they’re reading this board. It’s to issue £5m worth of convertible preference shares, convertible into ordinary shares at 20p, with a coupon of 9% and redeemable at par at the company’s option at any time after three years. This would provide a substantial equity cushion to cover any DCB liabilities, give the auditors and their bankers a lot of comfort, and it would minimise dilution for ordinary shareholders. I’d certainly subscribe for a substantial slug of such an instrument, because it would have first priority call (above ordinary shareholders) on the equity value of the underlying Kinovo business, the coupon would be attractive and easily funded from cash flow, and effectively investors in it would be getting a free option over ordinary shares at a price well under what they are likely to trade at when the DCB liability is eventually sorted out. The three year timescale before Kinovo could redeem it would give plenty of time for the DCB liabilities to be sorted out and for this to be reflected in a (hopefully) substantial uplift in the ordinary share price, which would result in the pref investors converting into ordinary shares before the end of the three year period. I’d get these pref shares quoted to make them even more attractive, and offer them to ordinary shareholders on a pro-rata basis, with a few major ordinary shareholders underwriting any not taken up. Canaccord, if you’re reading this, you’ll probably think WHAT??? But think about it - sometimes complex situations need creative thinking!

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