One day I’ll run out of these BELL related titles. So on to today’s news.
A placing for £0.60m
A Convertible Loan Note
A “friendly” takeover of TMT Acquisition.
So I’ve laid out what these mean below. First of all the number of shares of Belluscura will increase as set out below
This leads to these balance sheet changes (these numbers are gross, so there are going to be net expenses of a few hundred thousand)
Scenario 1 is the balance sheet as at 30/06/23 - obviously things like cash, receivables and liabilities will hav changed during 3 months but for the purposes of illustrating the impact I’m assuming steady state.
Scenario 2 is the impact from the TMTA acquisition. Cash goes up. Dilution goes up. But overall positive from a NAV/share and also operationally (more on that later)
Scenario 3 is the impact of the £0.6m placement.
Scenario 4 is the CLN where it is DEBT. Cash increases. Liabilities increase too
Scenario 5 is the dilutive effective assuming all CLNs convert to shares at 40p. Liabilities decrease.
What I could see from the Bulletin Board chatter is that several crucial facts were missing from peoples’ minds:
The sales pipeline has grown 50% in 6 weeks
“The Company has now received interest exceeding 10,000 units with a potential sales value of over $30 million.”
Wow! I previously modelled in my BELL-under article based on just 10,000 units annual US production for all of 2024 (with 12,750 units forecast via Innomax/China). This rapidly increasing level of demand and need for cash to fund that demand alters the model significantly.
How much?
Also the unit price of $2500 now appears on the low side 10000 units would equate to $25m not $30m suggesting a sell price possibly $2750-$3000/unit - so 10%+ extra profit which drops straight to the bottom line for both US and Chinese profit share Discov-r sales.
Who are the new NEDs? Jon Satchell? Paul Tuson?
I’m struck by the comment that their input will be highly useful. It suggests the “App” and Software side of Belluscura has further to run as I’ve theorised in past articles. Also that Paul is ex-Rutherford health - therefore is very familiar with this vertical.
The merger raises the liquidity, the ability to manufacture, but also the NAV per share.
This is welcome of course, so the dilution can be seen as a positive.
Changes to Model
X-Plor remains unchanged.
Modelling for 18k units not 10k of Discov-R from Q2 2024 as well as a higher unit price changes profitability by quite a bit. I’ve pushed back the timings of the $27.5m Innomax royalties too (since we do not know the split of these this is an educated guess baed on the RNS about Q2 2024). The GP (gross profit) activities is based on a US 18k/year ramp up of production by Q2 2024, and a 24k/year ramp up of Innomax by Q4 2024. These are broadly using Dowgate’s estimates of increases over time. I’m assuming some level of interim increase due to overtime working on the existing production line.
The “Invest” is based on the current fixed assets and I’m assuming to double US production doubles these. It may not require as much as $8.5m
The W/C change assumes some further debtors and stock build (more sales equals more stock - even though there’s the counter where they are seeking to reduce stock built up during the supply chain crisis last year)
Fin Activities assumes all the above funding closes this quarter.
Q2 2024 onwards cashflow positive - like Bob says in the RNS.
A final thought:
Is it a good idea to sell BELL and buy TMTA and then wait to get taken over?
At today’s prices. Yes! Let’s say you hold £10,000 of BELL. That would be 31,250 shares at 32p bid. With the proceeds you could buy 50,000 shares in TMTA at 20p ask. When they convert (50000/27.5m)x(18.75m) you’ll be granted £10,450 of BELL shares. The only risk to this 9% upside is the deal falls through and then you’re stuck with a holding without a purpose, or at least without your intended purpose of picking up BELL shares more cost effectively. I believe the deal will proceed because it makes sense for all parties. Bear in mind if/when the 32p vs 20p differential changes then the window to sell and rebuy closes too.
I was tempted to do this but on balance I’m staying put with my existing BELL holding.
This is not advice. I hope this article helps with your own research and your own decision making, as I write it to help with mine. Good luck!
Planning to update after the TMT acquisition Oak? Or waiting for the next TU ?
Great work here