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Balta has 532,000 sq metres of production/office space in Belgium across three sites and is closing the smallest one ~ 18% of the total. Business is clearly poor but it appears to be a cost rationalisation rather than a total collapse. It is going to be more difficult to close another of the two remaining because one produces components the other the finished tufted carpet.
I still rate this as a sell.
AceofClubs
I try to keep a sense of proportion. It's six months figures and one of the biggest impacts is the drop in the PGM basket price - outside of Leon's remit.
Mining and ore processing is a dangerous process - accidents happen and will continue to happen in the safest environments; South Africa and Zambia are not that.
Electricity power outages: both South Africa and Zambia are dominated by corrupt regimes that use state owned utilities to reward their supporters. For decades there has been a complete lack of investment, endemic theft of power transmission cable (they sell it for scrap metal!) and illegal "hook-ups" to the power grid. Diesel powered generators are a very expensive option for energy intensive processes.
Water supply infrastructure is equally underinvested, prone to unauthorised "tapping" and not surprisingly subject to weather conditions.
Keep plugging away Leon, the lady at the corner shop doesn't want your job.
AceofClubs
Entain could find itself in the unenvious position of having MGM as a partner in the US and a competitor everywhere else (see my post of 29 Jan 2022).
A 50% share in BetMGM is not a controlling stake; how Entain must be wishing they had held out for 51%. Of course MGM would wish to take over Entain, but not at the price Entain demanded. US companies play rough and partnerships are only worth having with willing partners; it could get ugly going forward.
AceofClubs
Plenty of shares available at about 2p above the placing price - and 2p should not be a factor in anybodys' investment decisions.
More informative is the 26 page document issued by DEC in support of the acquistion and share placing.
Page 6: "The wells included within the Proposed Acquisition have a simple-average well age of 13 years (with a production-weighted average well age and estimated remaining well life is 3 years and 45 years, respectively) and are estimated to have a one-year production decline rate of approximately 32%, a third-year decline rate of approximately 23%, and terminal decline rate of approximately 9%, based on Company estimates and represent anticipated PDP production declines for the 12 month periods ended 31 January 2024 and 31 January 2026, respectively."
"On a pro-forma basis, the Company expects to have a company-wide average decline rate of approximately 11% following the Proposed Acquisition, below its peer group."
"With a long life of productive capacity remaining in the acquired wells, at 17 years on average, the Company does not expect any significant near-term cash requirements in relation to plugging and abandonment (“P&A”) activities. "The Company estimates costs for P&A activities to be approximately $40,000 –$60,000 per well."
I am becoming afraid that DEC falls into that category of companies that have to run hard just for returns to shareholders to stand still.
AceofClubs
The misreprentation of DEC as being a 50 year annuity paying 12% is just plain wrong.
Most of us have a problem with forecasting next week, let alone 10, 20 or 50 years ahead. In my case, what happens in 50 years time is unlikely to trouble me!
I have DEC as a weak buy/hold for 2023 and will take the 12%: it's too far ahead to say what 2024 will bring, I keep an open mind and try to follow the numbers.
AceofClubs
Thank you to damofarl for some kind words. Kindness: now that's a commodity in short supply in the world at the moment - and you can't put a price on it.
Malcy refers to The Money Slide as "containg the chart in the current presentation to my eyes says it all" and "demonstrates DEC has the ability to pay the target base dividend for over 50 years AND still have ~$2bn of cash left over that can also be paid to shareholders." Wow!
"It really does come back to FCF generation as that is ~7X the current market cap."
I am afraid Malcy it doesn't. What it does come down to is a list of assumptions, all made by DEC, over a 50 year time scale, over things they have no direct control.
DEC's assumptions are all to the positive.
NYMEX 10 year strip is assumed at $4.66MMBtu - $4.91 thereafter. - When has DEC ever achieved a single year of sales at an average above $4? - and it certainly won't in 2023 or 2024. There hedging history of picking the peaks and avoiding the troughs is very poor.
Plugging costs are calculated at $21,000 per well, total $1.6B, "assuming no further efficiencies" The possibility that plugging costs may rise over the next 50 years is ignored - and 34,000 wells are assumed to be plugged after year 30.
The real killer is the assumed 4.5% production decline rate. DEC already claims "an industry leading 8.5% decline rate." The difference this assumption makes is huge. A well starting at 100% year 1 will still be producing 26.3% of its original output at year 30 with a 4.5% decline rate. With a 8.5% decline rate the figure is 7.6%. Total output over the 30 years is 1,664 v 1,094. Assuming the 4.5% decline rate gives production a 52% boost over the known 8.5% rate.
Sorry Malcy, there is no Money Tree and there is no Money Slide.
AceofClubs
The DEC Presentation is on their website; the Money Slide is slide 32; Malcy's Blog is on his website, dated 9 January.
Dear BlackBoulder,
FYI: I have no short or long position - and never have had.
I do have a healthy scepticism for companies that:
Produce heavily "adjusted" opaque accounts
Revenue increases by acquisitions but never profitability
Cash generation from operations is very poor - everything is funded by increasing levels of debt and preferred shares
Consistently has a negative return on capital emplyed
The Balance Sheet is a confection of Goodwill and other Intangible assets supporting a growing pile of debt
The BoD is beholding to one dominant character with a dubious history - who despite his large shareholding has already taken his fortune out of Victoria in the form of cash.
The Koch family and Spruce House are indeed sophisticated investors; who prey on the weak and needy. While not officially a concert party I would not be surprised if conversations have already taken place.
The end game will be the sophisticated investors picking up the business cheaply and the poor old PI's losing out.
I might be hopelessly misjudging the situation but the numbers don't lie. Unless you are a speculator there are many better places to risk your money - in my opinion - other opinions are available.
I wish you luck with your long position.
AceofClubs
From the interim statement issued 29 November: "The Board believes cash flow, after exceptional costs relating to the integration projects, will be in excess of £100 million in H2."
This company never makes a profit and I am on record as valuing the common equity at zero.
However, Wilding has nailed his colours to the mast with the above statement. This will only be achieved by liquidating a lot of inventory at any cost; so goodbye gross margin.
Please bear in mind the "trick" of turning inventory into cash can only be done once.
AceofClubs
Highlights:
Net trading revenue increased 5% to £494.9 million
Net interest income of £24.2 million (H1 FY22: £(0.4) million)
Active clients reduced to 312,000 (H1 FY22: 320,400)
New clients acquired reduced to 37,500 (H1 FY22: 53,600)
Total operating costs increased 25% to £279.9 million (H1 FY22: £223.3 million)
Profit before tax decreased by 2% to £240.5 million
Profit before tax: margins of 46.3% (H1 FY22: 52.0%)
EPS was 45.8 pence (H1 FY22: 48.1 pence)
Bought back £114.1 million shares in the half under the £150 million share buyback scheme
Extending the share buyback by £50 million, to a total of £200 million
Increased the interim cash dividend to 13.26 pence per share (H1 FY22: 12.96 pence per share)
Finally, the company we wish she'd never heard of: On a constant currency basis, pro forma tastytrade total revenue growth was 8%. It is never mentioned, but I have a suspicion that tastytrade is loss-making.
Sometimes a bit of humility means the reality can be objectively assessed.
AceofClubs
Two days running the SP has run up after the Americans have got out of bed. THe MGM Resorts noise is public knowledge in the US so perhaps some taking a punt it's true?
AceofClubs
"FY 22 hedge is 3.47 and 23 is 3.53!
FU 24 is 3.14."
US Energy Information Administration January 18 2023:-
"In our January Short-Term Energy Outlook (STEO), we forecast the natural gas spot price at the U.S. benchmark Henry Hub will average $4.90 per million British thermal units (MMBtu) in 2023, more than $1.50/MMBtu lower than the 2022 average. We expect prices to stay nearly the same in 2024 as dry natural gas production continues to grow in the United States and outpaces domestic natural gas demand and exports for most of the year. "
I am judging that the US Energy Information Administration knows a bit more about forecasting US natural gas prices than any of us, or DEC management it would seem.
If the DEC $3.53 2023 hedge price is correct and the US EIA forecast of $4.90 average is also correct then DEC will achieve 66% of the average with their hedging.
That not only puts a line under the SP but it also puts a line over the SP and I think the market could be telling us we are currently there.
AceofClubs
Rob Pitcher spends too much time writing his excuses and not enough time on the day to day detail of running a business.
Sort out:
1.) Rude Door Staff
2.) Inadequate staffing by the untrained and unmotivated
3.) A food offering that is too often awful
4.) Overpriced drinks
5.) Overall an experience that tempts too many to take their custom to better run businesses
AceofClubs
HSBC "Insight" - the full report can be downloaded.
https://www.privatebanking.hsbc.com/wih/investments-Insights/market-update/energy-market-volatility-outlook-and-implications/
Do remember that other opinions can be just as valid, your crystal ball is as clear as theirs and "events" have a habit of making fools of all of us.
AceofClubs
"or 137.50p average forecast - hard to choose between them?"
I guess JP shaded that one.
AceofClubs
ENTAIN is my largest holding in a UK listed business, largely organic growth from the GVC days; so far so good.
The future is, as always, uncertain. The 50% share in BetMGM is seen as the big growth driver but I am unclear about the relationship with MGMResorts, the other 50% "partner".
In September 2022 MGMResorts acquired the Stockholm listed LeoVegas:
"In outlining the rationale for the deal, MGM said the acquisition of Nasdaq Stockholm-listed LeoVegas will provide a “unique opportunity” for the group to create a scaled global online gaming business. It said the deal will offer strategic opportunities to accelerate growth and product offerings and a commitment to continued profitable growth."
MGMResorts may be a "partner" in the USA but they clearly have no compunction about being a competitor everywhere else.
My personal experience of dealing with executives of US businesses is that they are untrustworthy, 100% focused on self-interest and are your "partner" until the day it suits them not to be. I do hope ENTAIN management is up to the task of protecting the interests of ENTAIN shareholders; but I have my doubts.
AceofClubs
Anybody who bought at 65p back in February 2017 is enjoying a better diet than baked beans; but most current holders (myself included) have paid a lot more than 65p so for us it is still baked beans.
The fact is the World, the market and prospects for US Natural Gas have moved on since 2017. It's not that difficult for DEC to move with the times - but I'm not holding my breath and its baked beans for me at Christmas.
AceOfClubs
The share price reflects the market's view of the prospects for DEC and the ability of management to make returns for shareholders. Those abilities include maximising the price achieved for its products. In the quarter ended 30 Sept. DEC achieved an average gas price of $3.79 MBTU thanks to hedging policies. On the 31 Jul, 31 Aug & 30 Sept Henry Hub reported spot prices of $8.33, $8.93, $6.40. It is the failure of management to make hay whilst the sun shines that is holding back the share price.
Hedging should be a tool to inflate not deflate profits. If the cost of hedging is viewed as an insurance premium then that premium should be demonstrably proportionate.
AceOfClubs
Hi Bruce,
Sorry to read about your little difficulty so I shall keep it brief and simple.
California is the most populous and prosperous state in the USA and has just voted not to permit regulated on-line sports betting statewide. Entain has a 50/50 joint venture company with MGM Resorts called BetMGM which majors on regulated on-line sports betting in the USA. I presumed the relevance was obvious; but in your case clearly presumed too much.
Ace Of Clubs
P.S. Do not worry about Prohibition: it was abolished at the Federal level in 1933 and things have moved on since then.
Jim800: "But is a fugitive emission the same as a leak?"
A fugitive emission is the result of there being a leak - simply cause and effect.
I also assume that Brad Gray has worked out at the current rate of well plugging it will take DEC 60,000/200 = how many years to plug its wells in Appalachia alone.
He will also know how much a well currently producing at a rate of 100 will be producing in 10 and 20 years with an "industry leading" decline rate of 8.5%. The 40-50 year life-span for their wells is still regularly promoted; the fact that DEC is buying other producers "cigar butts" makes that claim rather implausible to start with.
I can only say to holders, (of which I am one) do not be dazzled by the 10% dividend rate to the exclusion of all the other numbers.
Company executives do not always tell exactly the same, or the whole story, as the company numbers do. Experience has taught me to test the story with the numbers - fraud excepted, the numbers never prevaricate.
AceOfClubs
https://calmatters.org/politics/election-2022/2022/11/california-sports-betting-what-next/
California says no.
AceOfClubs