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Cam Kite’s Micro Bite Pick – Updated

Update 23rd August 2015

MAC – By camkite

Now Mac is on the radar of many more retail investors I thought I would follow-up with a few thoughts.. these are questions and things i ask myself as to whether I stay invested in a re-rated company for a longer term or indeed believe the company has reached fair value.

There is no doubt now the company is valued at £5.9m the investment case has changed and decision-making should and does change along with it.

Friday’s trading saw a surge in volume and share price, having closed the day up over 400% … we received a statement from the company confirming that the Planning permission meeting is scheduled for Tuesday the 25th August… it will take place at 7pm Tuesday evening so it’s fair to assume especially after the recent statement from the company, we will get it RNS’d on Wednesday morning.

The bread and butter of the company as it stands is attractive, they are and have been profitable, making £150k profit for the last period… For me as a continuous holder this is a huge positive going forward.  The management have proven they are capable of running and maintaining relative growth, which in itself for a listed AIM tiddler is pretty rare.  Should we get the PP stamp of approval then it’s possible we have a team ready to apply their already proven skills and experience.

Valuing what the company could be worth on Approval has proven pretty tricky… we know from the report that refers to the planning permission being recommended for approval that the company have ““a grid connection available and reserved on the network.” … now this is an important note for more than one reason..

Statement taken from the most recent results

“Whilst it is difficult to attribute values until planning permissions and grid connections for sites have been secured, there is significant potential uplift value for Marechale’s shareholders; the valuation on the balance sheet represents the last funding round, and the Company’s investment is being carried at GBP140,000, based on the Equity Method of valuation and including a provision to reflect the uncertainties of the planning process for its solar schemes and specifically a potential loss on appeal of the project mentioned above in proportion to Marechale’s beneficial ownership % in Northfield.”

 

So as to now the company have marked the value of the investment in Northfield at £140,000 this is based on the last funding round.. now, grid connection in itself is worth a fortune in the right hands, as is planning permission to build a 49.9MW Solar farm.  As a very simplified example, a piece of land with Planning permission is worth more than without planning permission, of course dependant on other factors.  So the way I see it if Planning permission is granted the company’s NAV will improve that moment, as a very basic starting point, underlying value in the company will be higher than it was Tuesday morning.

From my understanding a Solar farm of this size will cost around £30-50m to build, so it’s not far-fetched to think MAC will hold 26% of something that has a build cost of £30-50m … taking the lower figure at 26% we end up with £7.8m.

As stated in the RNS that was forced out of the companies hands on Friday

Should the Committee approve the Application, Northfield will move towards the next stage of developing the project

– including seeking to contract for the construction of the site.”

The company have confirmed that one of the next stages of development is seeking a contract for the construction site… those of us who have known the company for a while will understand that they have always been pretty tight-lipped about updates, they have and are still maintaining good business within the finance sector.  To see this statement in the most recent RNS really confirms that this could all change once work commences.  It would be entering a news rich period and as seen in other examples the Solar farms can be erected within a few months.

Working out a value on a working Solar farm does also prove tricky, it depends on the position of panels, weather, input, output etc… I have seen examples on the Internet with 1MW producing anywhere from £500k – £1.2m a year so again taking the lower of the estimates we would get to revenue generated at £6,487,000 for Mac’s 26% stake in the company… and the higher estimate of £1.2m per MW at £15, 568,800 for Mac’s 26% stake.

Now the most interesting part and the reason I am keeping hold of half of the shares I purchased at 1.8p other than the reasons above is the company’s business model.

The team at Mac have raised over £450m for limited companies and tax efficient funds through their expertise and wealth manager contact base…they quite obviously have the contacts and ability to expand on the already existing and profitable business model.

I have noticed since this arrived on most Pi’s radar they are forgetting the possibilities what “could” happen if all this falls into place…

The company will be generating more revenue which will put them in a position to be able to invest and fund more companies themselves, diversifying the portfolio of Mac and essentially increasing the revenues of the company.

In not so many words, as of Tuesday 7pm the company could be in a completely different position then it was earlier that day… for me the business model if the company get the go ahead on the planning permission could really begin to unfold as through researching I am pretty sure management have intended it too, and given they have a proven track record of maintaining profit with skin in the game, for me it looks like it’s always been about the solar farms.

This planning application, although far from guaranteed, I feel has a pretty good chance of getting the go ahead… I would recommend people researching for themselves, things such as the site being an abandoned and disused airbase finding comparisons to other sites, there being minimal objections from locals & of course the document that was discovered last week mentioning “recommended for approval” … all good signs and the reason I intend to continue to hold shares through the decision meeting.

Given everything we know and a little of what we don’t £6m once the site decision has been granted will not be near fair value for Mac’s 26% stake, with the bread and butter holding a £1m valuation off that..  I also believe the market will agree with my thinking… For me the risk reward and possibility of if granted paying more to build another large holding I see the upside even from these levels far out weighing the downside.

This is no doubt a decision everyone needs to make for themselves… I have already made a large amount of profit and I am still holding a fair few shares, if (which i believe is unlikely) the planning permission is not granted there is no doubt the SP will not be above 10p, i’m more than ready to take that risk.

Everyone’s level of risk and reward relative to their holding and net worth is different, if you are unsure, seek expert advice, preferably not someone who posts drivel on BB’s.

I have sliced good profit and I intend to continue to hold. Best of luck!

Mac – Marechale Capital – By Camkite

 

Marechele are an investment banking and corporate finance company with only  57.68m shares in issue, 45.43% available on the open market, 33.6% of which are held by the Directors leaving the company valued at approx £1m market cap it appears there could be considerable upside from the current price for anyone willing to dig deep enough.

 

EPIC: MAC, is probably best described as a junior venture capitalist company, with a slight twist, the company uses its expertise, management, contacts and opportunities to source funding for any possible venture that they might see growth.The current investment / venture plan set out by the company is to “Raise capital and refinance high growth companies, leisure, renewable energy and infrastructure sectors” . Now the most interesting part to MAC is its venture Capital styled business model.The company will secure and source finance for new businesses for a % with or without a fee on top.

 

Currently running as a profitable Aim listed tiddler making gains for the previous period of £150k, with Net assets up 30% on the previous year, having committed to paying a dividend which they are seeking approval for at the next AGM (September 17th). The management during the last year have been making larger buys than previous years which suggests we maybe coming to a ripe news flow period, if you keep reading and possibly do some of your own digging you may be woken up to the potential the company offers.

 

Through its business model, MAC has gained a 26% stake in Northfield Solar which is a UK based Independent developer of Ultra Large scale Solar farms whose objective is to deliver on a selection of different locations a 250MW project portfolio.  The team at Northfield have experience in the energy & finance sector working with names such as Chevron, having built up previous energy projects in both the UK and the USA.

 

Currently planning permission has been ongoing at 2 locations which combined will output 87.9MW .

 

MAC’s 26% equity in the company and a few simple calc’s, the mission objective of Northfield Solar to build up 250MW portfolio it becomes pretty apparent that as an already profitable company there is a large gain to be had for anyone with appetite for it. A recent example of a sale came from a 49.9MW Solar farm which sold for £59.1m (Link Below)

 

http://www.trinasolar.com/uk/about-us/newinfo_833.html

 

As mentioned above Northfield Solar currently have 2 active planning permissions, one of which was dismissed at the later part of 2014 but appealed during 2015 it is currently under an ongoing review with a update in proceedings expected this yeat. This particular solar project is for a 33MW site.

 

The second project currently under planning permission is a 49.9MW site.

 

Now the most interesting part, As found earlier this week by eagle eyed picker and LSE posting legend who most will know as Smudgendan, the application has been recommended for approval for the council on the date given. (see link below)

 

http://www.kettering.gov.uk/download/meetings/id/11410/54_-_ket20150297_-_desborough_airfield_desborough_road_stoke_albany

 

Interestingly as noted on page 28 of the above Planning permission document the company have “a grid connection available and reserved on the network.” which obviously is half the battle for any company wishing to get their energy onto the National grid.

 

Other than the above huge positive to any current investor, the slow process to build a solar farm is obviously getting through planning permission at the locations, once the stamp of approval has been given work can then commence on the solar farm which if you look at previous examples can take just months to build and hook up to the Grid.

 

Given Marechale has a current market cap of little over £1.1m, profitable and committed to paying a dividend in the near term, a 26% holding in a growing business with an aim to output 250MW’s, management’s pockets a-lined with any future investor, the company avidly looking for future investment prospects, evidence of previous solar farms selling for many multiples of the current market cap, permission seemingly given the green light on a 49.9MW farm and the build process being a very short time-frame.

In my opinion this appears to be a bargain basement play and a stonking buy however to caveat this I suggest carring out extensive research in the riskier area of aim.

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