React Share Discussion Threads

[ged5] 01/7/2020 10:43

Yump, behave yourself. Perhaps a nice cup of coffee.

Effortless Cool, thank you for sharing the way you have come to a valuation. I think we need to hear what they have to say this afternoon.

BUT
Looking at the adjusted eps of .02 then the pe is 72.5

I think it was Yump who suggested an eps of about .06 for the full year in an earlier post. Looking at the PE for some support services companies, they are quite high.

RTO for example is 47.6.



If your thoughts are that we are in the initial stages of growth then a PE of 40 is not unreasonable.

So if .06 is achieved for the full year a share price of 2.4p can be expected.

Just another way of looking at a target price.

[yump] 01/7/2020 09:29

I I I I I

So what sort of recognised important person are you, that your targets are anything worth reading.

“Target adjusted p/e ratio”

Wow thats impressive

[effortless cool] 01/7/2020 07:02

zico01,

I fitted a trend to half yearly revenue from 2016 H1 to 2020 H1. I then set 2020 H2 £500k above this trend, reflecting mainly known extra revenue expected from COVID-19 related work. For 2021 H1 and 2021 H2, I set them 15% above trend on the basis that COVID-19 would drive a longer term pickup in cleaning work and that they would turn the fundraising proceeds to good use.

This gives 2020 revenue of £4,558k (H2 £2,467k) and 2021 revenue of £4,843k (£2,368k H1, £2,474k H2).

Happy to discuss alternative assumptions if anyone wants to make a case for higher or lower figures.

[zico01] 30/6/2020 23:26

Effortless Cool

Your quote "revenue could be higher ( and i have not been aggressive )"
What figures are you working on,could you be a bit more precise.

[effortless cool] 30/6/2020 21:31

Based on the H1 results, my valuation has increased from 0.4p to 1.19p. Still well off the current price, but trending rapidly in the right direction.

The main driver of the change was that I am now giving credit for an improving trend in gross margin. It had been trending steeply down until 2018 H2, but the last three half year periods all now show progressive improvement. Also, given the good rate of top line growth, I have raised my target adjusted PE ratio from 12 to 15.

The valuation shortfall to the current price means that I don't feel compelled to buy more at present, but I do see considerable upside and not much downside in my forecasts. In particular, revenue could be higher (I have not been aggressive and there are no broker forecasts to calibrate to), gross margin could improve more rapidly than I have assumed and operational gearing benefits could accelerate.

[rivaldo] 29/6/2020 22:51

Good to see 8.3m shares traded today. I suspect there were probably some short-termers in for the results and maybe hoping for additional news flow, so these volumes should have ensured that they or anyone else could exit.

[ged5] 29/6/2020 15:30

Courts and tribunals may adapt their existing cleaning arrangements using their current cleaning contractor. We can provide advice to help with this process, recognising that most cleaning companies do not have the in-depth skill and experience which React has developed as a hygiene and decontamination specialist. Our methodology ensures that cleaning and disinfection are two parts of the same process. This means we’re able to avoid leaving residues that could lead to health risks of another kind, such as skin irritation or damage to clothing, if used long-term.

[sikhthetech] 29/6/2020 13:06

Yump,
If you're looking for a Covid immune share, look at TLY...

They're not dependent on Covid19, are a healthcare provider so also economic turmoil immune.

The recent TU stated that adj EBITDA will be ahead of market expectations of £3.4m . I'm expecting revenues will be around £100m-£120m.

Mcap £39m

[investographer] 29/6/2020 11:51

I am amazed at the poor reaction here, back to the placing price, strange.

[jeanesy] 29/6/2020 11:11

Shares have nearly tripled in a short space of time. Profit taking is inevitable for those who bought below 1p imo. Still no guidance on full year leaves people guessing as to whether these are cheap or not. I haven't read anything in report that has made me change my mind so I will watch and wait.

[sikhthetech] 29/6/2020 11:10

They are already 1/2 through H2, Q4 starts on Wed.. so only 3 months until fy end.

Yet they are still unable to provide forecasts for the year.

Even if they publish what these 'management expectations' are, it would be something to go by.


The outlook was as they previously stated... the potential is already factored in the price..

[enewman36] 29/6/2020 11:05

Half year report provides good reading, buys ahead of sells and we are red, go figure ffs!

[moizz] 29/6/2020 10:42

That's the gap filled, let's hope it now reverses.

[yump] 29/6/2020 09:41

If any small stock pickers want to see the gearing of profit to revenue, when overheads are stable, in action, check out OMIP's half year results:



Surprised more aren't interested. Its relatively covid immune.

[superhoop2] 29/6/2020 09:36

They may be going down the Boohoo route ... underestimating and over achieving.

[yump] 29/6/2020 09:23

Perhaps they’ve got no guidance from the company.

Easy enough for investors to do a best and worse case though.

Maiden profit could be anything. I would have thought given the upbeat report, that they might have said ‘increased profit over first half’, or ‘accelerating profit’, or similar.

[cheshire man] 29/6/2020 09:22

Thanks for the link rivaldo, very pleased with news this morning and happy to hold :-)

[rivaldo] 29/6/2020 09:02

Allenby have already issued a 15 page Initiation note this morning:



They don't yet feel able to produce forecasts ofr the year to 30th September, which seems extremely over-cautious given we're now almost in July and we know REAT are doing well.

Especially given the confidence radiated generally:

"A bright future in prospect – The Group reports that the second half has started well and is confident of delivering a performance ahead of expectations, including a full year maiden profit. With a heightened awareness of the importance of cleanliness and hygiene together with strong operational gearing within the business, we consider that the future for REACT is very positive and further investment in sales and marketing are likely to bring rich rewards."

I particularly like this extract:

"Much more can be done to provide additional services to existing customers as well as expanding the customer base further and this can be accommodated without a corresponding increase in the cost base so the impact on operational gearing and profit is likely to be substantial"

And:

"we foresee a very positive outlook for the Company in terms of organic growth going forward and which over time could be supplemented by suitable bolt-on acquisitions."

[yump] 29/6/2020 08:52

Its reasonably easy to do afew numbers to see ‘what if’ to get an idea of valuation.

Eg. If you take the adjusted figure and say they do double that in second half (0.04p) from £100,000 profit. (So year profit is £150,000).

Thats 0.06p earnings, which at current price is a p/e of about 30.

At least can get a range of possibilities in the absence of anything else at the moment.

Then depending on personal view can decide if cheap, fair or expensive on bslance.

[andyview] 29/6/2020 08:46

Good set of figures and positive outlook. These figures only include one month (March)of COVID related business and so we could see another big boost from that in full years.

Added a few more

Gla

[rivaldo] 29/6/2020 08:39

Agreed - the interims show a company growing nicely, with turnover, margins, profit and prospects on the up even before the beneficial impact of COVID-19, which really only helped the last couple of weeks in March.

The conclusion says it all:

"The second half of the year has started well, with good trading across key sectors, especially healthcare, rail and facilities management. We remain confident of delivering a performance ahead of management expectations for the year to 30 September 2020 including a full year maiden profit."

REAT now has probably around £1.5m net cash and rising, and it's good to read that:

"Our activities are not capital intensive and, on an underlying basis, are cash generative"

And as we saw from the last investor meeting, "We believe there is opportunity for material growth amongst a number of both large and medium sized organisations, many of whom are already customers."

[ged5] 29/6/2020 08:32

Solid results. Maiden profit as previously stated.

Already have a major contract of 400K announced some of which will be in the full year accounts.

Also most of the contract announced in January will be in the second half.

Placing money to boost the cash balance.

Now all we need are a few more contracts announced.

[zico01] 29/6/2020 08:17

They have 3 months to go before year end ( September ) and have already said :

"we are confident of delivering both a 'maiden profit' and a full year performance ahead of management expectations."

[saucepan] 29/6/2020 08:05

Myself, I am happy with the numbers and outlook; and it is good to see the stock opening blue. The chart looks nicely set.

[zico01] 29/6/2020 08:00

Revenue £2.1 million for 6 months 2nd half is gonna be a lot stronger