Rainbow Rare Earths Phalaborwa project shaping up to be one of the lowest cost producers globally. Watch the video here.
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Reading Cenkos' analysis they say: We believe that satisfactory resolution of the company’s financing needs could act as a positive catalyst for the share price. However a bag of a fag packet calculation:
31/12/21 = £5.4m cash
HSBC Debt = -£7.0m
Shortfall = -£1.6m
Feb 22 Sapienza sold for £2m. £1m used to repay HSBC.
So we now have £0.4m net cash?? So what crisis? Do we not have a "positive catalyst" staring us in the face?! Joking aside, the September update should give some colour to how the ground lies. Much of the 2021 cash flow won't repeat in 2022 so there's a very good chance the coming 14 months are sufficient to keep cashflow neutral and be debt free.
Next problem is onerous contracts:
2021 Marine Margin 1%. 3 contracts are onerous. One of the 3 is 64% complete and ends 2027. Unclear about the other 2. Efforts underway to renegotiate. 2022 Trading update - behind target. At a guess there's a likely outcome of something between b/even and a -£2m loss for 2022.
2021 Service Margin 26%, 14% organic growth to £25.6m revenue; 2022 update - slightly behind but expected to recover. Assuming a further 14% growth and 2% margin growth could see a £2.9-£3.1m Op Profit.
Before you get too excited central costs will net that to near zero. That's a realistic case.
Of course there's a pessimistic case you can make..... and there's also an optimistic case where Key Defence Suppliers need to be safeguarded and a renegotiation is successful (i.e. if TPG went bust that creates disruption). Defence spending is going up and TPG is almost unique in this vertical, to not be enjoying a boon from the revival of Defence priorities.
To conclude, trying to piece together the 2022 picture out of the 2021 accounts has given me a right headache. I can see why the analysts copped out and said "there remains insufficient visibility to support forecasts for FY22."
What I can see however is a glimmer of hope. I can see how a lot of incompetence has been flushed through and a leaner, cleaner, sensible TPG is emerging. The Science Group people are not "nice". They won't throw a bone to TPG let a lone a loan. The £50k a quarter service charge for admin and £150k arrangement fee is taking their pound of flesh. However, you cannot fault the way they have cleaned the mess that came before and clearly it was what TPG needed. There's a good chance they cannot manufacture a crisis to "take the whole thing over". Clearly they a sitting on a large loss from their purchase of 27.8% of TPG at a 5p ish level (75% loss so £8-£9m maybe?)
The other ray of hope is simply that people who work there are happy. This was the reason I didn't sell up. I've monitored the glassdoor feedback since SAG's involvement and only found positives.
https://www.glassdoor.co.uk/Reviews/TP-Group-Reviews-E1697672.htm
GLA
SAG sitting on massive loss in exchange for a minority holding with IMO little/no chance of turning things round and getting their investment back. IMO looks like a disaster for them ...