LPE - Locality Planning Energy Holdings

[PZ99]

Braver than me. I have a 5% position here (one of my smallest).
I was reluctant at first, but conversations with Ben and Damien answered a few things

Sydney market, here we come.

The Sydney market is way overdue. Competitors with their own embedded networks are picking the low hanging fruit when it should be LPE doing it. IMO. This latest funding deal might facilitate that.

 

[kenny]

What's the consensus here on the Blackrock facility at 10% interest? Is it a game changer allowing LPE to grow as it intended?

 

[galumay]

Personally I prefer it to CR, but they would have struggled with CR at the moment probably anyway. Its a pretty sweet deal for BR, 10% plus plenty of upside with the options, but I guess thats the price when you are an unprofitable, growth business!

What I think is going to be much more of a deal is the next 4C, if LPE is cash flow positive and the growth has continued to accelerate then the BR deal will look very good.

 

[PZ99]

50:1 consolation on the cards. Thoughts?

Spoiler

One of our resolutions this year was that of Share Consolidation. In considering how to structure this a report of peer ASX listed companies was sought, 70 in total. On benchmarking by market capitalisation and revenues, of the sample the mean share price was $1.54 and the median was $0.74. It was therefore decided to take a 50:1 consolation to the shareholders. This will have the benefit of placing LPE in a larger investor market along with meeting mandates of higher calibre investor groups.

 

[Klogg]

50:1 consolation on the cards. Thoughts?

Don't see how it matters either way. I still get the same percentage of the company for the same dollar value.

 

[galumay]

I have seen them go horribly wrong, oddly and irrationally it creates more downside. I would prefer they just focussed on actually getting the business cash flow positive.

 

[PZ99]

They're not mucking around. It's on next week.

Effective Date Monday November 26, 2018

Record Date Tuesday November 27, 2018

Issue Date Tuesday December 4, 2018

 

[galumay]

Yes, I see that. Oh well, its another red mark for management IMO, they are nearly out of cash, still not cash flow positive and should be focussing on running the business, not messing around with capitalisation and worrying about share price.

 

[PZ99]

Looks like it's gone badly wrong. Down to one cent on the old money and no support.

Spoiler

 

[galumay]

You are right PZ99, just shows how bad management can be very capital destructive even if the underlying business is travelling OK. A series of very incompetent actions by management have destroyed a lot of shareholder value.

The consolidation was a stupidity, I know at least one fund recommended management not consolidate and warned of the dangers. Then the release to market, well after close, of a factually incorrect announcement, on the eve of a long weekend followed by a delay of nearly a full days trading before LPE 'fessed up to the error in the announcement.

I think now the market has no confidence at all in management's ability to execute with any level of competence.

The underlying ggod news is that despite the fall in wholesale prices which then flowed through reducing revenue and profit, LPE remain cash flow positive - the business will always be lumpy due to wholesale energy pricing volatility so thats at least one sign of some resilience.

They will need several strong quarters with no further stuff ups by management before the share price recovers.

 

[Smurf1976]

As a heads up for those following this - it's going up significantly but on very low volume over the past few days.

Just an observation - do not hold.

 

[PZ99]

Noticed that. Let's hope it continues. A lot of holders will be in the red until it hits $1.50

Sold out just before the consol at 80c (1.6c at the time)

 

[galumay]

Maybe there has been a bit of interest as a result of them presenting at the Coffee Microcaps Conference?

I still hold, but have grave concerns about management competence to execute. (Only deepened by feedback from the conference.)

 

[Klogg]

This has been very quiet. They've hit FY19 customer numbers and have put out a super bullish target for FY20. By their numbers, Gross Profit should hit about $25m (run-rate) by those numbers.

This will be worth multiples of current market cap if they come anywhere near those customer numbers.

 

[galumay]

This will be worth multiples of current market cap if they come anywhere near those customer numbers.

Agreed, my niggling concern remains Management's ability to execute. At least there are a couple of funds on board now who are sending management strong messages about expecatations around capital management, shareholder communications and cost control.

 

[Klogg]

Agreed, my niggling concern remains Management's ability to execute. At least there are a couple of funds on board now who are sending management strong messages about expecatations around capital management, shareholder communications and cost control.

I actually think they're very good at executing. Distractions and investor relations seem to be the bigger problem.

Their results have not been bad, even though they've missed forecasts. But they do set some audacious targets...

 

[PZ99]

SP now higher than prior to consolidation and LPE is leading the tipping comp. Good to see

 

[Klogg]

SP now higher than prior to consolidation and LPE is leading the tipping comp. Good to see

When they first released that market update, there was a line of about 100k shares available. I didn't take it and now am kicking myself. The end result was obvious.

I did buy a fair bit, but not enough. It's only a 6% position right now... As usual, mistakes of omission hurting the most

 

[PZ99]

When they first released that market update, there was a line of about 100k shares available. I didn't take it and now am kicking myself. The end result was obvious.

I did buy a fair bit, but not enough. It's only a 6% position right now... As usual, mistakes of omission hurting the most

It's still historically cheap. Most patient holders from the pre consol days would break even at around double the current price. I should have bought some when they were 50c though

 

[galumay]

I actually think they're very good at executing.

You maybe right with the actual sales side of it, but things like the extremely stupid consolidation and what I have seen of management's atitude to suppliers, customers and employees concerns me - but I have a fairly large position because I do think the downside risk is heavily outweighed by the opportunity.