Rebuttal on RBG & an announcement – Tune in tomorrow at 12!

Rebuttal on RBG & an announcement – Tune in tomorrow at 12!

I’ve been away for two days. Sometimes I need to take a break, so that I can come back stronger.

Tomorrow, I’m coming back with my live-stream – but this time, it will be available for everyone!

Check it out at mid-day:

Secondly, I was contacted by a reader on the topic of Revolution Bars (RBG).

The reader didn’t quite agree with my recent analysis of its balance sheet.

Since this is a free speech zone, I’m happy to post this reader’s view. Without further ado:


Re Revolution I am long. It’s very easy to be bearish… Of course the open offering minimises dilution for existing holders.

5* July 2022 ebitda is £55m.

5* is what the space currently trades on 2 years out.

Debt is currently post the raise £7m but they will burn cash in July 2021 – certainly H1 – as they ramp up slowly and pay “owed” bills. I am not sure this is new news.

Say H1 2021 debt is £14m but they should generate cash in H2 so end July 2021 debt is on my maths £12m.

July 2022 they should generate free cash of £5m so net debt is £7m.

£11m ebitda is normal trading (maybe a tad aggressive but lots of competitors will go bust so there will be less competition and therefore scope for more pricing) and it assumes no reductions in rents or a move to rent base turnover which is surely a conservative assumption.

Rent is £10m a year so a 20% reduction across the estate would be a meaningful saving and presumably would drop to the bottom line.

  • £55m EV
  • Less £7m of debt
  • So equity is £48m

Today’s market cap fully diluted is circa £30m so +60%

If the above scenario played out the market would also pay more than 5* as the business would be less geared and if the rent was lower or turnover based less risky.


Thanks to the reader for sending this useful counter-analysis.

That’s all for now. See you tomorrow for the return of the Midcap Report and the live-stream!

Cheers,

Graham

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