Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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"there is a general sell off "
That's my point. I'd be taking profit and heading for more certain returns.
Devon, be fair - there is a general sell off across the whole market today.
So, selling 780 items over 7 years, a shop renovation and London 2020 - if it goes ahead...
Why doesn't that fill me wish much confidence.
With this major sell off going on if i had any profits here I'd be taking them and buying something CV discounted with a yield.
I'll be keeping an eye on IWRD over the next few weeks myself. Buy the entire world on a discount and with some income!
I suspect that once all the renovations are completed at 399 and they are able to market these newly sourced 780 items that turnover will rise substantially. Add to that a good 2020 Stampex and who knows what is possible?
Their payroll has dropped through the floor with all the staff cuts
The mid-year update showed basic running costs and servicing the debt at £1.5 million for 6 months and actual profit from philatelic, publishing, coins and interiors combined at £300,000.
If they can halve the running costs and double the profit, there is a chance.
But you must admit you were surprised at the mid year update? Why should that momentum not continue in the full year results due soon?
And where do you think any uptick in volume and profit will go?
As I've said plenty of times, they don't need price momentum to turn a buck, but you do.
They only need external shareholders when there's a need for more cash - a la Horny.
Could you imagine an equity raise here to reduce the debt....little bit of equity dilution usually benefits debt holders. Just remind me, who owns the debt?
It's a deeply complex recovery play...it's not just about increasing turnover. It's taking into consideration the key stakeholders game play.
And that spread, down to 10% at the moment, a slight recovery from last weeks 15%, buy today and sell tomorrow and use lose a chunk of cash, or even worse if the figures turn out to be pooron release and you could take a 20% knock in the blink of an eye. It's a very high risk, speculative share.
These are all fair comments on your part Devon, but I am much more concerned about the debt now at £14m. How can a company with just £11m turnover pay off such a debt pile?
It can’t unless the turnover rises sharply - hence my focus on this. I believe turnover is continuing to improve and should be around £14m by year end. Hopefully this will be confirmed soon when the full year results are issued.
After yesterday’s update I expect the full year update to be accompanied by a bullish statement to the effect that ‘the company expect turnover to keep on improving aided by new stock recently bought from Phoenix’.
"There is more here than meets the eye..."
Major shareholder, debt holder and a "related party transaction". How could you not come to the conclusion that "there is more here than meets the eye...". It's what the market has concluded. As I've said before, they don't need the share price to increase to turn a profit out of this business.
Loan facility with Phoenix SG
"related party transaction" with Phoenix SG
And "subsidiary' of Phoenix SG
Even the "CEO of the Company and a Partner of Phoenix Asset Management Partners" and as such "is not considered independent for the purposes of this transaction."
All that's an acceptable structure, but it does make the market nervous when you have a "related party transaction" becuase you can't easily tell if it's just a simple commercial transaction or blood and oxygen being provided to the still warm corpse.
Whatever the value per item there obviously expecting it to take time to sell. They've got time, has the corpse and the small retinue of private investors got the same? I guess we'll know in 7 years time.
This is part of the Guernsey portfolio being sold on the cheap to SG by Phoenix to boost profits. An average value of £1372 per item so these are not cheap items but then again they were part of previous investment portfolios when SG sold stamps for investments and used to guarantee them rising. Thank God that has all stopped! But Guernsey built up a most impressive portfolio of stamps such as mint 2d 1840 stamps, mint QV £1 and £5 stamps and so on. I reckon the catalogue value on these 780 items will be at least £10,000 per item. As I say, this is likely to have been a very good purchase indeed for SGI and the repayment terms are as soft as they get.
This stock must have a very substantial mark up if it is going to sell so slowly.
The real profit is going to someone other than SG who only earn a commission. But then have to negotiate to buy the remaining hugely overpriced material.
I agree with Pearls that there is no capital outlay, but this isnt a great deal.
They could have simply gone to a few firms in the "trade" and asked for stock on approval for 6 months then give back what hasn't sold and change it over.
There is more here than meets the eye...
"now makes them investment grade to institutions?"
I'm presuming you mean institution - and that's the nub of the issue.
The 'sales" are so wild, they're talking about "after seven years of the agreement, 20 per cent. or more of the consideration owed to Phoenix SG remains outstanding". That hardly gives the impression that anyone is expecting it to happen "forceably".
I'd be happy to try and shift them for them, but rather than "negotiate in good faith the repayment" in 7 years time I'd want them to pay for the storage...;)
I don't know it is fair to draw a negative inference from the RNS. They obtained a certain amount of stock when the Guernsey side was ringfenced into administration, but it appears that they now need further stock, presumably to cope with current demand.
The impression given before at the half year results was that turnover was starting to recover, if this is now happening more forceably, one would expect SG to need more stock and getting it from Phoenix has got to be the softest option around.
The last comment on the RNS is also interesting as they are now no longer in default. I wonder if that now makes them investment grade to institutions?
"it ain't good."
That's what the market appears to think, maybe trading hasn't been that good over the winter period....or the existing stock isn't moving.
Either way, these "related party transaction" are difficult to interpret. You can only rely on the share price action.
If I am reading this correctly SGI has been loaned stock worth £1.1m from Phoenix to sell over 7 years. After 7 years any residue is negotiated as a sale to SGI. SGI earns an unstated amount of commission on sales.
I don't know what the implications of this are, but presumably SGI does not have £1m to buy stock, and a 3.30pm Friday RNS release means it ain't good.