Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Anyone know what's going on with this SP? Why are people selling off having just secured a major deal ?
3 months b4 any real rev from this contract if all goes plan, placing along line I'm sure.
Some one on another board has just pointed out that we are paid in $'s the airlines,.. hence why would inflation in DRC affect our sales revenue. Which is a fair point.,..... and could be right.
However... whilst we are being paid in US $'s... we will be paying for services and staff in local currency?-- 400 odd staff across the five airports? Could EWSG have linked the costs associated with these elements of the contract to local inflation in DRC?... it would make sense to do that, especially when inflation is so high over a sustained period?
I guess time will tell.
DrM...
Not necessarily,... as I understand it from the Investor cal it grows in line with inflation, reviewed annually. Perhaps someone else on the call9s0 can confirm if I have got that right. I certainly asked the question about whether there was a review period within the contract to renegotiate the fees, and PF replied, there was an annual review. My recollection is that he said words to the effect that worst case situation it would rise with inflation. But I didn't record the call so I can't double check.
So if I have it right, the rate of increase will depend upon what the inflation figure is. The government target is 7%, refer to link below.
The average inflation over the past 10years to 2022 was 10%. It is forecast to fall to 6.4% in 2024.
It just shows how the contract could grow substantially, just on the inflation fluctuations.
The government target is 7%.
https://www.afdb.org/en/countries-central-africa-democratic-republic-congo/democratic-republic-congo-economic-outlook
https://ycharts.com/indicators/democratic_republic_of_the_congo_inflation_rate_outlook_end_of_period_consumer_prices
That’s actually incredible
So the base contract grows at a minimum of 10% a year even if there is no increase in passenger numbers
Dr M,...
Inflation linked revenues....
Yes... security fees will reviewed annually,.. and lowest rate of increase will be in line with inflation.
Q: Anyone hazard to guess average inflation rate in DRC over past 10 years?---
A= 10%
So, if inflation cine on that trajectory, and you compound that up,. the contract near double to $20M/annum ( paid in US dollars via IATA.) in circa 6-7yrs. That is if we do noting!--- no growth in passenger numbers,... no additional domestic passengers, no freight, no extension of the contract to include additional airports.... etc., ( they have over 30-ish)
Note: --- I'm sure PF said the return or payment for the kit we install, which will be owned by WSG,... happens if the contract is terminated at the ned of the first 10yr contract period,..ie making it highly Riley that they will extend to the 15yrs...
There is many inbuilt security features (if you pardon the pun) in the contract. They will be putting a good few million of equipment into the airports over the life of the contract, paid for from the revs of the contract. If at the end of the 15 years, DRC doesn't want WSG to continue, then they have to buy all the equipment off them within 30 days. Quite the golden handcuffs to keep renewing it.
The $25 per passenger can be renegotiated every year with the lowest amount it can increase if there isn't an agreement is inflation in DRC
If the contract gets unilaterally canned, not only do they not own any of the equipment so airlines would likely immediately stop flying there, they have to pay x5 yearly revs in an international arb court.
Basically they have done a bloody fantastic job at trying to mitigate risks within their control and to be fair, they've actually done a brilliant job here, credit where its is due. I have a large holding and have been critical to their faces over the past 3 years but they've hit this one out of the park and i truly believe this contract alone will be worth north of 30p/share in 3-4 years. I continue to hold
Just stop this nonsense it's your fault you to a risk leave real investments to the professionals for the sake of us all
Agree . Look what people should be focussed on is that this company is now going to properly profitable . If there is £10 million coming in From DRC airports in 12 months I would be surprised if costs are much more than £5 - £7 million. WSG to my knowledge have never been properly profitable and being so will be a game changer as to how they are viewed . So by all means carry on your negativity about Fowler but watch others profit from the turn around.
I mean, there is literally a signed contract that starts in less than 90 days. It's a minimum of $10mil in its first year and likely to be multiples of that after a few years. It is profitable from the first day and profit margins rise thereafter. There was all sorts of British government lead trade envoys and ambassadors at the signing and indeed the ambassador co-signed the contract. Official UK government social media channels live tweeted it, but yea, "The Fooler has fooled again"
The cognitive dissonance to keep posting this tripe out of spite is mind blowing. It says a huge amount about you and your trading/investing history im afraid.
What specifically has been "fooled again" please?
Poor you. Literally i presume. Not too late to get these before they 10 bag or more. When you take investing personally you tend to lose it all like you've done.
The Fooler has fooled again. Back down to penny lane it goes.
Yes I did state initial revs, they will be more than $10mill in first year.
Peter says it will be very profitable from day 1. So with opex and capex initial year or so margins might be 25-30% but as the operation is geared the more passenger revs goes straight to bottom line and margins go towards other MSCs at 50%+
DrMaccers,
I think if you read the DRC RNS its $10m revenues in the first year. Not profit.
So £8m revenues.
Staff to pay, kit to instal, office space required, training academy to fund. x how many airports.
Will it be project based finance with presumably a high interest rate to reflect the risk or will it be another placing or combination of both
If they get no other new business and just run this DRC deal, the future is likely to be fantastic.
Here is a balanced assessment
Risks first...
DRC war - there is a spot of trouble around Goma with Rwanda but DRC is the size of Europe. A large scale war would clearly not be good
Global pandemic or local epidemic - clearly a Covid mark 2 would not be good for air travel or a more localised one. There was Ebola in 2018 but that was isolated to a small eastern region away from the big airport.
Some sort of coup - If the DRC contract is unilaterally stopped there is provision for international arbitration to impost 5 years revs as payment
Positives
The contract is now signed and it is starting, nothing is stopping that
Revs are paid by international airlines not DRC gov
The initial $10mill in first year revs comes from an historic embarking passenger number of 400k. This is very likely to be higher now and will certainly be higher going forward. Qatar have started flights, Air France are increasing, BA will start post next airport audit in Nov. Dubai etc are looking to start routes. The international passenger growth will be huge and in line with other african countries. As the contract is geared, the more passengers embark, this goes straight to the bottom line as the costs don't increase
Cargo screening will be coming after the international passengers have been sorted. DRC can't scan its own cargo leaving adding huge cost and time.
Domestic pax numbers are x2-3 that off international pax which should lead to a doubling of the international revs.
All in all, after 2-3 years with international growth, cargo screening and domestic travel, the contract will be paying $25mill in revs with say even 50% margins to give $12.5mill or £10mill profit.
£10mill profit on a PE of 10 is a 10 bagger from here. How nice.
There are risks but the reward is huge. No one is making anyone buy and frankly the weird negative ex holders here need some medical attention but ive a large bet and im happy to wait for the numbers to come in and the value to be attached.
One has to choose the right moment to invest. It looks like they are getting things right now. Not promising £1 but there is genuine promise here of sp recovery. Crucially the contract was signed publicly and is in US dollars . No back room deals. I know that representatives of UK Export Finance were at the signing. Government backing always takes time but looks like it could be on the table. The company has managed finances well recently with £.85 million in the bank and so it can start the process of getting the infrastructure in place right away.
The only experience this company has it taking the sp from nearly a pound to one penny. its going no where
It's a very important point that WSG will receive payments directly from the airlines or IATA in USD
They get x5 of yearly revs if they are terminated
What could possible go wrong with one of the dogs of AIM ,run by the family Fowler , with a CEO who embellishes every syllable that leaves his mouth , picking up a 10 year contract in a kleptocratic country ranked 183rd out of 190 for ease of doing business ( World Bank) - 186th of out 190 on the 2024 fragile state index and one of the most corrupt countries on planet earth 🤭
If WSG don’t “ Play the game “ they will be gone 🫤
Back on topic . Yes - the news was excellent and the future looks very positive. The clincher for me is that all fees paid come from the airlines straight to Wsg bottom line . So they won’t be hanging on for payments from some drc bank . Add in the possibility of cargo charging and domestic flights the £10 million per annum looks conservative.
The company has had many years of experience running the airport security in Sierra Leone which will be invaluable for making a success of the DRC contract
Hi chaps long time here but remember the fiascos with the prop shaft on the Sierra Queen! You couldn’t make it up. Hope the new contract provides everyone here with a better deal
Personally, I think it’s really rather excellent that WSG has finally pulled off a large Airport contract, it’s about 6 years later and in a different Country to the one I was expecting, but that just shows grit, determination & massive stamina.
With these qualities, the team are going to go onto greater things, momentum is now behind us!!
Let the good times roll.
Crack on mate. Your CEO will love you I'm sure