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Investormeetcompany.com
GENEL ENERGY PLC will be holding a Trading and Operations Update meeting on 24th Jan 2024 at 10:00am GMT.
Removing shares out of circulation (cancelling them or putting them into Treasury) is a an apportionment of the rights those cancelled or removed shares represent in substitution of the cash foregone to buy them.
If the cash forgone to buy them is more than the value those rights represent (expected future cash flows adjusted to present value by the mathematical process of discounting), shareholder value is being destroyed. Simple really. Sad you can’t accept you are wrong on this occasion on this topic.
Take the matter up with Phil Oakley, Warren Buffet, Terry Smith and explain to them why they are wrong about care needing to be taken not to pay above fair value aka DCF value when doing buybacks.
Podcast summary for those who have trouble reading research publications. Thoughts On The Market
https://podcasts.apple.com/us/podcast/thoughts-on-the-market/id1466686717?i=1000641215537
Filter activated!
"it is hard to argue with but it doesn't give shareholders the full picture, just as the accounts don't tell us why we can trade on a higher PE ratio if gilt yields fall later this year." could have been better phrased as
"It is hard to argue with because the treatment is objective, not subjective, giving directors little scope to use their own judgement as to how to present what has happened, the downside of which is shareholders are poorly informed, just as the accounts don't tell them why their shares can trade on a higher PE ratio if gilt yields fall later this year".
"Of course you have adjust the future expected cash flows to present value to make a comparison the price paid for them, causing a loss of shareholder value." should be
Of course you have to adjust the future expected cash flows to 'present value' to make a comparison with the price paid for them, a comparison which can show no change in shareholder value (your belief, always), a gain in shareholder value or a loss in shareholder value.
"Overpay for What?
For an entitlement to an expected stream of future cash flows. They have a value. That's usually why a share is worth more than zero. When the shares are bought back and cancelled, or held in Treasury (it makes no difference), the entitlement to ownership of those expected future cash flows is distributed or shared out among the non-bought back shares. If the bought back shares are worth less than the cash paid for them, the bought back shares subtract from the value already owned by the non bought back shares: previously the non bought back shares had an 'ownership' of the cash, and in its place has been substituted instead an entitlement to an expected stream of future cash flows which may turn out to be worth less than what was paid for them. Of course you have adjust the future expected cash flows to present value to make a comparison the price paid for them, causing a loss of shareholder value.
You seem fixated on the accounting treatment, which of course does make it look like a value neutral distribution, as you say, but nobody is interested in time slicing the company's investment performance over a nano second holding period return.
The problem of the actual cash flows differing from what was expected is a different problem: you buy shares on expectations of future cash flows, not with hindsight knowledge of what the future cash flows actually were.
All sensible people accept one must not overpay when buying back shares otherwise you destroy shareholder value (not obvious from looking at the accounting treatment of buybacks).
It also isn't obvious from accounts if we get richer from our share price rising due to the risk free rate of return falling (the 5 year gilt yield or T-Bill yield), but because this is a component of our WACC, when it falls, more shareholder value is added for a given set of expected cash flows, meaning our shares, all other things being equal, can trade on a higher multiple of earnings. The accounts are not there to give a blow by blow account in minute detail of how we get richer or poorer. The accounting treatment of buybacks is abominable: it makes it harder for shareholders to understand why they are getting richer or poorer, but there is a good reason why accounting standards bodies like this treatment: it is hard to argue with but it doesn't give shareholders the full picture, just as the accounts don't tell us why we can trade on a higher PE ratio if gilt yields fall later this year.
Overpay for what? "The company" buys something, ie its shares, and cancels them = they pay money for nothing in return = distribution of cash. What it does cause is a change in ownership % between those who sold and those who didn't. No one is compelling that sell or not sell decision - it is up to individual investors. They and only they are deciding whether to sell into the buyback and take some of the distribution or not to sell and hence increase their ownership of the company. (And they live with that decision for whatever time horizon they have ownership in the company.) The company itself just distributed cash. Holders who decide not sell and hence increase their stake in the company of course want those buybacks to be at a price below their then perceived fair value. But that's their view, based on then expectations, which may be proven right or wrong over time. Others with different views might elect to sell. Others who are unsure may simply sell pro rata to the distribution and hence keep a neutral position. Everyone needs to make their own decisions. But the company is merely distributing cash.
The filter bin is screaming...
Further, and if there is a serious risk the actual cash flows are going to fall short markedly of the expected cash flows, you do not gamble with shareholders' cash doing buybacks in case you over pay.
But, Putup, you presumably accept it is physically possible to pay more for a stream of expected future cash flows than they are worth whether the company is doing the buying or a new investor is.
Yet you will not look at buybacks as anything other than a nano second event, a holding period of no interest to 99.99% of investors, an event as far as you are concerned that doesn't involve buying back future cash flows to be shared among the non-bought back shares simply because the accounts show the NAV drop after the buyback is all over in a nano second time interval, just like after a dividend payment also, just so you can be correct in saying a buyback is just a value-neutral distribution that involves no addition or subtraction to shareholder value.
I think you have a mental problem and a logical inconsistency that needs sorting out with a psychiatrist or you need to pluck up the courage to invest for longer than a nano second
Most CEOs, Warren Buffet, Terry Smith and Phil Oakley of Investors Chronicle don't agree with you, and I don't either: only a moron pays more for an expected future cash flow stream than its worth, and it needs to be worth more than zero to add shareholder value when it is discounted by the WACC.
No clue Nobull. Keep flogging.
Should have invested in a biscuit manufacture!
Last Update: January 9, 2024 - 11:37 AM
Baghdad / Iraq News Network - A member of the Kurdistan Democratic Party Wafa Muhammad Karim, Tuesday, that all indicators are positive regarding the amendment of the region's share in the budget, expressing his fear of "the coup of the last moments." He pointed out that "the delegation of the regional government received positive messages to resolve the file, but we learned that there is a decline at the last moment, and we hope this time that the agreement will be adhered to." The Kurdistan Regional Government is looking forward to two important issues in the budget, the first is adjusting the cost of extracting a barrel of oil and the quotas of foreign companies to resume exports, as well as separating the salaries of the region's employees from other financial disputes and not placing them under the actual expenditure item.
How many red days now ?? The drop is relentless.
Shorts always win I guess because the pipeline ain't going to even this year let alone in a few week or months .
Let's hope the local sales are in increasing dramatically after the last abysmal update.
90s incoming for sure.
My sell at 126p got slated before Xmas and I said gkp always delivers.
Still holding of . Let's see where this goes?
Try reading it before you post it!
Https://new.thecradle.co/articles-id/1374
The Kurdistan Regional Government (KRG) in Iraq resumed oil exports through the Turkish pipeline on 9 February.
Exports had been suspended as a safety measure after a massive earthquake caused widespread destruction in southern Turkiye and northwest Syria on Monday.
Deaths from the 7.8 magnitude quake have now surpassed 20,000.
The natural resources ministry announced the resumption of oil exports to Turkiye on Tuesday evening, the Kurdish news agency, Rudaw reported.
The KRG began exporting oil via pipeline in June 2014. When ISIS militants invaded Mosul that month, KRG Peshmerga forces took advantage of the ensuing collapse of the Iraqi army and quickly moved to take control of oil-rich Kirkuk.
This gave KRG leaders control of the infrastructure to export oil to Turkiye via pipeline, independent of Iraq’s central government, boosting future Kurdish aspirations for independence.
Exporting Kurdish oil from Kirkuk proved controversial, as much of this oil was, in turn, immediately sold by Turkish traders to Israeli firms.
Forbes reported on 23 June 2014 that the sale of KRG oil to Israel had been confirmed, citing reports from Reuters, Bloomberg, and the Wall Street Journal showing that a tanker carrying oil from the Ceyhan port had docked in the Israeli city of Ashkelon.
The Financial Times reported that by August 2015, roughly 77 percent of Israel’s oil supply was being imported from Iraqi Kurdistan via the Ceyhan port,
According to the Kurdish Draw Media, the KRG sold 38 percent of its oil to Israel in January 2023, with the remaining amounts being exported to Italy, China, Croatia, Taiwan, and Romania.
The KRG has repeatedly denied that it deals directly or indirectly with Israel, stating that oil cargoes often change hands several times before reaching their final destination.
Apologies on typos
Yes I may be gullible and I may be a sucker if I read some messages on this board but let’s look at a few things - that there has to be a reason / rational behind
Is GKP the darling and the pain of general public investors - YES they are !!! Do they try my Patience - yes they do !!! But will I persist with them - Yes I will !!! The problem is that the general public investor I believe is 95% the same and there in lies the problem for the market.
Let’s look at general public ownership for companies similiar to GKP and international
GKP general public ownership 58%
Genel “ “ “. 28%
Jadestone 18 %
BP. 21%
No matter at what type of company I look at the anomaly of general public ownership is GKP
So question is do we have stubborn patient investors, persistent people in the market manipulating or rampant day traders - all the above.
Next question - if GKP is that worthless then why is it the most tiresly traded stock on LSE !!!!!
A few facts there are circa 40% shares that never move anywhere c90m that leaves c130m shares out there !!!!
I believe there are many general public investors like myself with a nice tidy amount that only ever buy to keep increasing my number as I am in the Patient Box 1 I would say there are probably at least another 70m in that box but a wild guess.
But why o why does a company trade on average 6m shares a week, that’s a measly 120m shares every 4 months. So looking at trading liquidity GKP trades it’s non 40% sacred shares 3x a year mmmmmmmmm - don’t believe it !!!!!! I would guess the liquidity will probably be 6-10x of traceable shares which probably still low.
Somebody is and continues to work hard for scraps every once in a while where there may be a distressed seller in the general public ranks - I feel sorry that some people’s patience is ground down by the persistent - who let the dogs out :-(
So long winded - but there are not really that many buyers and sellers out there I would go as fast as to say how many of it is all about continual trading of shares just for the MM.
But one day the patient will overcome the persistant
GLA see you at the dance
BlackSteel, it probably has nothing to do with perfect markets: it's more to do with your investment time horizon. If your holding period is 1 nano second, sure, a buyback is a just a value-neutral distribution (the cash leaves the asset side of the balance sheet and the "sources of finance" side decreases the same amount regardless of whether the shares bought back are held in Treasury or are cancelled.)
A holding period any longer than that and you want to be concerned the company is not overpaying for the shares bought back (whether cancelled or not) compared with the present value of the cash flows associated with the shares bought back.
Future cash flows discounted by the WACC and shared out among the remaining shares not bought back are value accretive if the NPV is greater than the share price paid: you need to be sure you aren't paying more for those cash flows than they are worth.
Our previous Chairman called the buybacks value-accretive: they weren't when he said that, and they still aren't. I expect the statement was written for him by a half-wit with an accounting background, someone fixated on the similarity of the effect of a dividend leaving the company.
MP Evans buys in its shares for cancellation at about an approx 50% discount to the DCF or fair value shown on page 100 of the 2022 Annual Report and Accounts (Equity value per share = £14.98p) and also referred to in Note 25, a DCF valuation done by independent specialists, a valuation not used on the balance sheet of course (PPE stated at historic cost less depreciation), giving a far lower NAV per share, the reason the shares trade at a premium to book value. The buybacks there ARE value-accretive but they aren't going to close the valuation gap any time soon on their own, nor are they going to stop a fall in share price if the fundamentals of the market they operate in change suddenly. I am just reassured they allocate their surplus capital wisely. I am not sure the same can be said for GKP's past buyback program - the oil price crash and covid could not have been predicted, but using debt finance (not surplus cash) to fund buybacks wasn't wise and not when your business model has a high level of unpredictability, I wonder?
I think our Board was talked into it by their broker keen to make extra money, and because our Board had more money than sense they duly obliged, just like they issue free new shares like confetti to staff not working at the coal face, like the human resources officer, diluting the hell out of us. JMV.
Accountant I'd say it looks unlikely to reopen for us.
How many years have we left on contract?
Theoretically value neutral (perfect markets) as the cash used for the buyback reduces the outstanding share capital so the reduction in enterprise value (less cash on the balance sheet) is offset proportionally by less outstanding shares - thus enterprise value per share is the same before and after the buyback. A share buyback means shares acquired by the company are then cancelled - so the shares evaporate. Share bought and held in Treasury are not a buy back - can be used for exec options etc. and don’t reduce the share capital. In which case should not be counted as a shareholder distribution.
Let me learn. Why is a buyback a value neutral distribution? Thanks Br
All very quiet in the media about reopening the pipeline, been out for a while, what’s the latest?
"You should take FCFY's comments seriously - from the questions he is asking he is a few pay grades above both of us in oil investing knowledge and experience. "
Not even close
You should take FCFY's comments seriously - from the questions he is asking he is a few pay grades above both of us in oil investing knowledge and experience. You seem not to want to think outside the accounting box with your line of thinking: "once the cash is out of the door, it's gone and it doesn't matter what price was paid in the buyback - it's purely a value-neutral distribution".
MP Evans has a choice between either buying new oil palms for its shareholders or buying in its own shares for cancellation that give shareholders more oil palms per share: sometimes it is right to use surplus cash to buy new oil palms directly and at others to procure them for shareholders by cancelling existing shares after a buyback. The surplus capital allocation decision the Board has to make is real as to which is better to do. The same sort of thinking should apply to our BoD, unless they are advised by you.
Oh God. The conversation that just won't die. Zombie. Into the filter bin.