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Savannah Energy+ (SAVE, Suspended, Under Review)
South Sudan acquisition update
In a short RNS this morning, Savannah has confirmed that (further to its prior announcements) the company continues to advance the various workstreams – including the receipt of relevant approvals in-country – required to complete the acquisition of PETRONAS International’s South Sudanese portfolio.
Regarding this major proposed reverse takeover transaction, Savannah reports today that AIM has granted a further extension to 2 April, with subsequent updates to be provided as and when appropriate.
Given the further eight-week extension that has now been secured, regarding this obviously significant transaction, we believe that publication of the related AIM admission document can be very realistically expected within this newly updated timetable – and will look forward to further news in due course.
Whilst acknowledging that publication of the admission document (relating to the South Sudanese reverse takeover deal) had originally been expected to occur at an earlier stage, we continue to sense that Savannah is pressing on to ensure that this can occur as soon as possible – noting AIM’s granting of the further extension announced today.
We will obviously continue to look forward to admission document publication, at which point we will be in a position to fully assess the incoming South Sudanese assets. Whilst the shares will naturally remain suspended ahead of this, we continue to forecast material organic revenues and cash flow in the meantime. Our last-published Risked NAV estimate stands at 45p/share.
TiL - thank you. and based on a 2 month further extension I see this as very positive. I spoke to the NOMAD in early Jan and AIM were asking for some very solid reassurances on significant progress being made in SS. If they did not get those strong reassurances, a further extension from today was highly debatable. We must have made progress in country.
If Shore are saying a realistic chance of AD in next 8 weeks, either the debt financiers are also happy with in country progress to incur their legal costs putting the deals together or as my previous note, we are not taking on debt for the deal.
Granted Shore will know some decent stuff to put that note together but we were also told from IR very clearly that Accugas debt re-finance deal would be closed before end of December 2023!!!
Anyway, based on where we are at, we could not have wished for a better note from Shore.
Return price on or before 8th April ……………………wait for it…………
89p
Hi RR
Good colour on your chat from the NOMAD. Fingers crossed for all those projects you listed.
With reference to the Shore Capital note, they are just a sponsored broker, hence why their notes always have a disclaimer for investors to view it as marketing communication. ("This material is considered to be a marketing
communication and accordingly it has not been prepared in accordance with legal requirements designed to promote the independence of investment research nor is it subject to any prohibition on dealing ahead of the dissemination of investment research. This material is issuer sponsored and has been prepared pursuant to an agreement between
Shore Capital and the issuer in relation to the production of research".)
Thus would not attached too much significance to it.
The other brokers who seem to cover SAVE are "Cavendish" and "Hannam & Partners" who might be independent and not hired by Savannah directly however cannot see anything published by them (which I guess is not a surprise as we have no data/ financials to analyse!)
Cavendish are joint brokers to the company, but have been largely silent since the suspension. They had been bulls of the company with a target price of 85p pre the SS deal.
All brokers and the NOMAD will need to play a crucial in the run up to the relisting, keeping the big institutions onside and potentially buyers of more stock.
My feeling is there may be a pent up order book of sell orders ( I’ve been an inadvertent large holder of this for too long and may want to rebalance) so if the SS deal is completed we’d need an orderly deal flow on both sides.
Until then, the waiting game continues.
Ian - I think quite the opposite. After all this time II’s will see huge growth and yield potential should SS close. They unlike PI’s in many respects but to mention 3:-
They don’t get bored
They don’t need to take cash off the table
They don’t forget the reasons they bought in
Yes there will PI’s who sell but I see far more demand if and when we land a big one.
I'm fine wit this extension.. and if there's another similar duration one thereafter then ok by me too. Thereafter again probably sees me say it's realms of the ridiculous now though.
You add much value here RR. Thanks v much for all of it !
ps: I really identified with your - RR - post of 8.55 am.. but - also - somewhat strongly disagree with one part of it :
''By the way, should we get the in Country approvals by 2nd April, there is not a cat in hell’s chance we will be trading again before 1/7/24.''
NtM - I agree and on reflection I retract that comment. I now think that if SAVE have made enough progress in country to be granted a 2 month extension by AIM, it’s probably enough progress for the finance provider/s (if we are taking debt on) to put all their wheels in motion. I genuinely think we have a decent chance of a Q2 completion now.
I’m inclined to agree to a certain extent, but when II’s see then opportunity cost of having capital tied up in a business where they can’t trade to another opportunity, particularly when in 2022 the NASDAQ is up more than 20%, II’s will be mindful of dead money taking oxygen from performance.
It's hard to say Ian.
Some of these institutions have major funds under management and while holdings in SAVE for the top 9 including the EBT are just shy of 60% it might not register that high at all on their overall FUM.
For a few weeks to a few months this either going to transform from $280m to nearly $1.8b yearly revenues with a significant debt reduction (we hope) on the transaction cost 2.25 years on ? and IIs seeing a more realistic valuation/re-rating with perhaps further deals in the pipeline in the short-medium term for continued growth ?.
If they were to pay a $50m div (from $1.8b revs) it's about 12% at the current valuation at 26p to 4% at 78p which imo would be affordable relative to low debt and a $70/b oil price.
Maybe a need to wait and see the expansion plans re reneweables - would IIs pull their money without seeing the details of that growth arm/performance next few years. On the above they'd have to now pull that money and look for opportunities anew and success while Save might be on the cusp of transformation. They may not react in the same way as PIs re access to capital. Just imo.
As with all deal making there is an escrow process so folks can google it, so all parties to transaction feel comfortable to commit to each other using a third party a legal firm. So the South Sudan government can feel comfortable that Savannah can finance the acquisition and has backers and the debt providers can feel comfortable that they have assurance on government approvals, It's a matching process and it happens in tandem, you can have the approvals happen later but in this case I believe Savannah and Debt providers would want approvals and debt execution to happen concurrently to give assurance to both parties, so the escrow process allows for this and both parties can not say you are not providing debt or you are not providing approvals, they can both satisfy each other through escrow.
It really comes down to SS government will to complete this deal and let's be frank that's the only thing that matters with this acquisition and nothing else really