Are you investing in the stock market? Are you consistently looking for new potential ideas to make some extra bucks? If yes, this blog may be something for you. In a concise way, you’ll find ideas of potentially under- or overvalued stocks. For further information, see the first blog entry titled "What is this all about?"
Nothing on here is an investment advice — do your own due diligence.
Last August, there was a lot of pessimism around Vopak in the markets. Since then, the company has performed very well and the share price increased from €22.23 to around €34.12, while collecting a dividend of €1.30 in between.
This leaves a performance in Euro of almost 60% incl. dividend and might be a good time to take some chips off the table. Congratulations if you have been holding Vopak in the last year!
Intro
RBG is a legal services firm based in the UK. Historically, the company had four divisions with a focus on: a) disputes, b) advisory services, c) sell-side corporate finance and d) litigation finance. RBG has shown a strong performance in the past years in the first two divisions, a decent but more volatile performance for the sell-side corporate finance boutique and a very weak performance in the litigation finanRBGce segment. Hence, the new management decided to exit litigation finance and was able to sell part of this segment in mid-July. Shortly thereafter, a further impairment was booked, the dividend suspended, and the focus is now on restructuring the existing business and paying down debt.
Due to the above challenges, the market cap has decreased from more than £150m in 2021 to approx. £17m.
Valuation
The legal services (disputes and advisory) and professional services (sell-side corporate finance) have shown revenue figures of £42m in 2021 and £50m in 2022 with a contribution of £20m and £25m, respectively. It’s evident that short-term the reported numbers will be distorted by the impairment and other one-off costs; however, the existing business will continue, has had a very solid track record and is worth more than the current market cap.
What’s next?
In two to three years, the world will – once again – be different again, especially for RGB. With the new management, the impairments etc. the company seems to be at a low point at the moment. If they will be able to execute on their plan and turn the current structure into a clean and lower volatility legal services company, attractive free cashflows will be generated and the dividend might be reinstated. In such a scenario, the share price should be at least double from the current levels.
Warning: this is a penny stock trading on the Alternative Investment Market in London and is certainly not suited for every investor due to less transparency, lower liquidity and small size of the company.
Current Price
£0.175 per share
Disclosure
As with most shares discussed on here, the author is long RBGP.
