© Gotham City Research LLC

Quindell PLC: A Country Club Built On Quicksand

April 22, 2014

 

Gotham City Research initiates coverage on Quindell PLC, with a price target of 3p/share (92% downside)

 

SUMMARY

 

  • 42%-80% of Quindell’s profits are suspect, as we are unable to reconcile the whole with the sum of the parts.

  • Quindell was little more than a country club until 2008/2009, yet QPP somehow began reporting Microsoft/Google-esque profit margins in 2010/2011.

  • 26%-43% of Quindell’s 2009 and 2010 revenues came from Clickus4.com, a subsidiary owned by CEO Robert Terry.

  • 41% of Quindell’s 2011 revenues came from an undisclosed related party (controlled by a QPP executive).

  • 10+ acquisitions lack economic substance. Several of the acquired companies are little more than paper companies.

  • QPP’s largest telematics customer is itself (via subsidiaries Himex & Ingenie), accounting for 61% of 2013 revenue.

  • 99% & 80% of Himex’s 2012 and 2013 balance sheets are seriously deficient (Himex is QPP’s largest acquisition).

  • Former executives allege Himex/Navseeker lied to them about its financial state and that in effect they were operating a Ponzi-style scheme.

  • 2011-2013 accounts receivable are between 86%-231% of revenue, while deferred revenue only 1%-2% of revenue.

  • Nearly all of CEO Terry’s £11 mm personal investment into Quiindell was used to build Quindell the country club.

  • No free cash flow and negative operating cash flow.

  • Quindell fails to explain how its personal injury business complies with Lord Jackson’s reforms & referral fee ban.

  • The Chairman of the Transport Select Committee, Louise Ellman recently initiated a probe to determine whether ABSs are used to side-step the Jackson reforms.

  • 3 auditors in 3 years, since 2011.

  • Quindell’s shares are worth no more than 3p/share.

  • QPP shares would qualify for a de-listing if the shares were trading in US markets.

  • When asked, Quindell refuses to answer simple questions about its business.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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