National World Share Discussion Threads

[simmsc] 16/12/2021 22:21

Great post. Experienced management team with proven track record and with skin in the game increases chances of successful execution too. Institutional stock with low analyst coverage (few nervous pi's causing unnecessary vol). Shareholder list looks good. Mostly long term holders who know this industry very well. I have a decent position on this already and will add on any weakness.

[opaldouglas] 16/12/2021 21:51

Sphere - mainstream brokers really do provide a dreadful services for pricing with illiquid small caps.

My current take:

RCH, NWOR and most aim small caps, what a conundrum at the moment! I severely reduced my aim exposure at the end of summer. Central bank policy tightening/rate rising environments into slowing growth aren't usually a good combination. Ala, big is beautiful whilst small caps without pricing power do struggle. That being said, consumers are in rude health, growth is slowing but from a high "covid money giveaway" watermark and nobody seriously thinks the FED has the means to raise rates to a meaningful level, well certainly not mr bond market!

Easy winners on Aim have come and gone and it's not really a stock pickers market in my eyes, that being said I'm still positioned mainly via funds, etfs and long/short strategies at the moment with only a handful of stocks.

Looking at NWOR, momentum from h1 has continued and full year results will provide some much needed meat on the bones. Revs are ahead and pretty much where I forecast previously, with info released to date we're looking at circa £12.5m gross profits, with an additional 3.5m of cost savings (could be more as indicated in trading statement), although I think the full 4.2m will flow through into next year. 2m digital capex, 4m restructuring and say another 2m property early exit fees (might land in next years accounts) brings us to a 8m net profit for the year.

I've penciled in a not so racy 12.5pe giving NWOR a 100m mcap, add back in cash of 23m and ignore intangible assets for now gives me a fair value of circa 123m at this moment in time vs current mcap of 75m.

Profit is further backed up by 4m free cash flow since June which matches my annual 8m estimate nicely. I'd say NWOR should be valued on 22 earnings looking ahead, but it is fair to wait for results to land.

I can see some disruption on print due to Omnicron, but I actually think this will be small in comparison to h1 2021 lockdowns based on info available to date. the big driver is digital which looks to have kicked out 1.3m profits in 21, rising to 2.6m in 22 and 5.3m in 23. This is based upon a 25% growth rate and increasing margin from 10% to 22.5% whilst print profits stabilise and slowly dissipate.

If and it's a big "if" digital can drive growth to 5.3m net profits in 23 and print stands still at circa 11.1m you can see how 16m net profits are achievable (add in extra annualised 4.3m cost savings and say 2m digital capex so potentially a further 2.3m) in just over two years. throw in free cash of 8m in 21, 16m in 22 and 18.5m in 23 and potentially some acquisitions.

Give me a profit of 18.5m on a racy 20 PE in 2023 with cash in the bank of nearly 60m (all things being equal, i.e no info on acquisitions at the moment) and we're looking at a fair value of circa £430m mcap vs £75m today.

Of course lots can go wrong, but the potential is very much there. I like Reach, but I think the upside here is greater.

Stay safe out there OD

[sphere25] 16/12/2021 11:37

I tried to buy these first thing. Ran a quote right at the bell, literally a second after the open, and for some reason no quote provided, and four orders at 25.76p have beaten me to the punch! I don't know how that works but feel like I have been stiffed there.

So I picked up RCH instead. Highlighted all the technicals and key price points there to watch on the board. It is moving 20p-40p at a time! 260p is key now.

Looking out into the market today, we have some interesting moves:

NWOR and GYM are moving higher on their statements AFTER alredy being beaten down. Highlighted BOO being heavily shorted last week and they were right. They were right on CINE too. It can pay to watch out for the spikes in shorting activity,

Overall, looking at price moves out there recently, the risk reward isn't stacked in the favour of buyers picking up companies in the spotlight that haven't already been clobbered.

A company making cautious tones on supply chains (or Omicron now) could warn and then it gets hammered. It looks sensible to just sit and wait for the updates, and then if they get beaten down enough, run the slide rule over them at that point.

That's where the value will come.

All imo
DYOR

[opaldouglas] 16/12/2021 09:26

Update looks really encouraging, will update my figures later today.

[puzzler2] 16/12/2021 07:25

Agreed, a good update, but that word "adjusted" bothers me. Just hope it relates to legacy costs only.

[tole] 16/12/2021 07:17

Performance in the second half of the year has remained robust and the Board expects the full year adjusted results to be substantially ahead of the Company's expectations.

[simmsc] 08/12/2021 21:57

I've been accumulating more during the recent market weakness too.

[tole] 08/12/2021 18:25

https://masterinvestor.co.uk/equities/time-to-clean-up-with-the-small-cap-picks/PS By the way I fancy National World (LON:NWOR) for a quick pick-up, now just 24p

[tole] 09/11/2021 17:43

https://www.fool.co.uk/2021/11/09/this-small-cap-penny-share-has-unbelievable-growth-potential/This small-cap penny share has unbelievable growth potentialAndy Ross | Tuesday, 9th November, 2021 | More on: NWORChart displaying growth Image source: Getty Images.Although I primarily focus on value and growth at a reasonable price (GARP) shares, I do like to dabble in small-cap shares occasionally. This is why I set aside a small part of my portfolio for more speculative companies. I think this penny share has many characteristics that could lead to spectacular share price growth, so I'm tempted to buy right now. Penny share with huge growth potentialNational World (LSE: NWOR) is a recently listed media company that has gone from nothing in 2020 to having revenues of £42.1m. This is a result of its acquisition of JPIMedia Publishing. The 2 January 2021 acquisition gave National World 13 regional and city daily newspapers, plus over 100 print and online publications. One of the major attractions of this share for me is the quality of the management team. It seems like they have pedigree and know the media industry inside out. Chairman David Montgomery was chief executive of Local World, which was acquired by Reach in 2015. Vijay Vaghela, the COO, was most recently group finance director of Reach.Mr Montgomery also holds about 7.5% of the shares, so his interests are well aligned with those of private investors. Unfortunately, many companies don't incentivise directors to be well aligned with ordinary investors, which is a shame but hey ho...The National World business model should work. Shares in Reach have been flying over the past 18 months as investors cotton on to its growth potential and digital transformation success.Looking at it right now, it's early days for sure for National World. There's a lot of work still to be done. But it has a scalable business model, a strong management team, and no or very few legacy issues to deal with because it's a new company. That makes it a very exciting investment, from my point of view.What could go wrong?As an acquisitive company, National World could end up overpaying for new websites and other media titles. That's probably the main risk I'm worried about as a potential investor. Also, while management has experience in digitalising media assets, it's not always an easy way to make money. In tough economic times, advertising is often cut. A change in how Alphabet's Google ranks websites could hit traffic. The group may not create content that leads to high levels of subscription and recurring revenue. That would also hit its profitability.As with all companies, especially small caps, the journey with this share is likely to be rocky and testing. The shares will fluctuate – fact. However, the payoff, if management get enough things right and grow revenue and profits in the coming years, could be huge. Despite being a penny share right now, National World could become much bigger and much better known in the coming years. I'm tempted to invest, at least a little, in the shares.

[simmsc] 07/11/2021 09:46

3 issues\ months later than i thought it would get tipped \ spotted by them. I already have a large long position here

[waspfactory] 07/11/2021 07:55

The Momentum Investor Nov 21
"With cash of £19.1m, management are eyeing further aquisitions...the prospective PE of 12.5 is modest given it's growing from a low base with market cap under £78m and I think more M&A will drive the shares higher"

[opaldouglas] 09/9/2021 11:34

On the print side NWOR do state input prices have risen as with all commodities post covid as bottle necks are still evident. Probably best to be conservative with 10% as print revs decline in the long term although if we manage to escape any lock downs h2 this year and 2022 print revs should rise next year one would think.

Dowgate have released an updated note today with a 50p price target which looks very conservative. It's all about digital growth trajectory in my eyes. Let the print continue to provide safe profits and ramp up digital.

I see most of the restructuring costs as one off, granted this may come back in the future but NWOR outsources all it's printing hence little depreciation and amortisation costs, it's a super flexible structure. If that's the case could print kick out 10.8m a year in profits? Strip out this years h1 restructuring, financing of loan notes, D&A and duplicate in h2 and it is! Then extrapolate digital profits by "x" growth rate with an increased margin moving upto the mid 20s and it's not difficult to see digital taking over print profits by 2025.


I'm clearly getting ahead of myself but the structural drivers for digital growth aren't going away and the management seem brilliant with actual meaningful skin in the game.

Good luck all.

OD

[saltaire111] 09/9/2021 08:51

I think 10% margin in the print business is conservative. Most regional print margins are above 20% these days as free newspapers, ie the tight margin products, have largely been closed.

[opaldouglas] 09/9/2021 08:38

In terms of a valuation, 2020 is a bit messy with restructuring etc. If you take a simple view that print revs will replicate h1 in h2 and 2022 looks the same as 2021, you're looking at 7.1m profits. Free cash should be higher depending on D&A.

Digital is where the excitement starts, q1 had a 1% growth rate this year and q2 up at 50% whilst management rearranged legacy issues. Is 50% sustainable per qtr from such a small base?

If you forecast out 25% growth rate per half (not qtr) a year digital revs will exceed 20m in 2022. Current margins of circa 10% look normal for the print biz, but you'd expect digital to push to 25% once established. Maybe blend digital margins to 15% in h1 2022 and 17.5% in h2, that would kick out 3.3m in profits.

So you get to see how 10m in profits is doable in 2022, particularly when you factor in 5m annual cost savings and hopefully no further covid lockdowns which hit print and advertising in q1 this year.

So 10-15m could be an outside bet. Let the market rerate NWOR as a digital play on a sensible pe of 20 based on say a 12.5m profit next year and you have a 250m company in the making with a lot of upside.

I think we should be looking at a 5 year time horizon with digital overtaking print. Need to think over capax for digital as well.

Plenty to think over in the coming days and lots of number crunching ahead!

OD

[saltaire111] 09/9/2021 08:01

It’s got to be worth 80p a share. The Directors practically stole this business at the price paid.

[abergele] 09/9/2021 07:38

buy and hold,,
reap rewards later down the line,this is a good long termer imho,,

[puzzler2] 09/9/2021 07:33

I've had NWOR on my watch list - this morning's strong results have caused me to take an initial stake.

[opaldouglas] 09/9/2021 07:29

I've only managed to skim read through but theres a lot to like which backs up my initial investment thesis.

Basically NWOR is an early stage Reach without the pension headache, no debt (discounting odd short term debt below 1m and lease liabilities).

£5.4m Operating profits in h1 before you strip out mostly one off restructuring fees of 3.3m and 1.4m depreciation and amortisation. This is far ahead of my initial expectations when you consider covid hit H1 operations. Once full 5m cost savings take affect next year NWOR could be kicking out free cash of 5-10m and they really have only just started digital transformation which is my main investment case.

Note - circa £20m of cash will reduce when final payments are made for initial JPI acquisition to circa 15m.

Digital revs grew 50% in q2.

Please sense check figures above, I'm going to have a good read through later today.

OD

[hibberts] 09/9/2021 07:13

Digital publishing revenue on a proforma basis grew by 21% year on year, partially mitigating the 9% fall in publishing print revenue.

Looks good to me!

[saltaire111] 09/9/2021 06:38

Made over £4m profit in the first half! From a business that cost them £10m!!

Payback in less than a year?

[opaldouglas] 08/9/2021 06:37

Hi Hibberts, have NWOR confirmed dates? Looking forward to finally having some tangible uptodate info to work off.

OD

[hibberts] 06/9/2021 07:35

Looks like results are this Thursday the 9th.

[simmsc] 06/8/2021 22:39

Let's see if this gets tipped this weekend! It should!

[opaldouglas] 15/7/2021 05:04

I’ve taken a position recently on the premise of NWOR copying the Reach playbook, I like the management and large skin in the game.

I dedicated some time reading through the prospectus recently and was actually quite surprised by the number of publications National World has on the books, 17% market share vs reach at 25%, 104 publications vs 112.

Guidance is somewhat difficult at this stage so not a huge amount to go off. Looking back at latest annual accounts for Johnson Press we have 88.2m revs, 7.7m ebitda. NWOR have stripped out 4m of cost savings in recent months and wrote off a number of historical intangibles.

It’s clearly too early to accurately predict potential profits or at the very least FCF, I’ve pencilled in circa 5m as a real finger in the air for the time being in 21 or 22, add conservative PE rating of 15 and 18m cash in the bank and I think theres value here if management can deliver on digital growth promise. Note circa 5m is still payable for Johnson Press acquisition over next 2 years.

On the flip side (and where it get's exciting), a comparison with Reach provides much food for thought from a growth perspective over the next 2-5 years, based upon Reach’s 2020 digital revs of circa £120m on a 25% margin producing £31m profit. If NWOR can replicate this model which is clearly the ambition then the future is indeed very exciting. I.e, on a pro rata market share basis all things being equal NWOR would produce profits of 26m vs Reaches 2020 figures of 31m. Note - these figures have been blown out the water this year as Reach rotates into a fully fledged digital play.

I note NWOR have cash in the bank and valuation metrics are somewhat simplified vs Reach with pension deficit, targeted acquisitions look likely as digital content arms race continues at a pace.

Any other valuation metrics out there to throw into the mix?

Good luck all.

OD