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Not so green when directors too busy smoking pot
Well it's seems a little more robust than last time it was here. Mind you the higher it goes, the higher it goes as dilution reduces.
let's hope we get another 3 trading days like this over the next week.. then I'll be a little happier about GKO..
any views on this ?
I wonder when they are going to RNS something? Mkt clearly getting concerned again
It is certainly true it has high debt and interest costs - which is a little uncomfortable but not surprising given the nature of the company. But there are two points to make. Firstly they restructed their borrowing in cAugust last year such that c$550m of borrowings from Indian banks (c12-13%) was replaced by a bond (8%) issued to foreign investors. This will be a big interest cost saving mainly coming thru this year. Secondly in last years results they are financing a big ramp up in capacity that was being built and so not yet revenue generating. Most of that will come on stream this year and start earning revenue in the second half of the financial year as the monsoon hits India. I totally agree about bureaucracy and corruption in India but the founders are expatriate Indians, UK MBA educated, who I seem to remember come from wealthy Indian West coast families. They will know how to work the Indian system but the hope is have somewhat more Western values towards corruption. There is risk but it is very different to the China companies listed on AIM which appear mainly fraudulent. Also it helps that the projects are dispersed and India is desperate for power. One thing to watch for is the constant depreciation of the Rupee v dollar which can impact reported results. However, the Rupee has held up in the first 6 months. India seems to be having an OKish monsoon so far.
Well I'm no expert but looking at the company's annual report 2014 it tells me it has huge net debt. The interest payment on borrowing alone was $56 million yet the company only generated cash flow from operations of $58 million. What ever you're paying for your shares you're not really get much return for your investment. Added to the fact that it's an Indian company so you have the usual problems faced in India like bureaucracy and corruption.
Well some have hade 40% or so from the low and so it'll dribble off until either we get some palpable news else the risk/reward is in balance maybe into the low 50's again? But given they said eight weeks ago we'd get some news, the deal is obviously complex or is going bad so to speak.
Intrinsic value 100p+, hmmm right so why has it been falling every day since I bought these shares 2 weeks ago at 70.8p? Could somebody please tell me if it's going back to 41p and then beyond? What's wrong with those shares? Why are they falling every single day if the company generates income? It's a scam.
From 15 small-cap Slater picks: Shares in Greenko ...have been hit by the prospect of a massive dilution from two sizeable convertible instruments. Two separate investments of $46m and £100m are free to be converted into new Greenko shares from now until July 2017 at the prevailing price when the conversion occurs. The number of shares that the convertible instrument holders are entitled to are a maximum of 29m and 45m respectively. The maximum number of shares the £100m investor is entitled to is 79m, but there is no limit on the dilution from the other investment. Broker Cantor Fitzgerald believes Greenko could use $106m from its $110m cash reserves to buy out the $46m convertible. Meanwhile, the broker points out that the share entitlement limit on the £100m convertible means the investor will only maximise value if the shares trade above 82p. The dilution effect of a conversion of 82p leaves the broker with a discounted cash flow (DCF) price target of 125p on the shares.
MW in the ground isn't a bad thing, but appreciate your point and totally agree on the intrinsic value. Hoping for loan issue closure ASAP.
I agree and I'd rather assumed they had identified it was an issue some considerable time before that. It's the "stupid deal overseen by inadequate non execs" that worries me.
Because I think the maximum dilution value per share is around 120p whilst if they satisfy the two loan repayments in cash by perhaps selling assets, the intrinsic value per share is north of 220p. But I'm worried that they (the execs) who own a big slug of equity too have a weak non exec who haven't got a grip on the complexities of these deals and in any case are motivated simply to add MW. The intrinsic value is there though.
I own a big slug of GKO and am currently taking up their whole ridiculous LTIP structure with the Board. This incentivises them to put MW in the ground. That's it. Not ROE or share price performance, absolute or relative - which is what I care about. MW in the damn ground. It's totally preposterous. A totally incompetent chairman and Board, particularly the Chairman who couldn't manage National Power when he ran that and displays similar incompetence here. Watch this space.
It can't go up in a straight line forever. The uncertainties/ silence are being addressed. I doubt we will see sub 60, let alone below 50 for a considerable time (f ever), I added a little at 65p today.
Is it gonna keep falling on Monday again? It's supposed to be rising.
Could someone tell me why are these shares falling? Is it because every time I press the buy button the shares start falling? I hope it's not coming back to 41p.
Yes I did a bit of buying today. I am increasingly of the view that the dilution issue has become overblown. The convertible holders are faced with quite a number of practical difficulties in realising their position. It is interesting that GEF has not yet exercised - from GKO's latest investor presentation it is clear its investment has now stopped compounding (although that was not absolutely clear from the GEC circular which also dealt with GEF amended terms). GEF was on prevailing price (not sure if that got changed) and GEC is more sensibly on 5 day volume weighted average which is c65-70p now. Another problem for the converters is I think that GKO does not have enough authorised share capital for super dilution. It has only 300m authorised share capital leaving c150m for dilution. If the convertibles needed more the shareholders would have to vote through an increase which would slow the process of getting the share and selling them.
Yep, have to agree with you ghost. Looking good in a low-key sort of way for a move towards £1 on any resolution of the CB issue.
What got me involved here was the pattern of volume build up in the 40s at the recent low, prior to the last advance. Someone knew back then that something is brewing in the background.
Yes I agree Bigprofit. It was a tongue in cheek remark of mine earlier. All this stuff about a Greek bank run and leaving the euro is more or less fully in the price by now, given all the media hype from the BBC et al who love to revel in other peoples' disasters. Once this storm dies down, as it surely will, Mr Market will return to appreciate that equities in general are still attractively priced, even with an interest rate hike or two in the US.
I am contemplating averaging down, but the main problem is, until recently, this share is just iliquid. I always believe no true price without volume. IC was so confident about this share as were many others, but now I am nursing large losses, but I think a rapid recovery is on the cards and an update from Investec would help.
Surely the current market is just the usual 'sell in May and go away', I do not see a doom catalyst yet.