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The pref shares are now xd, so if you bought now, you wouldn't be getting the 5.5 div (4.5p semi annual payment + 1p arrears) payable on 31 12 21. The prefs have a very different risk rating from the ords. Next year, if all goes well (CPO prices stay high, coal interests generate cash for the first time in about 10 years, or alternatively get sold off, if stone interests start to generate cash - another dud asset that could suddenly help make a contribution) then the prefs will pay out 19p (2 x 4.5p semi annual payment + 10p arrears). After that the arrears on the prefs would be 7p. The inflation rate and interest rates are also a factor in how the prefs are valued. There are 72m prefs in issue, and there is an RE.B thread where people talk about them. The ords have a speculative risk rating, so ought to be quite volatile. Their price performance maybe depends on how well (or not) we cope with reducing net debt using cash generated from the business before movement in working capital. Mr Robinow's purchase of the warrants is a good sign, but there are no guarantees that CPO prices will stay high, and those seem to me to be the most important driver of share price performance, and predicting those is a mug's game. The combined leverage (operating and financial) is high, so the share price should theoretically swing all over the place. Hope that helps. ATB.
I've looked at the company website. I have read the annual report but I cannot see anything about the Pref shares. They do not seem to be receiving a dividend; how much is owing to the Pref holders? Should I buy these instead of the ordinaries? Appreciate any advice. Thank you. SS
Greenfish, yes that's true, but the operating leverage here is better than AEP's and MPE's, so a small change in revenue leads to an utterly mega change in EBITDA. You also have the same effect with the financial gearing: the utterly obnoxious levels of debt and prior ranking finance (the bloody prefs) mean that a small change in EBITDA causes an utterly massive change in eps attributable to the ords. No I don't like the debt and prefs, but I can't deny that in the current CPO price environment with spot CPO hovering above $1300, the level where those obnoxious export levies and export taxes cease to make further demands on the CPO price upside from then on, we are likely to report profitability that hasn't been seen for donkey's years (See my forecast of 8p eps attributable to the ords for FY2021 on the ADVFN threads - no, I am not confident in the method I used of assuming the same levels of gearing to forecast the EBITDA figure, but we will see if I am anywhere near close next May).
Even our chairman acknowledges we are entering a period of prosperity. Yes, he is careful not to say how long it will last (he is a cautious person, right?).
Sure leverage works both ways, so volatile share price movements are to be expected, I wonder?
BTW, when comparing our historic miserable profitability levels with AEP and MPE, you have to remember that they DO NOT CHARGE FOR THEIR EQUITY CAPITAL. We being more debt financed do charge for our finance. Arguably, their profits are overstated compared with ours. Look at our 5.5 cpo tonnes per mature hectare - they get less. Agriculturally speaking, we are a good company. MPE and AEP have lower risk ratings than we do, but as ever you have to choose the risk level you can best tolerate. ATB. P.S. Don't forget we have had about $50m to $60m of dud assets on the balance sheet (coal and stone interests), and these are probably now going to make a contribution, something they haven't done for donkey's years. REA has about $500m of total assets from memory, of which only a tiny proportion is financed by ords shareholder funds. Imagine if all that debt finance is paid off from cash generated by operations before working capital movements are taken into account, and we would surely have an 8 bagger here. AIMO. DYOR.
from what i can see they normally don't make any profit and the have a load of preferential shares that they have to pay a dividend to when they start paying a dividend again.
https://masterinvestor.co.uk/evil-diaries/evil-diaries-oil-in-your-palm/
The valuation of the ords still makes little sense - way undervalued. They were trading 150p+ prior to covid, since when palm oil prices have roughly doubled and reported net debt has fallen from $209m to presently somewhere below $175m, and with a vastly improved outlook. Much more to go for, IMO.
except our BoD hasn't toldbus how sale of the coal interests is going = except our BoD hasn't told us how sale of the coal interests is going
He needs he ords = He needs the ords
The strike price is £1.26p, so I don't think he'll be exercising them anytime soon. I am not even sure they are listed, so finding a buyer may be tricky. He needs he ords to go over £1.335(?) to break even on the warrants once the time value is lost, if he can't find a buyer for them before the time value in them is exhausted.
As cpo futures prices today reversed a good deal of yesterday's falls, and given we are likely getting about $890 a tonne ex-mill gate (excluding any premium for sustainably produced) I am not sure today's share price fall is really justified, except our BoD hasn't toldbus how sale of the coal interests is going and whether they have started stone production or not. I think the current ord market cap is justified on the basis of reasonable expectations that the $ loan note can be repaid next year if they can get by without a mega capital expenditure programme, but WDIK? We'll see. AIMO. DYOR.
maybe this is robinow unwinding his options?
I added more of the Sterling Notes, YTM over 10% til 2025. Not sure about the common stock after that rise, it was going toby on my list for next week! Slight twitch up in the Pref's as well.
Bloody typical I jump ship and the stock rises c.30%! Seems Robinows scooping up the 'out of the money' warrants has done the trick when you would have thought the surging cpo price would, should have been the catalyst for a rerate of sorts. Bodes well for H2 if the cpo momentum continues given even REA can't screw up a c.$800+ net and a lot going straight to the bottom line. I never learn!
Added some more of the Sterling Bonds, @ par, happy to put some income in that direction.
Malaysian benchmark price averaging around 10% above H1 in H2. Given roughly $160m annualised sales run rate in half 1, and high gross margin likely on incremental price increase, should bode well for cash generation in H2. ATB
Morning Nobull, so true! This is one I intend to slice and dice if I start showing a profit. At least in the first instance we have evaded dilution by sacrificing a % of our holding for £13m cash for drilling costs. This should carry us into 2022 with a bit of luck when I will be sunning myself on a desert island.....I wish!
JL, hi. Yes, I get that about Malaysia. I've been there too, but not worked there and not been there since the 1980s. I hope you WA gold explorer comes right. I think it's safer to go for low cost producers and just play the commodity price cycle there. The games that are played when an explorer tries to transition to a producer are simply diabolical - its seems to be always the case that someone with more money will come along and try to dilute one out when there is an opportunity to extract a huge profit from the change from cash guzzler to cash gusher. JMV. Good luck.
Hypothetical question. If the price of palm oil were to rise another 30-50%, what would be the effect in usd on the bottom line?
Morning Nobull as usual I'm on the same page as you and as usual I think I sold out lower than 63! Had REA not been a debt junkie it's sp would be multiples of current. Of course when I originally bght REA the B20 program was unheard of and replanting was ongoing. REA was always a sentimental fave stock of mine having worked in Malaya (as then) which just goes to show don't fall in love with a stock even if you understand the business! At least it's showing some signs of coming out of intensive care so recent buyers should have a care free run all things considered.
I have nailed my colours to a junior WA gold explorer so definitely jumping out of the....into the...hoping for a multi bagger (1 x will do for me) from my avc of 14•87. To date despite resource data exceeding expectations the shares languish at 3 year mid levels and ain't that just typical these days!
Wigwammer, thanks. No, I don't think it was covid that caused the share price to crash, although that was probably the cause of other oil palm stocks crashing. I think it might have been anticipation that the accounts were going to be qualified with a "material uncertainty as to going concern" or words to that effect (the time when directors bought some ords). Naively, I thought if the next set of accounts weren't going to be qualified (as indeed they weren't) that the share price would just bounce back, but it didn't!
It didn't dawn on me that the company would have to have +ve eps before the market would allow the shares to rise. I've got a small profit here, but on a risk adjusted basis it is really a loss as a company like this ought to return 12% a year (either in gains or divs or both) in my view. Fingers crossed for the coal mine sale soon and for the balance sheet to strengthen.
JL, hi, sorry to be slow replying.
Agree it isn't necessarily going to be one way, up-only share price rises here from now on : Finncap came out yesterday with a lower eps forecast for MPE for FY2022 than for FY2021, implying the uplift from the volume gearing effect of MPE's, rising production profile won't be strong enough to counter the downward price gearing effect from an anticipated easing of palm oil prices next year. REA being more leveraged and not having a growing production profile, like MPE has, is maybe more exposed to any cpo price downturn, so plenty of scope for share price falls here too.
I hope something good happens e.g. sale of the coal interests or a new revenue stream is developed from the coal and stone interests. Coal was $177.5 today, which is way past coal's previous cyclical peaks in the last 12 years or so. The directors own more ords than prefs, so I don't think they are going to dilute the ords out at this low share price. We'll see. All the best. P.S. REA has the best cpo yields per mature hectare, I wonder, so it isn't all bad even if the net debt level is a horror story.
Thanks nobull, yes I agree the market needs to see tangible debt reduction before any sustainable rerate, but I think events are coalescing that make that event increasingly likely - the main ones being the favourable pricing environment confirmed by the return to profitability and the confidence evident in the outlook statement. Interesting I think to look at the share price chart pre and post March last year. It seems the stock took a gigantic covid hit, which has yet to unwind - despite the market increasingly pricing in recovery pretty much everywhere else. Given what we are seeing in the fundamentals here, a reversion not only to £1+ but perhaps well beyond - given the specific fundamentals here have strengthened beyond where we were in early 2020 - may be warranted. Seems to be a background seller currently - hope they don’t know more than I do! ATB
Hi Nobull, concur with all your thoughts on REA but.....tbh I don't think enough is going to change for me to revisit. Add to the negatives you have a predatory Govt hell bent on using Palmers as there own piggy bank.
Add in estate running costs, the bottom line as a % of sales are abysmal. Oh well, I lost money here despite being well aware of the pit falls, how stupid was that! Gluck to those holding and praying for a t/o or merger.
Morning devonplay your first para completely went by me as I'm only at the changing the light bulb stage!
I never had any Prefs but the 1p return?.....a start I guess. No doubt i'll cont to watch events here but the bloody debt is a killer for me and if the Fed pull a fast one on the mrkt by raising rates, what then for the Ords?
My Gold stock keeps coming up with the 'resource' goods but as per is ignored by the mrkt.....at least they are debt free, unusual for a junior expo miner! Be lucky.
Wigwammer, sorry I didn't say that right. When I said you were right about everything else I didn't mean you were naive; I meant about the quality institutional shareholders and the director share purchases.
Hi John, just seen your message. Last few days I've been struggling with my large mp3 collection and Linux. Wonderful command line application called beets. Didn't work for me though, I need to deal with permissions, maybe another day.
Well, the Sterling bond has played out OK and the purchase of the Preference Shares. I've held off buying the common equity , although I believe I do have some rights connected to the Sterling's if memory serves me. I may still feed some of the income in that direction, but I'm never in any rush. I might have another look when they've calmed down again. I guess I've got some decent yield off the company tucked away. Even if it's adventurous by income standards. I've another income and growth play I'm buying monthly at the moment and that remains my "go-to" for excess cash. But, if I was feeling adventurous the common stock here or Raven Property common/Pref's might appeal. That's if I wasn't worried about the odd sleepless night.