Rainbow Rare Earths Phalaborwa project shaping up to be one of the lowest cost producers globally. Watch the video here.
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All these companies being acquired, Anglo yesterday and Darktrace today, when will it be our turn?
Yeah so so cheap atm, must be a target but I need £3.50 +
You won’t get that. You need to lower your average. We’d be lucky to get £2.
The main thing holding this back is the collossal debt. Have a look at the results presentation where they talk about how they plan to settle the £250m 2026 bond and the language they use.
Their ships have a market value of atleast £700m and the market for buildouts for such vessells are fully booked until 2028 and demand is off the charts since to there are not many dockyards which build such small vessels. These ships cost saga £600m and since 2021 the cost for buildouts has increased by 35%. A sale and leaseback would generate enough cash to be in a net cash position.
'They're coming fast and furious. We believe there's going to be a scarcity of capacity worldwide. Some of these will go to China,' he said, 'but some of these will continue in the US operation.'
https://www.seatrade-cruise.com/shipbuilding-refurb-equipment/10-more-viking-ocean-ships-2030-tad-bigger-and-some-china
So disagree again with TO as Roger will block it.
But sale and leaseback would change the dynamics of this company. It would take the risk of paying the 2026 £250 billion bond of the table and of course make an exceptional profit for the year instantly.
Would also settle for selling AICL as well which would now be much more than the £90 million offered earlier.
However Saga is not had a history of making deals so far, but that was useless Euan, maybe Mike can do it
Rupans, I'm not sure if a leaseback automatically will make an exceptional profit, as there will be also new costs associated with rental no? It would be a great move for sure but whatever positives there are there, we still have the 344m goodwill question mark to deal with. Could be loss making on paper for some time albeit not in cash terms...It would shift the sentiment and perceived risk hugely though.
Hi Rogue,
I am not an accountant so I maybe wrong but the reason I say this is because:
Currently the cruise operation has no goodwill on the books.
So if they sell the cruise ships for more than the current debt associated with it it would create a profit. As this profit is a one off and not due to normal operations it would be an exceptional profit.
The lease or rental on the ships would be part of normal operations, and therefore affect the underlying profits. This would therefore reduce the EBITDA and underlying profit with respect to the cruise ship business. However note that the proceeds of the sale would be used to pay of the ship debt, so the normal debt payments which have been affecting the underlying profit in the cruise business would dissappear. So I think the basic equations, keeping all other factors constant, are:
exceptional profit = sale of cruise ships - ship debt - transaction costs of deal
new EBITDA = previous EBITDA - lease/rental costs
new underlying profit = previous underlying profit - lease/rental costs + ship debt repayments
overall this would be very good as we would no longer have an issue regarding £250 billion bond payment and perhaps also lease more cruise ships
Hiya,
I am no accountant either. I agree with what you said, except the goodwill is a company issue. It may be sitting against insurance but all part of the piece. So an exceptional profit could be very enticing for them to reduce the goodwill on the balance sheet. Apart from that, yes agreed all good if it happens....
Rogue,
so that would be a sensible thing offsetting any one off profit from the sale of the cruise ships with a goodwill rightdown as there would be less tax to pay. The main point is sale and leaseback generates cash while goodwill is a non-cash item so the debt would go down on a sale ...
Rupans, yes. Agreed. If it was gone then a profit is a profit...but then there's depreciation, or is the view now that bearing in mind demand for ships its appreciation?
Rogue, so i think the recent appreciation in build cost has cancelled out some or all of the depreciation. so a sale of i estimate £600 to £700 million for both ships would wipe out the debt. Even if they leased out the ships at £60 million per year then with an EBITDA of £90 million for both ships would leave a profit of £30 million .... just for ocean cruise ...
What about ship refits? Cruise division is the only part doing really well.
Still feel someone will buy Saga. Just need to get a crazy CEO like the one at Nationwide who wants to buy Virgin banking. Let's make a great company overnight a second rate outfit.
Rupans, yeah I get the logic for sure. Let's hope we get some news soon. I have a couple of things that need a big top up sooner rather than later.