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I agree with you, Kiwi. There's always a few negative media reports of tariffs falling, costs going up, GST, delayed payments, etc. and yet MYT seem confident in what they're doing to keep raising money and constructing more wind / solar farms while the opportunity is there. I just wonder if MYT are blind to / unprepared for the unforeseen but I'm happy that that's easily priced in at a �50m market cap.
From what I can tell from the financials they're comfortably on top of their debt. With refinancing on maturing assets, repayments will continue to come down substantially. They're essentially borrowing and constructing as much as possible whilst Modi/ the Indian govt. aggressively supports renewables. I suspect when things change, they will consolidate into a business model like that of UKW. Seems like a fantastic business that's only going one direction in the short - medium - long term.
They appear to be able to refinance at lower rates so lenders clearly believe so, and they have better access to the numbers than we do. It's not really a headwind, it is basically the business model when you have an asset heavy business with secure medium / long term revenues.
With around a billion dollars of debt, the big question is can Mytrah overcome the headwind of its interest obligations and pay down the debt? How they can do this has to be the big question here. What do folks think?
held these a while ago as I needed the cash , but just got me 30k ish . had to buy in 2 lumps stock hard to buy?
Much improved by the looks of things. http://www.mytrah.com/index.php
My apologies Monkf6. I dropped away from this board for a month for specific reasons. Thank you for your 14 July post which was very informative. My two main concerns are that they will take on uneconomic projects in the rush to grow and they may run into a problem with debt. However, they have a large corpus of projects where the tariff was fixed prior to a more competitive environment and the debt looks entirely manageable. Indeed it looks as though they should be able to refinance some very expensive 12% debt next year. Nearly all their debt is floating I think (accounts not very informative on this) and Indian rates are declining and forecast to decline further. The DISCOMs are an issue which I watch quite carefully - but they seem to be paying and as MYT point out they are diversified by State. The mystery remains the share price and someone willing to sell which I think makes everyone think they are missing something. I think there is a variety of issues here. India being one. Another is track record; 2015 was a bad wind year so loss, 2016 they refinanced which led to a small loss and it was ramp up year which was not in time to catch the wind season and new accounting. All this has made the results very difficult to follow. However, these issues are falling away. The benefit of the refinancing and lower rates will start coming through, last year's ramp up will be fully in this year's results, solar will balance wind seasonality and importantly gearing should start to fall as profits are made albeit reinvested. I expect the half year results to show a modest profit (say $5m) although it may be more with the new accounting which seem to recognise construction profit on projects being built.
It's good to hear from other investors here - thanks for your posts. I also see Mytrah as being grossly undervalued at this level.
Thanks ZENGAS - I hadn't heard that podcast before. It's more of the same but always nice to hear the continued confidence they have in what they're doing. It sounds like I've followed the same strategy as you, ZENGAS - just kept topping up over the past few months as the price has been suppressed. We'll be in MYT's top 10 shareholders at this rate ;) I'm really surprised the price came down yesterday to where it was during the uncertainty of the end of year results. I thought we'd never go back there with the results out. I also don't understand why the seller/s wouldn't wait for the half year results, which I'm sure will be good and sell into a rally. The share price falling back is not questioning my opinion of the company and I continue to buy. I see someone with a large stake who continues to want out of India probably due to the concern of bank bad loans across India - it's not MYT specific; just the sector and/or country.
Always found MYT interesting for the past few years and thought this was cheap post results and not sure if it's at bottom or just seller/liquidity that's pushed it down? I have bought 300k while some seller has supplied the market. Doubtful if the seller hadn't been here if I could have purchased them without the price running up but anyones guess ?. Bob Smith saying indian investors get the value more so than UK and highlights that we should be valued at 15X current and I suppose this goes on the bearing of what Renew are paying for Orange. https://www.investorschronicle.co.uk/shares/2017/08/15/boardroom-talk-mytrah-energy/
What's happened today!?! The never-ending big seller/s selling continues but how much longer until they're finally done? The biggest risk in my mind was the DISCOMs not paying but that seems to be mostly resolved now (reportedly down to 2-3 months). I know we've talked a lot about valuation in the past but as a recent comparison - which seems to have gone unnoticed - Renew have offered to buy Orange Renewable for $950m. Orange has 600MW (mostly wind) and debt not too dissimilar to MYT. So if MYT has double the capacity (1200MW) would it be worth... ... .... Well, at least considerable more than £40m ;)
My buy earlier today stil not showing up
At 29.5p
Aim company making profit, few shares listed, low MC and project projects to increase over the next 6 months in a huge market. Hmmm
No other views? Just us then, Hounddog. I haven't been able to track down the big seller/s. I considered MOAB (they say they still own MYT) and Capital Research & Management (won't confirm either way). The FT.com website shows CR&M have sold millions of shares but it also shows they still hold 12m (what they've always held) so I don't know what to believe there. I see the following 3 main reasons for wanting out... (1) Energy market competitiveness / potential bubble (especially solar) will lower returns and margin of safety. Only a couple of years ago MYT themselves were talking about higher prices (to better account for future inflation) so lower prices, in theory, should make them less profitable. If / when a couple of companies get into trouble all the funds will want their money out at the same time. COUNTER: Lower prices means renewables are here to stay, which could be interpreted as reducing the risk in MYT. I think I'd be more concerned if prices where increasing to 2x coal because renewables would be a much harder sell. Moreover MYT make a point of being more profitable with scale despite lower prices. (2) These Indian distribution companies delaying payments / changing agreements / wanting prices lowered to match the auctions (regardless of the location, scale, creditworthiness, etc.) / wanting the generation based incentive to go straight to them (or taking it off the price they pay) / not using renewables because they can't be bothered to plan for them / etc. These are all horror stories I've found online. It seems the payment delays have been for all power, but particularly, important for renewables who need to cover their interest payments from rapid growth. I have to admit, I underestimated how serious these issues could be earlier in the year. COUNTER: The government's UDAY scheme now covers most of the "DISCOM's" debt to power companies... making it more likely that MYT will get paid quicker in the future (although I imagine it won't be as smooth as that). MYT gained $27.7m post period end, which does bring the proportion of their receivables in line with recent years, as Ravi says in the annual report. I still think a lot the other talk is just posturing by the DISCOM's. At least the state and national government's are on the side of renewables but they could / should be more assertive. (3) Considering (1) and (2) above, the debt could be a problem if a few major things went against MYT. What do you think? Any other major risks / concerns that I've missed out? None of these are new, and if anything, I think moving in the right direction. For the record, I have continued to buy MYT recently up to 30p and back down to where we are now. Factoring in these risks (that maybe I was not giving as much weight as I should), my valuation has not changed.
IM-limited-O the accelerated depreciation, which I estimate to be on 60-70% of the cost of the turbine, is a real positive for MYT. It would have been even better if the towers could have been accelerated from 50 years too! The tax benefits from accelerated depreciation is one of the main reasons Warren Buffett got into wind / solar. MYT doesn't have profits elsewhere so it won't really help us in the way it helps Berkshire. Still, the accelerated depreciation means less or no tax in the early years, which leaves more for growth and/or to pay down debt - perfect. I guess this was a big motivator for MYT changing to the Indian accounting standards ahead of the 2018 deadline. I know from your previous posts you'll already know that, Hounddog - it's more for my benefit putting my own thinking into words! So the question was whether the wind turbines will last only 15 years instead of 25-30 years assumed on the previous European accounting standards. The problem being MYT will need to spend capital to replace them earlier than expected. Here's my thoughts on one of the components: rotor blades... The rotor blades are approx. 20% of the turbine cost and have changed from 30 to 15 years under the new Indian accounting standards. There was some UK research a couple of years ago that suggested blades are good for 15 years (I think) - the blades are still useful but there is a huge drop in efficiency from wear and tear and lack of maintenance. These studies were based on early industry turbines - not the turbines MYT has in place (and even MYT's early ones aren't great compared to what they have now). I'd hazard a guess that MYT will get 25 years of 90%+ efficiency from their rotor blades. However they may want to replaces the blades earlier for technology (or tax) reasons, although I doubt they will. The technology is moving so fast now that blades can be twice as long and the towers a lot taller. It means we can capture 2-4 times the wind power using the same footprint. This is why I'm not too concerned about the lower auction prices. Equipment costs are falling too. So aside from the early tax benefits, I think it's fair and reasonable that these assets can depreciate quicker as the technology is developing so fast. IMO it should benefit MYT. Like Hounddog, I'd also encourage others' views - especially those that are different from mine or ours. No-one will be attacked for the ideas they share. We're all here to learn. I've continued to enjoy posting on this board because we discuss, challenge, and debate MYT - the good, the bad and the ugly - 90% good, 8% ugly and 2% bad IMO ;)
Thanks Monkf6. I should say my revenue calculation was a crude one. Last year was $120m. Opening MW c540, end 1,000. So I guessed on a fully loaded basis (much of the new capacity would have been ramping up to full load) average 750MW last year. So 1,000MW a third higher - $160m. I would be interested in your and others view that the turbines are now being depreciated over only 15 years (see accounting policies). Do they really only last that long or is there an assumption of replacement by bigger and better ones?
I like your logic, Hounddog. I think your $150-160m figure is a good figure to use because even if the 1000MW portfolio fell a little short of that, the extra MW already added this year would make up the difference. And next year we'll be in the region of $200m per annum of power revenue from a 1700MW portfolio... assuming MYT achieve their huge 700MW target this year, of course! I'm confident they will as the majority of it's solar (approx. 6 months to completion vs 9 months for wind) and they have a good track record to date. I'm sure there'll be no looking back after this year as their scale (and cash flow) at 1700MW is going to help immensely in the upcoming wind and solar auctions.
I agree that the Mail article is an absolutely useless piece of analysis but amazing what it can do. The herd is joining us. I was looking at the accounts over the weekend and I reckon on the 1,000MW, they have at the moment to pay $100m interest per annum but should generate $150-160m per annum of power revenue. In other words they should clear each year $50m plus. This appears to be similar to their annual repayments on loans. At a rate of c10% that means interest drops by $5m per year and profit increases by that much. According to Bob they are tidying up their complex mezz financing. Also next year some expensive 12% $100m bonds mature and they should be able to refinance those more cheaply. Frustratingly they do not disclose the average rate on most of their borrowings but they seem to be variable because there is the usual disclosure that ifIndian interest rates drop by 1% that makes a $7m difference. Indian rates are falling as inflation abates. Looks like at the moment the force is with them.
Hounddog - I had a brief look into Greencoat UK to compare them to Mytrah and the following is just my first impressions. I certainly wouldn't post these thoughts on their chat board... It's an interesting idea to use DCF and GAV - it certainly makes them looks good. I'm not convinced though: they've chosen measures that they think they can win with (fair enough) but then they measure it themselves (not so good). I'm sure it'll all be above board and audited. I prefer MYT's more conventional approach. I guess UKW and MYT just have very different philosophies. In my mind, the MO for UKW is: look good on their own measures; the share price rises; fundraise off the higher share price; buy an already completed wind farm; look good on their own measures again; share price rises again; fundraise off the higher share price again; buy a wind farm; and so on. Nothing wrong with that. It seem to be working for them. I prefer MYT building a business with longer-term value by doing it themselves. MYT will have 3x the MW installed now compared to UKW (1300MW vs 436MW). UKW generating £79m income vs MYT £100m and UKW generating £52m in cash vs MYT £72m (including the post period end $27.7m). Do any of you reading disagree with these numbers? By my estimates, MYT will generate double the income of UKW this financial year. And yet operating expenses are only approx. 15-20% higher than UKW. However UKW are making considerably more profit, as you said... PBT £61m (UKW) vs underlying PBT £8m (MYT - based on the same accounting standards). I know I'm being a little generous to MYT here using the underlying figure adding back the one-off re-finance costs and 3-year employee share options. I do think this is largely down to lower debt and interest payments (UKW £100m debt vs MYT £770m debt). Just comparing today's PBT (not future potential) might suggest UKW would be valued 8 times MYT but they're valued at 22 times! £880m vs £40m. UKW's PBT is less than 2 times that of our recent friend and comparator, OPG. And yet UKW is valued at 5 times OPG (£170m). I'd definitely take OPG over UKW. And I'd take MYT over both (that shouldn't come as a surprise). As you say, quite a big discount for the leverage. I also think (based on OPG too) that there's quite a big discount for being in India - an unjust discount IMO. As always, we welcome anyone to challenge and disagree.
More useful than the Mail is an interview I wasn't aware of until the weekend. It's Stock Tube on 12 June but you'll have to search for: "Results 'a clear demonstration of our ability to grow the business' - Mytrah's Bob Smith". After all our discussions over the past couple of weeks, for me, this answers the two main concerns: leverage and falling prices.
The power of the media, hey?! It's incredible what happened today based on a nothing piece in the Mail. I've only seen the article online so maybe I'm being unfair and there's more in the actual newspaper. Still, I'm not complaining - it's nice to see a proper market for MYT shares again. Unlike recently where the volumes have been low and almost all the trades that have been buys show up as sells. I know the trades on Friday were buys but they all showed as sells. LSE (this LSE not the real LSE) said if the trade is less than halfway between the bid and ask prices, it will show up on their website as a sell even if it is a buy. That explains why most of the recent purchases showed up as sells. Today is far more accurate. Although this website couldn't handle all the MYT share trades today as it's lost all record of the trades from this morning and last week! The seller/s had chance to shift more shares too. I looked at Greencoat UK today and the patterns of selling is very similar to MYT so, again, not sure if that gives us a clue to the seller/s or not?
In Daily Mail
http://www.thisismoney.co.uk/money/investing/article-4633740/SHARE-PUNT-WEEK-Mytrah-Energy.html
I know. That was quick. Is there something they know that we don't?