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Will THAL's holding in NWT be a catalyst to drive the price higher in 2024?
I've just taken my stake in NWT to over 3%. The rally towards the end of the year and an overall return on NWT of nearly 150% in the year makes THAL potentially another stock to watch in 2024. The 10% holding in NWT reflects nearly 40% of THALs market cap. At the start of the year it represented just 20%. So not all the value of this rise has come through into THALs share price or other assets have performed less well.
I'm with the recent finals commentary in the NWT could well become an acquisition target in the next couple of years. I'd expect a sale price in the region of £40m as being realistic and this is 5/6x the current price. I am certainly of the belief that we're only just at the beginning of a strong rise in NWT as the US continues to out perform, that Safetell in now growing again and the rest of the world strategy accelerates. Another doubling/ trebling of the NWT share price is on the cards in 2024 and this should reflect well on THAL.
By 2025 we'll be in the offer territory for a take out at £40m or so.
I shall potentially be buying here in the new year once I have done some further research on the other investments.
30th Apr 2024 3:33 pm EQS Thalassa Holdings Ltd: Annual Financial Report
" ... Holdings
2023 results reflect limited movement in the carrying value of Company’s unquoted Holdings, in particular Autonomous Robotics (ARL).
In contrast, there have been large movements in the Company’s quoted Holdings, in particular:
Newmark Security plc (NWT LN)
In 2023, NWT’s shares performed well, rising 127.2% from 33p/share to close 2023 at 75p/share.
THAL own’s 9.98% of NWT, which we believe has significant growth potential, particularly in the USA. NWT’s fiscal year- end is 30 April, such that 2024 results should be announced towards the end of September 2024. The Company had a soft first half, revenues declined 2%, but has indicated that several new Human Capital Management (HCM) ‘access control’ contracts should drive revenue growth in the second half of the year. At the prevailing market price of 83.5p/share, the Company’s market capitalisation is ~£7.8m, plus debt of
~£5.6m, giving an EV of ~£13.4m.
Based on trailing twelve-month numbers the stock does not look undervalued. However, looking out over the next few years, we see the potential for sustainable annual revenue growth of ~10%, and EBITDA margins rising from 6%/8% back towards 10% to 15%, or £3m to £4.5m, on £30m of revenue by 2028. Based on our estimates, the Company should be able to pay down debt at a rate of £0.5m per annum, or roughly £2m over the next 4 years. Whilst the EV/EBITDA multiple on 2023 EBITDA of £1.1m is 12.2x, we believe that this reflects investor anticipation for improved results, and that a more conservative EV/EBITDA multiple of 8x our £3m to £4.5m 2028 EBITDA estimate is more appropriate, which in turn would result in an EV of £24m to £36m, or an Equity value of £20.4m to £32.4m, or a share price target of £2.125/ share to £3.75/share (9.6m shares outstanding). Based on our estimates, we anticipate a potential 154.5% to 349.1% increase in the upside value of NWT’s shares over the next 4 years, or a potential compound annual return of between 26.3% and 45.6%, from the prevailing market price of 83.5p/ share. ..."
https://www.lse.co.uk/rns/THAL/thalassa-holdings-ltd-annual-financial-report-remcxj11jwvdhvp.html
It's interesting that NWT is the only one of THAL's listed holdings that THAL mentions; and that it talks about it before its wholly-owned unlisted subsidiary ARL (Autonomous Robotics), which in its previous annual report was its only holding (listed or unlisted) that it talked about.
So it looks like NWT is now THAL's 'blue-eyed boy' - or rather girl ... what you might call its 'Thalassa Lassie':-
"Maybe looks a little sassy, whoa
But to me she's real classy, whoa"
"Tallahassee Lassie" - Freddy Cannon
Though THAL's update predated NWT's bullish full year trading update (by a couple of weeks).
And especially in light of this new NWT update, THAL's projections are looking far too conservative.
So I wonder if THAL fully appreciate quite what a gem they are sitting on here in NWT?
Newmark Security (NWT), current s.p. 95p, market cap. £8.91M.:-
https://www.lse.co.uk/SharePrice.html?shareprice=NWT&share=Newmark-Security
From the bar graph on page 12 of NWT's annual report & accounts for the year ended 30.4.22:-
"Five years of consecutive revenue growth:
HCM in North America: £m"
2017: £0.9M.
2018: £1.2M.
2019: £4.0M.
2020: £5.9M.
2021: £6.5M.
2022: £8.7M.
https://newmarksecurity.com/wp-content/uploads/2023/06/Newmark-Annual-Report-30-April-2022.pdf
https://newmarksecurity.com/investor-relations/reports-and-presentations/