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Excuse spelling mistakes. Writing on a small screen.
Thanks for input sr123, I guess I am basically looking for a basis to balance my expectations here.
In a simple way, the question of PDL credit worthiness sums up to: When will the accumulated net income equal net debt (currently 290m) ?
Is 80m usd a fair guess for net income for FY21 ? Further upside depends on number of new high quality gems (10-50m), increased production levels at Finch (10-20m), Tanzania VAT and packet solved (20-40m), williamson case dismissed or settled (rusk management). All of which seem realistic to me.
If next year is similar to FY21, the balanced state I am looking forward to might materialise as soon as 2024...
I hope this development will enable PDL sp to correct itself fully to benchmark level, as an unleveraged company based on ebitda projections similar to what you mention maling a future sp of 8-10p as fair a guess as any...
Steve E60,
I think you would be very unlucky not to make money here in due course.Its frustrating holding and waiting but sometimes thats where eventually the big money is made.I have a position in Barc but my main hold in the banking sector is Birg @£1.50 average and think it can reach circa £8 in this cycle with a proxy of 10k in the FTSE100 and 6k in the S/P500.
Its Birg I mentioned to you last year.My targets are ambitious but its a bull market until the Fed pulls the rug which wont happen until 2023 in any meaningful way.Well thats my investment hypothesis until proven otherwise.
I am also bullish on SIG,STX and IMM,Due diligence required but I know you like to embrace risk !! and these are certainly on the riskier end of the curve.
Best of luck
Hi Holygrail
My purpose is not to 'knock the price down', nor am I averse to looking at PDL financials and critical succes factors.
I am trying to contribute to an informed market discussion to create a sustainable share price development, and have done so ever since I started as a member here a few weeks ago.
So, if you do not want awareness about PDL risk factors, my posts might not be relevant to you.
"The only way is up" is a nice pop song, but I do not find such assertions credible without qualifying information.
In this market it pays to be diligent and aware of both pros and cons.
As stated before, I am long, with a reasonable exposure to PDL myself.
Not sure who you are but clearly here for another reason perhaps trying to put the share price.
In others word do one
I have one public source at simplywall.st projecting these numbers for the Present Value of the future free cashflow (Discounted @ 12.92%)
2021: 85,02
2022: 57,56
2023: 60,22
2024: 59,19
2025: 56,62
2026: 53,1
2027: 49,11
2028: 44,97
2029: 40,89
2030: 37
With a total gross debt around 450 M USD (net 290) at about 12% interest gives an annual interest payment of about 50M USD (even though most of these interest payments are not payable until two years from now due to the new covenants, they are still to be paid).
So, in this picture, PDL walks the line and just about keeps the balance intact. It would be nice with a better credit profile!
To conclude, it all comes down to growing revenue by meeting production targets and enjoy the improving market conditions, SO THAT PDL can repay its debts within the next 2-3 years in order to reduce interest payments to a level where the EBIT/interest ratio is sustainably above 1.5
A brief note on credit ratings and ratios:
According to Moodys, PDL is currently "of poor standing and are subject to very high credit risk". This is mostly based on the low EBIT/interest ratio in previous years, when PDL had unsustainably large amount of debts. Looking ahead, Moodys finds PDL to have a positive outlook though.
But, in the years to come, what do we know about the development of the EBIT/interest ratio of PDL?
Answering this question is important, since a sustainable ratio of at least 1.5 is the main factor for Moodys decision to upgrade PDL credit rating to investment grade (to B3 from Caa1). Obviously, the demand would get going for real once PDL is seen as an investment grade paper, with high FCF vs. high credit risk... (The other factors are "meaningful recovery in diamond prices and on-target production levels such that Petra is able to fund its medium-term investment plans through operational cash flows").
Now, I know some will say PDL will be debt free in two years, and I believe as much - but do we have numbers to corroborate that?