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Good move imo Optimus, AAF have been on my radar for ages.
I managed to bag some DEC at 107.
Duke is high risk now given the potential impact of higher energy costs on smaller business balance sheets. Some but not all will be able to pass prices on IMO.
Will take a mamouth task to work out a risk profile so better off out atm. Can always buy back in.
Real shame as such a good well run innovative Co. Actually pleased to see the SP hold up so well and if it continues I will likely buy back later.
Good luck with your investments
Usual caveats
Trek
Took it to Aitrell AAF
GL all
patience depleted so out of here holding in cash and waiting for something to come along
Current numbers more than support the current dividend rate.
Is the quarterly rate of dividend, at 0.7p gross, sustainable into a severe European downturn? 2.8p annually means £11mn of after tax profit needed to be set aside for dividend distributions, to maintain that 8% yield. Not sure it can be.
Yes. i hold ; if I was confident the wider market had stabilised, I'd be piling in for more. But i'm not, so.....not yet.
Decent dividend yield and the prospect of the hike in Corp Tax being kicked into the long grass; Mr Market should like today's figures.
Let us see how long he is chancellor for. With the way things are going, who knows who will be in which post by the end of the day.
"Nadhim Zahawi, the UK’s new chancellor of the exchequer, has said he will review government plans to raise corporation tax from 19p to 25p as Boris Johnson seeks to rescue his floundering administration."
https://txtify.it/https://www.ft.com/content/7504568d-8057-4224-b29a-68f61aaa8968
The 6p increase in Corporation Tax is a body blow for companies like DUKE; a reversal would improve the dividend outlook.
Exited here, parked it in DEC. Will look to come back later when have better idea of gas situation in Europe.
Usual caveats
Trek
Another view albeit transient on the CNBC app so sorry no link….
“ Natural gas drops 10%, on track for worst month in more than three years
PUBLISHED THU, JUN 30 20221:36 PM EDTUPDATED 34 MIN AGO
U.S. natural gas futures plunged below $6 per million British thermal units on Thursday, after an inventory report showed a larger-than-expected storage build, sparking fears of an oversupplied market.
Henry Hub futures declined 12.5% to $5.68 per million British thermal units. The contract is now down roughly 30% for June, on track for the worst month since December 2018.
The U.S. Energy Information Administration said Thursday that inventory for the week ending June 24 rose by 82 billion cubic feet.
David Givens, head of natural gas and power services for North America at Argus Media, said he was forecasting a build of 76 billion cubic feet.
“The 82 number was bearish in that regard,” he said, adding that storage accumulation is closing in on normal levels.
Campbell Faulkner, senior vice president and chief data analyst at OTC Global Holdings, pointed to the “sensitivity of the supply demand balance that natural gas is under for the summer cooling demand season.”
“Gas has been a hugely important commodity export, and power burns have been robust for H1 2022. When the commodity is at such high price levels due to perceived scarcity, any fundamental indicator will cause the commodity to swing violently either up or down,” he said.
Part of this month’s weakness is also due to Freeport LNG announcing earlier in June that its Quintana Island, Texas, facility would be offline for longer than expected following a fire.
The announcement caused natural gas futures to plummet more than 16% on the day as traders feared an oversupplied market.
Freeport’s operation accounts for roughly 17% of the U.S.' LNG processing capacity. A record amount of U.S. LNG has gone to Europe in recent months as the bloc looks to move away from Russian energy. Demand for LNG in turn boosted Henry Hub prices.
The Pipeline and Hazardous Materials Safety Administration said Thursday that the facility will not be allowed to return to normal operations until PHMSA deems it safe.
“As a result of the preliminary investigation, it appears conditions exist at Freeport’s LNG export facility that pose an integrity risk to public safety, property, or the environment,” the agency said in a statement.
Despite June’s heavy declines, natural gas is still up more than 50% for 2022.
John Kilduff, partner at Again Capital, noted that while storage levels are still more than 10% below last year’s levels, “we are in the zone of being manageable now.” He added that the weather outlook for the Northeast is pointing to mild conditions into mid-July.
Natural gas prices surged above $9 per MMBtu in May, hitting the highest level since August 2008.”
Trek
Hi nomlunga,
Thanks,
Yes I read that article as well and it’s been picked up in the telegraph today…
https://www.telegraph.co.uk/business/2022/06/30/ftse-100-markets-live-news-heinz-tesco-recession-inflation-latest/
Going to have to have a rethink unless something changes for the better! Although mostly North America their book extends to Europe as well. In any event it’s all related.
I would even expect the UK to ration to support Europe if the worse came to the worse.
One of the advantages of autocracy is the Russian people have to suffer or face torture. Ours will riot, steel and create massive civil unrest! Putin knows, that. They are better placed to win an economic war. I have posted similar before.
If there is no solution to the energy, well it’s mostly just gas as Oil should be ok. Then it could get very ugly.
Africa have nowhere near the infrastructure to supply Europe even though they have the gas!
I have been mostly picking up energy and gold stocks for now. Rest is defo under review.
Good luck with your investments
Ps.. Got myself 3 full patio gas bottles so at least I can cook on the BBQ!
Usual caveats
Trek
Trek,
This will be a factor to watch... just how bad are European energy costs going to get; how easily will businesses pass on costs, and will there be rationing. Gazprom are currently limiting supplies to Europe when mass storage facilities would normally be being filled. If prices are spiking in Summer, what happens in Winter? This warning issued last night seems to have been ignored by the wider market; it should not be:
https://www.investegate.co.uk/uniper-se/eqs/withdrawal-of-outlook-for-the-financial-year-2022-and-talks-with-german-government/20220629192226EREQR/
"Shares in Uniper, Germany’s largest buyer of Russian gas, dropped by a fifth on Thursday after the company warned on profits, withdrew its annual forecast and said it was in talks with the government over possible support.
The Düsseldorf-based group said it expected earnings before interest and tax to be “significantly below” previous years, as it was receiving just 40 per cent of the gas ordered from Russia’s Gazprom since June 14"
https://txtify.it/https://www.ft.com/content/d36e2f47-c8a3-4783-b96d-a8d22e5a042c
Xd today and hardly a blink!
Usual caveats
Trek
Hi Slikoil,
Diverting an additional 6% of profit to tax is significant for any business. For sure some can absorb better than others.
Arguable Duke is better placed as it’s a low capex business with a predictable revenue stream.
Forward divi costs 1.16m. FY22 normalised cash revs of 14.8m (excluding redemptions). 23FY should be higher as Q1 alone is guided at 5m on a normalised basis.
Duke also has plenty of cash having just placed.
So yes they can absorb but it’s a balancing act with the loan book and the timing of the corporation tax rise on the heels of a placing. Dukes revenues lag for obvious reasons.
All said I am more and more confident here and intend to add again after the xd date end of this month hoping the SP discount is disproportionate when it trades without the divi. If not then it’s still a buy imo.
But here SEPL, JIM and PAY have very compelling metrics for hi yield quarterly payers.
Usual caveats
Trek
Agreed, increase in corporation tax has an impact on every business, but is there a greater impact on Duke than any other company or PLC? Perhaps it has less scope to absorb or offset the tax increase?
Divi held at .7p so forward yield of 7.9% delivered quarterly.
I had concerns about divi but now concerned if there is an impact to come from the 6% hike in corporation tax.
If duke can absorb that it will be some result but that could restrict capital distribution to loans.
Still a great result so far. Let’s see how it goes.
Usual caveats
Trek
Hi kentio,
My pf is pretty fluid as I trade a lot. This is currently around 8%.
If it goes to 32p range I will add more. Some peeps may be holding back in case of a recession but I see Duke as well placed for specialist targeted lending. Buying now near the placing and recent lows is imo an opportunity for a long term income play.
Time will tell
Usual caveats
Trek
Trek . I am also. building. position. here- I intend. to. go. to 1.5% of my portfolio. Just for my own information, I. would be interested. to know. your % if. you are prepared. to. reveal!
In now at 35.99!
Keeping these for income.
Usual caveats
Trek
Hi nomlungu,
Good post,
Do you know I had completely overlooked the obvious impact of the increase in corporation tax! Doh!
Tories a party of low taxation lol!
Gosh it’s getting hard self funding from investing/trading!
Thanks
Usual caveats
Trek
Trek,
In the next quarter there will be an increase in royalty income of around £330k from investments made in the first quarter that were only made for a portion of that quarter [presuming all investment were made at 13% and were funded through the loan facility at 9%]. Hopefully the loan terms allow the company to repay the accordion facility from the placing proceeds which will reduce financing costs by around £450k per quarter going forward. This additional income should cover dividends on the new shares.
In the last financial year they paid just under half the free cash flow in dividends so there is wiggle room. Even though the business model should see profit margins increase with more investments the increase in corporation tax from 19 to 25% will hold back further increases in dividends.
Except for. 2020 when they reduced. the. dividend, which was. presumably because. of the. uncertainty. re. Covid, they have always maintained. or increased. it. I have seen(but cannot remember. where) a forecast. dividend of 3p for 2023 I think it may have been on Market Screener and is therefore. probably. a. consensus. of booker. views. That should read. BROKER. views views
Has anyone calculated the sustainability of the divi across the increased shares?
I am assuming it can be absorbed as the last divi went up and costs are pretty much fixed with quarterly revs of 4.7m. The impact of 0.7p on an extra 57m shares for the next quarterly divi though is not insignificant at 400k.
Some of the book may be already sold as royalty which would obviously immediately yield but it’s difficult to work out the cash position.
Interested in any views as I am starting to build a position here for income following the huge placing.
Good luck with your investments
Usual caveats
Trek
Agree Trotsky and I voted against too (its easy on ii to vote), and will vote against directors at agm's for what it's worth, they might listen or catch on one day....probably like Boris feels really sorry, but that's just cynical !!
Do notice they just said 'passed' on the rns and didn't give a breakdown.