Zegona Communications Share Discussion Threads

[skyship] 04/5/2021 17:47

Any thoughts on that Tilts?

[elsa7878] 04/5/2021 16:14

And mine. Surprised the share price isn't climbing as an increased chance of a total payout has to be good news.....and 15% upside for holding for 5 months isn't to be sniffed at.

Marwyn has nearly 20%...think it just needs a simple majority of votes.

[skyship] 04/5/2021 16:09

Well, that certainly sounds good - they'll have my vote...

“That subject only to and conditional upon the completion of the announced sale by the Company of its Investment in Euskaltel, S.A ("Completion") the Company will promptly (and in any event within one month of Completion) return at least £350 million to its shareholders (by way of capital distribution, scheme of reconstruction or otherwise) and pending such return the Company makes no further investments or acquisitions."

[redalert] 04/5/2021 14:49

Skyship, for the life of me I cannot find the RNS (only the follow-up Alliance News item), however ZEG have now put one out

[tiltonboy] 04/5/2021 10:55

Pot/Kettle come to mind

[skyship] 04/5/2021 08:48

RedAlert - I'm sure we all are, especially MVI holders - of which I am one. Did you see a mention somewhere; as nothing from MVI that I can find?

Bizarre that they should be seeking clarity when they control the game...

[redalert] 04/5/2021 07:52

marwyn seeking clarity regarding possible returns to shareholders re EUS

[pireric] 20/4/2021 15:46

I suspect for many investors its a mix of two things:
1) a perception that this is not being run for shareholders but management. Im not sure that is really true, if you look at the precise details of the incentive plans and the need for a 5% pa return hurdle rate. Combined with the track record of management pre and with Zegona. Frankly, investors might look at the share price chart and have reservations, without accounting for tenders and large dividends.

2) the historic liquidity discount this has had. Institutions outside of those in fundraisings have little reason to jump at the opportunity given its very small and used to be single asset with Euskaltel and Telecable. There was also a track record discount as I think there was a perception that Euskaltel was expensive and the ultimate crystallisation value could be lower than the trading share price.

The institutional discount wont disappear as nothing has changed, but we've moved to a discount to hard cash versus a discount to trading assets. As a shareholder, there's a 20%+ uplift on a liquidation, and even if they dont do that, a replica of past deals would suggest a pretty good above inflation return pa plus potential for that discount to narrow at any point

Eric

[cerrito] 20/4/2021 14:30

Yes pieric, it would be interesting to be a fly on the wall in the discussions they will have with MVI and Artemis as well as Fidelity, Canaccord etcet.
I see that the EUS share price is very stable so the market is v comfortable that the deal will go through.
The question I have difficulty answering is that given the adjusted NAV is £1.60 and the current buy price is £1.35 why am I so reluctant to buy more?

[pireric] 20/4/2021 07:30

"Zegona intends to consult with shareholders to understand their views on allocation of proceeds if and when the Offer is completed successfully"

While the base assumption has to be that ZEG continues with its strategy in a new deal, if the lacklustre share price stays where it is, could well see some large shareholders tempted to request a cash out post Euskaltel, which would be around 160p accounting for preferred returns, MIP etc. Annual IRR they calculated with respect to Euskaltel was >10%. Hard to imagine that a big portion of the cash proceeds are not given back to shareholders

Either way, discount to largely hard cash assets seems still harsh and must give large shareholders pause for thought about whether it makes sense to just close the NAV discount by requesting a cash distribution. Or to go again and try to earn a decent IRR as with past deals

Eric

[dan_the_epic] 09/4/2021 11:44

Do not believe tax is an issue elsa. Look up substantial shareholdings exemption legislation that provides exemption in the uk from capital gains tax as written in their annual report. These boys have done a good job on their investments and have a good track record in industry which is why Zegona was set up in the first place. stock should be 150p min IMV

[livewireplus] 09/4/2021 07:59

Indeed - but new opportunities may be limited in present market ??? They had premium knowledge of the industry / company they bought in to before - and added no other investments during that time. I'll be happy to sell out on takeover - not wait to see what 'opportunity' they chase next (if indeed they do go down that route).

[skyship] 09/4/2021 07:57

Whole deal of E428 hedged at 115.67, ie £370m. A pretty good deal IMO.

[elsa7878] 09/4/2021 07:49

I'm not suggesting that they don't deserve it - where is the agenda?

All I'm saying is that if you know The Marwyn way, they will likely look for another investment. That means leaving a decent slug on the table (£20 million?).

Tax to pay?

[livewireplus] 09/4/2021 07:48

Indeed - the Management are on a nice little earner. But they spotted the opportunity years ago so deserve it (up to now). Let's see if / what they do to keep it going once the takeover has gone thru.

[dan_the_epic] 09/4/2021 07:41

I literally wrote it yesterday elsa, are you serious. Its a 5 YEAR 5% per year hurdle scheme. If the share price gets to 170p I calculate 7.2p. I wish people would drop their agenda against management. They have delivered a very strong return in the two investments they have done and that accounts for running fees. I have earned over 6% per year since IPO taking the the Telecable tender and dividends and assuming 160 pence. That shoots the telco index out of the water. A discount of 15% is not at all a function of time to completion?? Euskaltel is at a 1% discount to the offer price, that is time to completion!!

[elsa7878] 09/4/2021 07:37

169p plus bit of cash on the balance sheet.

Sent 2 emails to the management to ask for confirmation of the expected scheme payment to management and they have not replied....

I'm expecting around 10p...

Leaves 160p.

Discount is therefore around 15%..which is a function of time to completion and the fact that they will probably retain some cash, if not just so the management can keep paying themselves a £1 million a year each while they "look" for another investment.

Anyone know about the tax implications - presumably they will have to pay some...

[rimau1] 09/4/2021 07:35

Logic suggests a heavily weighted capital return to me. You wouldn’t normally go to the expense of a hedging contract if the intention was to retain substantial funds. The track record of the mgt team means they will raise future funds easily so why not return all the proceeds to close the valuation gap and then simply conduct a placing when the new target is identified?

[tiltonboy] 09/4/2021 07:34

LP, that was already known at the time of the announcement. All they have done is take FX movements out of the equation.

[pireric] 09/4/2021 07:33

Or more simplistically, the £ has been strong since December and there's a good chance that it at least remains where it is today particularly versus the euro given relative COVID situations etc. So this takes out that tail risk of FX eroding away at the expected proceeds while the transaction completes and looks like they've timed it OK on a little currency pullback.

Eric

[tiltonboy] 09/4/2021 07:23

ZEG hedging the FX, therefore protecting it's GBP proceeds. Pretty much rules out a further non-GBP acquisition...but does it indicate proceeds being returned to shareholders!

[livewireplus] 09/4/2021 07:21

Re this mornings RNS - then GBP370m seems to be about 25% uplift on the present mkt cap (as indicated on advfn info). Look forward to a rise of some sort today ....

[dan_the_epic] 08/4/2021 12:18

1) it is a 5 year scheme with a 5% a year return threshold from the new base so the management payout is up to 7.2p per share if this gets to 170p;

2) To Igbert. That may explain it to you but it does not to me. Did you read my post 219? Telcos have been the dogs dinner over the last 5 years and these boys have netted me a 6% return per year if this goes to 160p which is more close to raw liquidation value. That I am delighted with and deserves at least NAV -msp when the NAV is cash !, not a discount.

This is buying money for pennies under the pound

[red ninja] 08/4/2021 12:17

Posted earlier in this thread there was "Liberum View: "We would expect the majority of capital received by Zegona to be returned to shareholders."

I am not so convinced, I would have thought they will return some cash, but I would expect them to use some/a lot of the money to invest in a new company which they think is undervalued and/or could be enhanced. I mean if you read the annual report they employ office staff to analyse companies just for that.

[igbertsponk] 08/4/2021 12:12

1) Of course! Like all Marwyn vehicles the management do better than the shareholder!
2) No - they'll keep the cash and try to do something similar again

Those answers explain for me why there is a discount.