Paragon Entertainment Share Discussion Threads

[playful] 15/12/2015 10:32

I included the link for all to see.

I hope you deliver and a convertible is not issued, but you have a tendency to “over egg the pudding” in your private communication with investors so this would be best avoided in future.

Like I said it's a good business so let the business do the talking.

[pelboss] 15/12/2015 10:29

Playful. You missed the bit about "We have to always ensure the company and team continues to deliver the best for our clients, shareholders and staff. It’s tough but it drives us forward."

We are not considering a delisting. We have a 5 year plan and its our intention to deliver on it.

[playful] 15/12/2015 10:27

Depends on the key terms but it’s usually on demand at any time during the life of the note

[pj 1] 15/12/2015 10:09

playful. Isn't there a minimum 5 year term for a CLN? pj

[nick rubens] 15/12/2015 09:19

cheerslanb5004 for the 'update'.

I've often found conservative forecasts to end up 'fallen short.. but ... etc'

The share price rises anticipating a better than expected revenue or profitability and then falls when they don't come.

[playful] 15/12/2015 09:16

With an army of demanding PI’s to service I imagine maintaining a listing on AIM is rapidly losing its attractions.

If I were sitting in Marks chair looking out at the airfield I’d be thinking let's do a convertible loan between the previous vendors (they received £1.75m) with the ultimate goal of delisting the company on conversion.

In a recent interview Mark was asked:

Biggest mistake?

"Surprisingly it would be the flotation of the business in December 2011, having a small (in city terms), creative business on the stock market is extraordinarily hard and you open yourself up for huge criticism.

hxxp://www.yorkpress.co.uk/business/boss/13612592.Mark_Pyrah__chief_executive_of_Paragon_Entertainment/

It is a good business with a wholesome family mentality but in all honesty I don't think we will see this as a listed company in 18 months.

Know the game!

[cockerhoop] 14/12/2015 08:09

PJ1,

I was hoping to get up the the AGM to meet up again this year but events conspired against me. I'd be very interested to hear how you felt it went. Cheers

[pj 1] 13/12/2015 13:17

ramas- I agree with you that PEL (as with most other shares) should be valued on a fundamental basis and not regarded or looked at as similar to any 'blue sky' stocks, especially as being specialist manufacturing it is relatively labour intensive. Even on a fundamental basis there are a few different ways to measure it as we all know.
No matter how 'big' the contracted order book PEL will always have the 'lumpy Revenue' risk but it is clear to me the BoD have worked extremely hard during 2015 to reduce this to a now much reduced risk.
Funding does look tight as discussed on a number of occassions and is certainly an area PEL will have to work hard on as we move forward, and was obviously discussed at the AGM.
Unfortunately, the share price has been extremely volatile on much greater volumes over the last few months. Whilst some recent news flow has quite rightly had a negative effect the good (excellent) news has not really been digested. How many are actually aware that the framework agreement with HAMLEYS followed 3 years of talks? No doubt the share price has also suffered additional volatility as it has been highlighted a few times by such likes of Zak Mir and judged totally on an unemotional chart/technical basis.I am sure, imo, that affected the selling on Friday as short term traders exited.(yes I accept they also bought in at some point)

I am trying to ignore all the 'noise' (easier said than done). If there had been no noise, would PEL have been sold off on an £11m 2016 Revenue projection? We all know market sentiment and share price momentum, lacking in PEL currently, can play a part in the value of any Company.

I hope to write up my notes and summary thoughts of the AGM by the middle of next week for those interested.

[ramas] 12/12/2015 19:12

for some balance to this overly bullish thread ...
Paragon entertainment is a thoroughly respectable business doing great things for its customers on this point there is no doubt, i think we can also all agree financially there have been some difficult times. Its also very likely that given at June 2015 free cash assuming all receivables come in at about £200k is a little on the light side – so expect capital raising of some sort in the near’ish future – nothing wrong with that bar some dilution.
The big question is the investment status of PEL and the ability for the shareprice to move north based on fundamentals and outlook. For me £12m revenue does not look enough to move into positive EPS to justify even the current shareprice. i’d be interested in the maths behind the apparent £250k operational leverage over and above £8.3m turnover – maybe the year end accounts will shed some additional light on this awesome possibility. For me i see another 2 profit neutral at best years before financial success kicks in at the level to justify a 2.5p share price or about 1.5p discounted to today – of course i may be wrong but its worth noting that there are companies out there now delivering the success PEL is only yet aspiring to (i know this is where i go on about AEO on a PE of 9 mkt cap £1m less than PEL and with £1M free cash in the bank AFTER paying this years dividend of 3p / 10% on a bad years earnings of 3.5p per share)
Monkey Puzzle raises a good point that shares dont just move on fundamentals – which i refer to as the greater fool theory however i suspect Joe Punter, previously known as MUG, is starting to get wise to this alternative investment style and maybe even running out of cash !!
Not for widows and orphans and i suspect returns for average Joe look unlikely IMO but of course you pays your money after DYOR ......

[grantlfc] 12/12/2015 16:26

I think we are looking at a great entry point again.

[ianb5004] 12/12/2015 13:53

12.3m revs hit = £1m profits = mcap £10m on pe x 10

Current mcap £3.5m

[ianb5004] 12/12/2015 13:51

Hi Nick, i have spoken to 2 who attended the agm. The order book for next year is far in excess of the £11m forecast for 2016. The bod stated they have been deliberately conservative with forecasts. I think they are Looking to exceed market expectations in 2016. (As opposed t cauing disappointment)

£8.3m revenues is break even, every £1m over 8.3 is £250k profits. I personally think 2016 will be nearer £14m revs. - The company can handle 12-14M REVS after that they sub contract work out and margins are then lower. But at 12-14m 25% margins is the norm.

2016 will be there best year ever. Bod stated short term traders ramp requirements will not be pandered too.

[ramas] 11/12/2015 17:32

I'll be posting an update over the weekend but briefly I reckon positive eps is a long way away leaving only the greater fool theory to make money in unprofitable stocks like PEL - how much more money has Joe punter got left to give away ?

[fozzie] 11/12/2015 16:21

I doubled my position today, not what I'd hoped for but there is still much to play for here imo.

[nick rubens] 11/12/2015 16:19

Around 8% changed hands so far. Quite a significant change of hands today. The update wasn't particularly inspiring. I think the market had hoped for a nice surprise but got status quo maintained instead.

[themadstork] 10/12/2015 12:13

Clearly that doesn't include Capex

[themadstork] 10/12/2015 12:12

£8.2m is breakeven on an EBITDA basis. Every £1m t/o over that adds £200-250k to the bottom line at current margins.

EPS is slightly harder to calculate but £20m t/o for 0.25p EPS is waaaaay off. As PJ says, £20m should = 1p EPS minimum.

[dontsweatit] 10/12/2015 12:05

Your projections look a bit on the high side but generally okay to me PJ's what is agandas of ramas? it seem to me £9 to £10 millions turnover is breakeven point for bottom line profits

[pj 1] 10/12/2015 11:59

edit-CAPEX needs confirming obviously

[pj 1] 10/12/2015 11:35

ramas-It is not without risk and nor would I, or should anyone else, stubbornly hold out for £20m Revs. Research and evaluation is always ongoing as any business develops. This is high risk even by AIM standards there is no secret in that. The risk of lumpy Revs from the main Creative side have been well documented last year.

Following 2014 AGM I made the following predictions based on rough 20% growth per annum from then £10m starting Point. Based on 26% GP from comments in the meeting

Revs
PTP
eps

years 1 12m 0.690 .36

years 2 14m 1.11 .58

year 3 16m 1.63 .86

year 4 18m 2.05 1.05 End of tax credits

We will find out tomorrow how the Business model has changed following the merry hill exit and the BoD expectation for the Company.

The figures were just a guide and included no dilution etc (even for director awards which would kick in at some point)

These figures also mainly excluded any A&L Revenues, which I assume would be at greater GP with little admin cost as it would be mainly licensing fees (recurring?). However, following 2015 I am unsure of plans for this area, which I am sure will be discussed tomorrow.

The above is all IMO.

[monkey puzzle] 10/12/2015 11:06

How about a more simple way of looking at the company and others listed on AIM. Compare the MCAP v Revenue for this company against a stack of others and you will see that most are valued at multiples of revenues (and are not profitable either). Just because the EPS argument fits your bear case here it doesn't make you right regarding current and future valuations of this business. It's not as simple as measuring a single metric such as EPS. The stock market is a lot more complex than that and we know that AIM is a market where MMs dominate market pricing mostly based on newsflow and daily trading volumes.

[ramas] 10/12/2015 10:44

Of course forecasts are never an absolute science - 20 Million revenue is my estimate of whats needed to get to 467k profit / 0.25p eps that justifies todays shareprice of 2.5p. Your comments suggest the possibility that PEL can make 10 Million turnover but without radical remodeling of ‘admin’ costs this still puts PEL underwater.
assuming my 20 Million turnover number is accurate and they will get there in 2019 then of course the shareprice needs to be discounted by 4 years of opportunity cost – even being conservative this is going to be 5% a year compounded which takes PEL down to a price of 2p today – maybe less if you allow for slippage and additional dilution – which i also see as a neccesary evil as working capital is on the low side.
I am even prepared to accept your 1p eps and pe of 15 but its at least 4 years away and a huge leap of faith to achieve 20 Million turnover. Even good businesses and execution will experience risk over such a large period and especially in a competitive , customer fickle industry. I do accept the price should move north if there are signs of reaching profitability, not just customer win announcements
My suspicion is that PEL is a greater fool investment because I cannot get the maths and risk to stack up – thats not to say the greater fool flip wont work as there are lots of punters prepared to lap up every new story and cannot be bothered to do the ‘boring’ analysis – i don’t put you in that category of course but PEL is a real enigma as to why there is so much faith in their eventual fiscal success ?

[pj 1] 08/12/2015 18:36

ramas-Im struggling that you have PEL needing £20m turnover to justify an increase in eps?

A rough calculation shows all things being equal £20m turnover would give eps close to 1p and a >15p price target, although I accept funding may at some point be required and some admin costs would probably increase

[ramas] 08/12/2015 17:28

OK PJ here we go ...

7.7 Million is indeed the FY14 turnover – the 10Million i referred to was the FY13 number. I took your 10 million as a referral to future PEL performance from your post 1074 – restated here ..

“IMO. Moscow was rumoured to be circa £750k to £1m. So from above its easy to see possible £10 million turnover for PEL to have first choice (over a number of years) from the framework agreement”

Thankyou for reminding me markets are forward looking – indeed the 20 Million turnover / 467k profit was my attempt to calculate whats required to justify the current 2.5 pence shareprice – assuming this years numbers will be dismal lets assume this is whats required for FY16 to justify a 2.5 pence shareprice one year from now. Readers can pro-rate performance needed to get to a higher shareprice – my conclusion is todays price is fair or even generous based on known information including Hamleys
Anyone care to counter argue why the shareprice should be higher based on some sensible turnover/profit potential or is there concensus 2.5p is a fair value based on all known information - indeed 2.25p is we discount at say 10% ?
Your argument on PEL keeping the market informed is just process over substance and quite ridiculous as we see from your quote on PEL slippage ....

PEL have a previous 5 year target to hit £20m turnover by 2019 but that may have gone back 12 months due to 2014 delays

I would suggest its going to be some time yet before PEL hits an eps to justify a higher price i.e. 20 Million turnover and by your own words this wont happen until 2020 assuming no further slippage ?

AEO isnt a model company when it comes to earning visibility BUT they have consistently delivered over the last 3 years, informing the market as required, plus delivered dividend increases over those 3 years (2013 = 1.5p, 2014 = 2p+3p special cash distributiion, 2015 =3p) and i feel optimistic of an increase to 4p in 2016 – IMO DYOR. Indeed following this years AGM there was a concensus to look into better shareholder communications – i think you took Mike Hales prior year comment out of context – His point being earnings visibility for a small business is by its nature very granular and you can become a hostage to fortune – the plan is to grow the business organically, profitably and distribute the lions share of profits to shareholders (3 year run rate 10%)- new website and office laying the foundation for this to accelerate in 2016

Agenda – well i am interested why you are such a fan of PEL which might tick your process boxes but would seem to have 2020 as the earliest horizon for meaningful EPS – I dont see the upside ?

regarding erroneous forecasts etc on rogue sites its a hazard of the job - we all search for successful businesses in the AIM crud jungle of information/misinformation – I always thought that was the fun part.

regards

[pj 1] 07/12/2015 23:02

ramas 7 Dec'15 - 19:04 - 1077 of 1077 0 0

I have been doing some research but I am struggling to see the opportunity here , what am i missing ? –
PEL has a track history of net losses even at a recent revenue peak in 2014 at £10m / 0.53p loss per share. I see gross profit compression from 30% to 20% over 4 years results so its a competitive environment – maybe explaining the ‘take it or leave it’ framework for the deal with Hamleys.
The big problem are PEL admin costs which needs some serious attention. I didnt see if contracts are open or closed book deals but the relative GP consistency over the years implies formal or informal open book approach.
PJ you mention that with the Hamleys good news turnover might reach the dizzy heights of £10m but to me this means more losses unless they can hit 40-50% GP margins and control admin costs aggressively. I also note 14 million of additional share dilution in the last year which will likely continue to keep insiders happy ?
To justify todays share price of 2.5p on a pe of 10 would require £467k profit after tax (or 0.25p eps) – applying some metrics to current data suggests £20m turnover minimum. For PEL to rise on fundamentals turnover would need to be much much higher – say 300% – is this really a possibility ?
Seems very early stage with risk and potentially a lobster pot if you own in size (like another favourite of mine AEO but paying a 10% yield). I have no doubt Paragons customers love the work they do and given a few years this could translate into bottom line profits and maybe a dividend – I will keep observing and wish holders good luck

================================================================================
ramas, you raise some interesting points. Have you been drinking? Id stick with AEO and nothing else if I were you.

Turnover in 2014 was £7.7m. where has £10m come from?#

GP suffers from previous use of Sub-contract at lower margin hence variances. If you had spoken to the Company they would have explained. 25% seems a fair average from your figures

Yes all business's are in a competitive market!

''Revenue from Hamleys may reach the dizzy heights of £10m'' Have I said that? Or did I infer the framework could include an estimated amount over a number of years based on Web comments from Hamleys? Did I use the word ''dizzy''?

''unless they can hit 40/50% GP'' Agree. I do not believe PEL can hit that % GP

''14 Million share dilution in the last year to keep insiders happy''? what dilution? what insiders? Do you mean 2013/2014?

''To justify todays share price of 2.5p on a pe of 10 would require £467k profit after tax (or 0.25p eps). I agree with the maths and the P/E ratio used,However.... Incorrect. Markets are historically forward looking not backward looking. I'd make a note of that if I were you

"applying some metrics to current data suggests £20m turnover minimum'' Disagree. PEL have a previous 5 year target to hit £20m turnover by 2019 but that may have gone back 12 months due to 2014 delays. Why is £20m a minimum t/o target? What is AEO's 1, 3 or 5 year target?

''For PEL to rise on fundamentals turnover would need to be much much higher – say 300% – is this really a possibility ?'' 300% is unreasonable yes. I cannot see in the foreseeble future PEL achieving >£30.8m turnover. However you need to check your future fundamentals imo

Agree AEO pay a 10% current dividend. Pel pay no dividend

Have you phoned or called the directors of PEL? I suspect not somehow? Who did you talk to? What are PEL's plans for the future? You fail to mention it so I assume you have not researched this area in any depth or you are not interested in the future but past performance? What are AEO's future plans (financial?)

PEL hold their AGM on Friday (no doubt despite all your research you were obviously not aware). I shall be attending. I will guarantee that when I ask about future plans and estimated future turnover and profit margins that it is not be responded to in the AEO way of '' we are not going to get involved in that Rubbish!'' (2014 AEO AGM)

I strongly suspect PEL will have broker forecasts. Will AEO?

I would also expect PEL to dispute and remove any false forecasts, if any existed in the market and replace with more accurate ones. Do AEO have a history of that? Please supply examples!

I am currently unsure of your agenda here as well as your ''research''

I really look forward to your reply#

Regards

PJ

EDIT- for the avoidance of any doubt I had my first squash match after 18 months out injured tonight, 2 stone heavier and I got trounced. I have also had a drink after,