Purple-shirted fairies, hackers and PVC
M&C Saatchi – Vin and the ‘purple-shirted fairies’
As I have stated many times before – do not dismiss Vin Murria.
She may well have been kicked off the Board of M&C Saatchi (LON:SAA), the advertising group in which she and her cash-rich quoted acquisitions vehicle AdvancedAdvT (LON:ADVT) have jointly a 22.3% holding.
However, Vin is certainly no fool. She started buying into the accounting scandal troubled media group’s equity when the shares were trading at well below 50p a couple of years ago, they have subsequently been up to 227p, closing at 165p last Friday night.
That the Saatchi Board instantly recommended the higher Next Fifteen Communications bid when it was made, then proceeded to get rid of the proven successful businesswoman – shows that if Vin manages to succeed with her previously lower but now higher bid, then there are a few of the Saatchi board members that have marked their cards.
Next Fifteen shares collapsed last week after a corporate hiccup. And now the Saatchi cowboys have withdrawn their recommendation.
So that leaves Vin back closer to the ‘driving seat’ and the market is wondering what her next move will be, she is obviously in no rush.
Vin built up and very profitably sold off a couple of companies, including Advanced Computer Software when she was one of my SQC Research clients. That rose 60 times plus in value before being taken over in 2015 for some £650m.
My late father-in-law called all of the ad men that he ever had dealings with ‘a bunch of purple-shirted fairies’ – which of course in today’s ‘woke’ generation would be totally unacceptable as a description, but it still makes me laugh.
Just because they can draw pretty story boards and prepare well-worded campaigns does not mean that they can handle the real machinations of a £200m plus market capitalised business.
However, Vin can and has proved herself many times over – which is why having got rid of her shows just what a bunch of silly ‘boys’ (that is me being polite) they really are.
The Saatchi executives have stated that they were not sure what Vin’s approach to the business would be – wouldn’t you have thought that must have been one of the first questions they should have asked her when her cash-rich vehicle made its first offer?
I understand that she has in fact lined up a number of accretive acquisition targets for her enlarged group, if she succeeds in winning Saatchi.
And remember she actually has a load of unspent cash on her ADVt vehicle’s balance sheet, that would grease Saatchi’s wheels as it expands.
If her bid succeeds the Saatchi shareholders would end up with over 50% of the enlarged vehicle’s equity.
The stricken Next Fifteen Communications bid would see them holding some 14% instead as they go forward.
I know who I would go with – Murria has already shown her worth and is playing a steady and shrewd game – I wonder what Charles and Maurice say about the situation.
So will Vin win through – oh I really do hope so – and if she does then the current Saatchi shareholders will undoubtedly, in my view, do well, as she shakes up both the Board, the business and the books at Saatchi, whose shares closed last Friday night at 163.50p.
Hold very tight – there could well be a lot more fun in store.
‘Vin to Win’ is my new motto!
(Profile 11.05.20 @ 64p set no Target Price)
Kape Technologies (LON:KAPE) – a ‘thundering’ generator
This company really is one of my ‘ace picks’ in the digital security and privacy software business sector.
Last Thursday saw Don Elgie, the group’s Chairman, tell shareholders that the group was proceeding well to plan so far in this current trading year.
His AGM Statement covered the 2021 financial year as being ‘transformational’ with its sales up from €122.2m to €230.7m, while adjusted pre-tax profits were up nearly 142% at €72.8m (€30.1m), and earnings up 121% at 29.8c per share (13.5c).
The biggie, of course, was the acquisition of ExpressVPN late in the year, the benefits of which will start to show through in the next few years as massive cross-selling gets underway.
Elgie went on to say that –
“Kape is a leader in the consumer security and privacy space, servicing some 7m paying subscribers worldwide and growing. We expect our strong customer growth to accelerate further as the privacy and security markets become more mainstream, with consumers increasingly viewing our products as critical components for their daily digital lives.
Looking ahead, we are also focused on further leveraging our significant M&A experience and extended product pipeline to accelerate our market, product, and SaaS customer reach.
Kape is now in prime position to lead the market given our current growth trajectory, and we look forward to expanding our footprint through organic growth and strategic acquisitions, as we have done consistently over recent years."
This really is a ‘classic’ business that has massive upside.
Analyst Caspar Erskine at Singer Capital Markets rates the shares as a ‘buy’ with a price objective of 500p per share.
For the current year he sees revenues more than doubling to €618.5m, with profits more than doubling to €159.1m and earnings lifting to 39.2c per share.
The coming year to end December 2023 shows his estimates at €690.7m sales and €181.7m of profits, with earnings of 44.6c per share.
Despite having risen 36p to close at 364p on Friday night, I believe that this is a ‘cheap’ price.
The group’s cash generation and massive annual recurring revenues would make it an absolutely cracking takeover proposition for any aspiring private equity player on the global stage.
I am very much more bullish than Erskine.
The shares are totally undervalued – hold very tightly indeed.
(Profile 21.12.20 @ 172p set a Target Price of 215p*)
(Profile 01.11.21 @ 402.5p set a Target Price of 600p)
Safestyle UK (LON:SFE) – the strong recovery now underway will move the shares
To the UK homeowner market, this group is the leading retailer and manufacturer of PVCu replacement windows and doors – and it is going great guns.
Since its Covid-19 and early in the year hacking hassles, this group has been out there and banging its drum loudly – and with effect.
Its first Quarter order intake has been ‘robust’ up some 16.5% by the end of April.
For the first four months of its trading year, it has increased its sales by some 6.5%, with March and April being particularly strong showing 10% growth over the ghastly January cyber-attack problems.
At the recent AGM, held two weeks ago, the group clearly stated that its marketing plans will balance out any decline in demand.
The first half results to 3 July will be reported on Thursday 22 September, however the group will be holding a Capital Markets Day on 7 September.
Analyst Andy Hanson, at Zeus Capital, the group’s NOMAD and joint-broker, is estimating that the full year will see sales up 7.8% to £154.5m (£143.3m), while its adjusted pre-tax profits will fall to £4.7m (£7.6m) with earnings down to 2.8p (4.7p) but still able to cover the 0.7p per share dividend against nil last year.
For the next two years he sees sales of £167.3m then £177.3m, with profits more than doubling in 2023 to £10.8m, then £11.7m in 2024, worth 6.1p then 6.6p per share in earnings and covering a 1.5p then 1.6p dividend.
Charlie Campbell, at the other joint-broker Liberum Capital, rates the shares as a ‘Buy’ with a price objective of 75p per share.
In fact, he states that the group’s shares could almost triple from current levels on a full restoration of profits.
The group’s order book is getting stronger, while end-year cash balances could be close to 25% of the current market capitalisation of £58m.
I look for another positive Trading Update late in July, by which time the shares could well be starting to climb back up again.
Recovery is certainly what the group is currently determined to achieve.
That is why I rate the group’s shares as an excellent one-year proposition, from the current 42.5p, I see them rising back up to the 62p level at which they stood this time last year.
(Profile 06.01.21 @ 36.5p set a Target Price of 48p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)