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Check the HY results call transcript - CEO mentions about consolidation. The consolidation will be a better move especially when there will be a buyback following that. Last time post Senegal there was no buyback.
I don't think there is going to be any share consolidation like what happened as part of the SEN distribution. They have made no mention of a share consolidation. I suspect they learnt their lesson from this. It appears it will just be a plain and straight forward dividend and then share buyback. But perhaps they will surprise us! I hope not. People didn't seem to like that share consolidation - even though in theory it should have made zero difference to value.
AA - I meant the share count post dividend consolidation but before buyback commencement.
As in, the way it was done post Senegal. So if share price on the day of ex divi is £2 then by my calculation(which could be wrong!) the share count would drop down to 320mn post consolidation.
Calc : 1 minus 72p/200p multiplied by 500mn current share count.
So in this example, buyback would essentially start after the share count has been adjusted to 320mn shares post consolidation. So £140mn would buyback a lot more of these 320mn which could get the share count down below 300mn if my rough calculations are right? Feel free to correct me?
But of a bleak picture :)
We have teamed up with Deltic for North Sea drills, on with Mexico, links with Israel and other regions discussed too. We also have UK tax losses. I cannot see a concentration of risk, because as you say, it wouldn't get support from II's who would need to vote.
I do fancy a takeover hatching here, not at £3, but I see the potential at £2.20 - £2.50...
And it could take them a good 12 months to do that
I don't see the £140m ($200m) buyback generating a final share count of 350m. 430m or so shares at best. As soon as they start the buyback programme the share price should begin to rise, thereby increasing the average buy back price per share. I wouldn't be surprised if it ends up costing them around £2 per share average, hence buying back around 70m shares
Megla - they brought the new legislation in so as to get out of the trap cne had them in. Since its a law now, it's just a matter of dotting the i's and crossing the T's in the forms /documents. They are actually gaining a lot more with the settlement /refund, as CNE could have dragged their name through the mud via seizing of gov assets etc., given how bullet proof the award was.
Regarding buyback closing the value gap - I think it would depend a lot on the post consolidation share count as c.£140mn buyback would have a bigger impact on sp with let's say 350mn shares outstanding vs 500mn currently. But the market does not always close the gap fully as it's also dependent on what's the value story on the remainder of the company post buyback and divi.
This is where CNEs "what next " story comes in. It's quite possible that the big IIs like abrdn or even aegon in the last few months had conversations with CNE on it, but didn't like the story or direction the company will be taking with EGY and any other acquisitions in the region? It's just a guess really, but the remainder of the company needs to be exciting enough for new IIs to replace the ones that are exiting. And imo entry into such high risk regions can make cne a bargepole stock for many IIs, as we've seen with the likes of genl, gkp etc.
On the other hand if cne had some similar value propositions like sqz and kist then there is a story that these IIs can sell to their investors regarding looking for green investment angle and hence investing in CNEs new story?
Well said Megla and I think you are spot on with your assumptions. It has just been over 2 weeks since the CEO said on record his comments / statements, news due very soon on 2 fronts. Egypt and tax .
Assets currently valued at zero if/when the cash drops.
Market is still pricing in some risk that India about turns.
True market value will be reflected when the cash hits the account, if it doesn’t, it certainly will during the buyback. There’s zero chance the market will give the company the opportunity to pick up shares at a discount (whatever metric you choose to use) when they’re going to be buying back so many.
In short, we just need the cash to hit the account and the market will do the rest.
Whitehat - the main issue is that assets (EGY, K+C cash flows etc) are being valued at zero in that calculation. Only on a cash basis after divi and buyback, CNEs new market cap comes to roughly £500mn( sadly valuing cne lower than Tlw sqz enq on debt/cash basis) in your calculation.
And NAV of EGY assets is $500mn(from the circular) and if you subtract ($180mn) debt for it you have $300mn to be valued. The number you are starting off with of 200p per share is already a discounted number, as broker analysts mentioned on the call. Their and the CFOs guess is that the buyback will help close that gap. So in your calculation the 111mn buyback number is what needs to grow to close the value discount gap.
Given that CNE would do a share consolidation and after that the buyback would start means the supply demand numbers might be different to what you have assumed in your calculation I.e buyback start point of 500mn when in reality buyback could start off at a post consolidation share count of less than 400mn? So the share count would be a lot lower when the buyback starts off and hence buy pressure would be felt more vs if share count is at 500mn?
Hopefully CNE would finish buying back the shares before the announcement of another acquisition because if there is a sp bump post that new acquisition announcement, CNEs buyback would be able to purchase fewer shares. On the worse side, if market again does not like the next acquisition as it did with EGY acquisition news, the share price could go lower and cne could purchase more- which will be worse nonetheless.
I believe there would be consolidation associated with the dividend.
The buy back is a separate issue.
In the end though it is all the same as you say.
Fair point. Last time we got both, consolidation and share price weakness (which may just have been unfortunate).
they will do another consolidation IMHO
The alternative is that the SP drops by the amount of the dividend, so makes sense. means that the value of your holding drops by the amount of the dividend, but we have a clean chart.
Does anyone understand if the proposed 'special dividend' is a genuine cash per share held with no associated reduction in share capital or a repeat of the Senegal 'distribution' which by the time the share reduction had taken place did not feel special at all? It makes quite a difference to the investment case right now.