React Share Discussion Threads

[rivaldo] 22/10/2020 07:54

Interesting. On EC's figures for the current year, with a rounded £400k PBT, the P/E falls to a quite reasonable 16.5. Given the £1.8m cash pile, and the current £4.8m EV, the ex-cash P/E falls to just 12. The PEG (based on a P/E of 16.5) falls to a mere 0.14. As we know, any PEG below 1 is deemed to be good value. A PEG of 0.14 is therefore an out and out bargain. And of course, if you strip out the £1.8m cash - almost 30% of the m/cap - then the valuation looks even cheaper.

[yump] 22/10/2020 00:05

EC’s figures look reasonable to me. P/e of 30 falling to 20 at a share price of 1.5p. Difficult to know if thats an attractive valuation.

[brownbear3] 21/10/2020 23:49

Could be snapped up by one of the big boys

[sikhthetech] 21/10/2020 21:48

Reat are expecting an extra £1.3m revenue compared to fy2019? That's not much considering we're in the biggest pandemic for 100yrs. "REACT has continued to make strong progress in the period, achieving 42% organic growth in revenue to approximately GBP4.4m* (12 months ended 30 September 2019: GBP3.1m)."

[effortless cool] 21/10/2020 21:44

I have updated my valuation model for REAT and now get to 1.26p per share. That's 5% below the current price, but I am happy to hold as my valuation has been tracking up at each model revision and I expect that to continue when I roll forward my valuation window once the full year results are published. Annoyingly, Allenby have not extended their coverage to 2021, so their note is pretty pointless. I have £4,843k revenue for 2021, £398k profit, 0.08p EPS and £2,144k net cash. The interesting thing is what has been happening with gross margins, which have progressed as follows (Shaun Doak appointed 2019 H1) 2018 H2 19.3% 2019 H1 26.4% 2019 H2 30.8% 2020 H1 33.2% 2020 H2 36.0% (est) I am projecting 36.5% for 2021 H1 and 37.0% for 2021 H2 although, clearly, given the historical trend, there is scope for these to be exceeded.

[yump] 21/10/2020 21:33

The best thing about the accounts is they're easy to work on... 4.4mln revenue. minus 3.08mln (Cost of sales min has been 70%) Gross Profit: 1.32 mln Admin: double first half say 1.2mln Profit: 120K So unless admin costs drop significantly in the second half, 200K profit is pie in the sky and has certainly not been 'conservatively' estimated. Perhaps there is something else at work...?

[yump] 21/10/2020 19:14

Also just repeating the stuff about a 'similar upswing' doesn't make it any more valid, without backing it up. You seem to have totally missed the point that businesses moving from loss to profit always show a rapid change in profitability. Come on now, its trivial stuff.

[ccr1958] 21/10/2020 17:14

Would be a big shot in the arm to shareholders

[investographer] 21/10/2020 16:52

The CFO needs to buy a few too

[ccr1958] 21/10/2020 16:39

Thx rivaldo.....2 out 5 board members then ..be nice if Sean bought a few million.

[sphere25] 21/10/2020 16:15

Have put this on the watchlist for the first time after reading the update today. The valuation isn't bonkers cheap nor is it overly expensive imo, likely explains why the price hasn't moved materially today or for a while. The volume doesn't suggest a change in sentiment to that view either - a happy market neutral. However, they are clearly sat in the sweet spot, and anyone you speak to in this area are bonkers busy, so I think there is every possibility REAT could keep smashing forecasts out of the park. Some of that is definitely priced in, but the higher earnings look very sustainable in this new world and beyond. First high level view too bullish? No position yet, but could be a speculative one to tuck away. DBAM DYOR

[rivaldo] 21/10/2020 15:54

It's all here ccr1958: Https://www.reactsc.co.uk/react-group-plc

[ccr1958] 21/10/2020 15:46

Do the directors have skin in the game here ?

[rivaldo] 21/10/2020 14:04

You cannot simply forget about the £1.8m cash pile from a valuation perspective. REAT now have a £4.8m EV (m/cap less cash). For the current year a similar upswing to last year would see PBT at well over £500k - an ex-cash P/E of under 10 and an extraordinarily cheap PEG. At only say £350k PBT the P/E would be just 13.7. There's also the likelihood that REAT will make an earnings-enhancing acquisition from the cash pile to jump-start earnings further. Furthermore, in the year just ended REAT made a considerable investment in additional staff and overheads to achieve faster growth. Not only will this have dampened the numbers for last year, but it will benefit this year's numbers as the the new staff are now up to speed and more productive.

[yump] 21/10/2020 13:51

Without knowing the relationship between costs and revenue, assuming a jump to 500K profit is just wishful thinking, especially as the movement from loss to profit ALWAYS looks impressive - for every company, everywhere, since time began. Anyway this year at 1.3p the p/e after year end will be about 30. Whether that’s cheap or fully priced is very difficult to assess, without a forecast. A forecast of 300K would bring the p/e down to 20. Perhaps thats more reasonable.

[zico01] 21/10/2020 12:36

The business generated nearly £350,000 cash in second half alone on only £2.3m revenue >>>>>>>>>>>>> this is FANTASTIC for such a small micro cap. From todays TU ; Year of strong progress in which we saw accelerating organic growth The new financial year has started well with momentum continuing Core sectors of the business performed well alongside net new customer relationships that have evolved in areas of development such as education and residential care homes These are good pointers for the current year

[zico01] 21/10/2020 12:03

Investographer many thanks for the Allenby note rivaldo agree with your post above Also of note is revenue of £4.4m and cash £1.8m are subject to audit they could well be slightly better.

[rivaldo] 21/10/2020 11:34

A couple of additional points... - I note that today's RNS mentions specifically a couple of times that REAT have experienced increasing business with new customers in residential care homes. In the past it's not been possible to confirm that REAT covered care homes, and imo this could be a large source of new business given the pandemic and the need for cleanliness - the new/current year should benefit from both COVID-19 related new business and non-COVID workplaces and sectors returning to normality or nearer normality as the pandemic waxes and wanes and lockdowns reduce or are more targeted.

[investographer] 21/10/2020 11:14

Thought there would be a better market reaction tbh The CEO Shaun Doak & CFO Andrea Pankhurst need to dig into their pockets & make some maiden purchases now. Not having any skin in the game is poor & not a good look.

[investographer] 21/10/2020 10:25

http://www.allenbycapital.com/research/research-reat_6_2411331195.pdf

[ged5] 21/10/2020 09:38

Thanks Rivaldo for 1275 and the Allenby note. I was just going through their note from July. They had revenue at 4.3M and PBT at 152K. Going off their 34.9% gross margin I had worked out the PBT would be around 186K but the company does say they expect to exceed market expectation! So in excess of £180K PBT for this year and if you're correct 500K for next year. I guess that makes REAT a growing company!

[mickinvest] 21/10/2020 09:27

All sounds good rivaldo, future looks good cheers.

[rivaldo] 21/10/2020 09:21

Allenby have a new note out and have increased their forecasts accordingly. They now go for: EBITDA : £220k, up from a loss of £182k last year - a £402k turnaround PBT : £182k, up from a loss of £178k last year - a £360k turnaround Net cash : £1.8m Once again, it's likely that Allenby will have been guided conservatively, so I'd guess that the final EBITDA will be say £230k-£240k and PBT around £200k (no tax payable). REAT now have a £4.8m EV (m/cap less cash). For the current year a similar upswing would see PBT at well over £500k - an ex-cash P/E of under 10 and an extraordinarily cheap PEG. At only say £350k PBT the P/E would be just 13.7. And there's also the likelihood that REAT will make an earnings-enhancing acquisition from the cash pile to jump-start earnings further.

[yump] 21/10/2020 09:11

So what are the expectations ? Usual question