QPP
Mayfair Broker research
won't be saying the name of the broker, because that would be a breach of trust to my friend who works there. But as Pingu777 suggests they have done full and thorough due diligence on QPP and have met Rob Terry on a number of occasions in 1-1 meetings. They also have over £3bn in assets under management so they aren't small (although not massive either). That research note was posted to clients as an update for a holding which was initiated at 16p. It wasn't full of technical analysis or numbers because that isn't the language of most PI's, but it certainly cannot be labelled as "hearsay".
My only intention for posting this was to encourage current holders that there are plenty of buyers out there, and reputable brokerage firms that continue to stand by the story and company.
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QPP
Mayfair Broker research part 2
Today 11:21
As we see it there are a number of catalysts that have the potential to drive a re-rating in the shares from the currently depressed levels, the most crucial of which being the company proving its ability to generate cash. We believe that there are a number of factors that could drive this – firstly, the ongoing roll out of the collaboration protocol (where some debts can be settled one month after invoicing), secondly, slowing growth – the intrinsically high upfront case acquisition costs mean that Quindell must invest heavily in order to grow. As reflected in the rebuttal statement made by the company to the Gotham allegations, the company did actually collect a significant amount of cash in 2013 (£270m), albeit this was substantially invested straight back into buying new cases. Accordingly, as the pace of growth at the group slows, and its receivables book matures, the natural levels of cash generation should improve.
The other potential catalyst is the move to the Main Market (which was scheduled for June), upon which we keenly await news. We have no feel for the work that needs to be undertaken by the UKLA to pass muster and secure FTSE 250 inclusion which would potentially trigger extensive tracker fund buying in what is a materially institutionally under-owned stock. One would like to think that the UKLA’s timetable for the possible move to the Full List follows a strict and predetermined process, and the team haven’t been swayed by what we felt to be share price action and/or sensationalist press comment. However, we certainly wouldn’t be surprised in a slippage in the Full List timetable and acknowledge that this would be seized upon by bears as implying something “wonky” in the numbers, although this wouldn’t necessarily be the case.
Every investment decision we make needs to be made on a risk/reward basis. We acknowledge that Quindell is not whiter than white. There are a number of uncertainties within the business and we would like to see a markedly stronger and more objective non-executive board, a pause in acquisitions and the temporary closing of the door to cash consumptive new business in the Services Division. However, on balance, we are comfortable with the principles behind the cash consumptive working capital model of the claims management business (and that is why we supported the £200m raise last November at 16p to capitalise on new contract wins) and welcome the opportunities afforded by the move to better rated higher-margined telematics opportunity; the RAC contract win of the 7th April looks an exciting development and the potential for expansion into North American markets looks material with a NASDAQ list to be borne from that too. Accordingly, we believe that there is considerable merit to the story and at 20p and on a risk/reward basis the shares (on 5x FY14E earnings) should be bought.
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QPP
Strong coverage from Mayfair Broker
Today 11:18
This is my first post but I've been watching this board with interest for many months now; a friend of mine works in a well regarded brokerage firm in Mayfair, this piece on QPP is from their internal Small Cap Research analysts.
It's long so due to character limits I will be breaking it over 2 or 3 posts. Hopefully it will act as a boon to those of you who are holding out for an uplift, and a confirmation for longer term holders of why you're in the story.
Quindell is a core holding within our portfolio. The stock has attracted a lot of national press and bulletin board comment in recent weeks. This is of course the ultimate marmite stock in the UK stock market. Some proper institutional investors like Fidelity and M&G are on the register. Some investors won’t be prepared to hold it because of mistakes Founder and CEO Rob Terry made during the last tech boom. Some hate it, or at least are prepared to short it (whilst the FCA Daily Short Positions Report suggests a short interest in the company of c.4.6%, this only covers individual short positions of over 0.5% - currently short interest is now rumoured to be over 6.5% and maybe as high as 10%). Whilst the recent price action, precipitated by the release of a bearish “research” report disseminated via social media has been understandably unsettling, we thought it helpful to rationalise the merits of the story from our perspective.
First up we readily acknowledge that there are a considerable number of “red flags” attached to this story. Rob Terry certainly has had a chequered past, given the travails at the Innovation Group more than a decade ago. The pace of acquisitions at Quindell (and associated paper issuance) has unquestionably been aggressive (but the model has been approved by the industry regulator, the SRA), whilst the attempted use of the derivative instrument was clearly a mistake that has been acknowledged. The subject matter within the business i.e. claims management outsourcing for the motor insurance industry is relatively complex for investors to understand, not least given the state of flux in the industry following the relatively recent legislative change. Perhaps the key issue facing the group however is the inherently cash consumptive nature of its work (it can be of the order of 6 months to payment in the claims outsourcing operations), which will always lead to investor concern and provides an easy basis upon which bears can allege earnings manipulation.
http://www.lse.co.uk/member-info.asp?nick=Daytrader25
That said, we derive more comfort from the fact that KPMG signed off the 2013 Report and Accounts on an unqualified basis rather than the Gotham City “research” report which, whilst highlighting some good points, many of which were answered by the robust riposte from QPP, also contained what we felt to be inaccuracies and some commentary that we believe was misleading. Who do you trust on the numbers? KPMG or an unregulated invisible entity, likely compensated to pro |
