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Well worth a listen.
https://www.brrmedia.co.uk/broadcasts/627cf2729927dc4c27332f0f/serabi-gold-corporate-update/
Hi AIMtodeath and thank you for your response.
I take on board the free carry element on the July 2019 BKT DFS. I hadn't picked up on that previously. Their 24th Oct 2018 DFS ($895m) didn't mention that the free carry was included but the very same figure is employed in the 2019 'enhanced' version indicating it was considered all along.
That aside the key point here is that the inclusion of and agreement to a free carry element is not a fundamental reason to 'optimise' the DFS and spend c. 6 months and counting to complete it. It is a paperwork element whose affects ACP needs to communicate to the market as and when it is agreed. BKT clearly appreciated that it was going to be 16% because the finalisation of their deal has not led to any further changes to their July 2019 DFS.
As for what is going on with ACP right now I have generated a thread that can be read here. For me, its FEED study led which in turn generates the final EPC price and likely concludes the inputs to the optimised DFS. That may well come with added modules or a speedier expansion. Or it may simply refine the costs and bring them up to date so that finance can be agreed against current pricing. This includes both basket prices and plants/build costs.
Most important of all is as painful as it has become it is all happening and will come when it is ready. Matt Bull's 7.85m share purchase helped confirm that. So it's about patience because once the first element hits interest in ACP will return and a solid re-rate should then begin to take hold.
https://twitter.com/BigBiteNow/status/1509441384566169601?s=20&t=5cwWIbrcbwsnLQqP1fbsCg
Morning everyone,
I saw the comment regarding ACP's 'optimised' DFS and wanted to challenge the thought process.
Optimisation in itself reflects an enhanced DFS as opposed to a brand new DFS and therefore process.
Blackrock Mining conducted the same process. Completing it in July 2019. Their enhancement brought about a 4th module driven by additional demand from off-take partners. They then commenced initial free carry discussions with the Tanzanian government in April 2020. So well after their final DFS was completed.
The DFS is what it is a document to determine the value of the overall project. The ownership is a separate matter.
My view only.
https://blackrockmining.com.au/tanzania-initiates-formal-free-carry-interest-negotiations/
Just to add.
HMI is already undervalued based on its sales forecast for 2022, the clear message that no fundraise is required and what it all means for future sales.
However, in an environment where international supply chain issues and so significant price rises are being witnessed a local supplier who can sell to customers via internal road systems and even customers own transport is on to a winner. Especially when they have had several years to infiltrate and build their market. That lends itself to an increase in customers returning and increasing their orders in order to secure supply that comes with a greater guarantee.
This is compounded by the fact that agricultural prices such as coffee have soared which itself should drive farmers to expand their own production in 2022. A factor that again heavily supports increased demand for KP Fertil.
At £10m market cap I see a great risk-reward given the supportive factors in play here.
Hi, mesb48 thank you for engaging on this.
I appreciate what you are saying and that wording does tie in with management's comments in the Q4 2021 update. However, in order to beat a sales forecast then actual booked sales for Q1 have to have jumped even if they potentially come with sizeable further orders later in the year. That aside the exact detail of when sales are booked is not what's driving my decision making but the fundamentals and the supportive proof that sales forecasts for 2022 can be hit and perhaps even be broken.
In the Investor meet presentation, the statement was as follows (45mins 15s),
"because of the overall market and the shortages and difficulties that people are having getting fertiliser. Some farmers are bringing their buying decisions forward."
So whether they are booking now to pay later or paying upfront is not what I most interested in. What I am hearing and clearly seeing through other investments I have in Brazil and other geographies is that freight, delays, inflation, production interruptions are preventing enough goods from entering Brazil in 2021/2022. Fertiliser material looks to be a part of that and 80% of its market in Brazil is imported.
HMI is demonstrating that this is already sufficient enough to drive customers (be they new or previous smaller buyers) to build up inventory/spend their money earlier than planned. That is meaningful for a local fertiliser supplier who reportedly holds a local monopoly (also in the presentation) on its specific type of product in the local 300km area.
Why? Because it will inevitably drive greater sales. So the pattern forming in Q1 and which will be reported in early April should continue and that is a key driver for me being invested here.
https://twitter.com/InvestorMeetCo/status/1491314676688433152?s=20&t=mmAkqT8awP9w98ET4dVy4w
Afternoon everyone,
My tuppence worth on the sales debate.
"We are running at multiples of our forecast for sales."
This is not about multiples to 2021 or indeed 2020 and so comparisons to those events (which as a comparative year for most businesses is of little use given the influences Covid brought). This is about sales progress in the first 6 weeks compared to what management expected it needed to achieve in order for the FY2022 result to come in at c. 150,000tpa.
A debate can be had about the timing of sales and customers bringing forward orders to lock in prices. That's fair but difficult to measure. What is known is that HMI management is signalling strong early sales that at the very least represent multiples of their forecasts across the first c. 6 weeks of the year. The CEO even went as far as stating "50x where we expected to be" after 6 weeks.
So for me as an investor that builds in plenty of slack on a risk-reward basis.
That said if we do insist on playing around with the known figures then the following can be considered.
In 2020 HMI did 3,334t sales for a final outcome of 54,155t. So Q1 contribution = 6.2%
In 2021 HMI did 8,872t for a final outcome of c. 85,000t. Q1 contribution = 10.43%
At 87t in Jan 2020 that represented 2.6% of total Q1 2020 sales. January 2021 isn't available
Given the uplift in forecast sales for 2022, it is more likely that HMI management has (at the very least) employed something around the 2021 Q1 contribution to total sales (10.4%) rather than going backwards and using 2020 at 6.2%.
If so then 2022 would be expected to deliver 15,600t of sales at 10.4% of the total 150,000t sales. At the 2020 2.6% contribution rate, January would therefore be expected to deliver 405t of sales. Remember HMI talked about the first 6 weeks of sales and not just January. But January is at least a start. But it should be noted that at 6 weeks the pattern has continued to almost the mid Q1 point.
If January was set at c. 405t and is running at the CEO's 50x claim then we are talking 20,250t for January alone in 2022.
Even if we simply take the Q1 2021 8,872t figure and apply for the 2.6% allowance then it would be a management forecast of c. 231t which generates 11,550t for January alone at 50x. But I cannot see how the January forecast can tie into 2021 when the overall forecast is 87.5% higher.
I also take the 50x with a pinch of salt until more documented info is known but it is such a high multiplication figure that a good percentage of it must be relevant and so allowed for. Especially as 'multiples' was clearly stated and he is I believe marked down as the accountant.
None of this assures a final number but what it does is support is a substantial uplift in sales being achieved and as we approach Q1 update I expect the market to start to factor that possibility in.
No problem sparky333.
Here is the updated broker note from SP Angel which discusses the same points that I posted about yesterday on cash on hand reductions plus a few others such as digitalisation investment.
https://www.yugroupplc.com/wp-content/uploads/2022/01/YUG__25012022_Note.pdf
Just like last year, they will likely wait until the March results are out to update their valuation.
Note in January 2020 SP Angel set an initial price target of 207p based on,
2021 revenues = £116m
2022 revenues coming in at £149.5m.
The 2020 results led them to upgrade their forecasts in early April to £5 based on,
2021 = £128.4m
2022 = £159.8m
So a near 150% increase based on a 10% jump in 2021 forecasts + a c. 7% uplift in 2022 revenues.
YU just beat those 2021 forecasts by at least 17% and has secured a whopping 97.9% of the 2022 forecast before the year has even begun with c. 30 months foresight for the majority of it.
The only downside is that they have set higher gross profit margins than YU have achieved to date and cash is lower than they expected. However, this is about profitability and I expect that YU is going to demonstrate improvements (mainly through their digital portal) that will counter the majority if not all of the lower gross profit margin.
If they do then based on previous increases SP Angel is going to have to raise their price forecast by a considerable margin.
At some point, the market will get this and react accordingly.
Morning everyone,
I don't frequent the BBs very much these days but I do follow them from time to time. I noted a few murmurings about the drop in YU cash on hand. Reducing from YE 2020 £11.7m down to £7m as of 31st Dec 2021.
Below is a set of posts I have just published on Twitter regarding this. For those that do not have access to Twitter, I will summarise below.
https://twitter.com/BigBiteNow/status/1486287005961105410?s=20
In essence, because YU focus on their EBITDA level profit one-off costs is not taken into account. In 2021 YU paid £2.2m in cash for the final payment for their Leicester office + £2.7m in deferred VAT/PAYE payments from the Covid lockdown in 2020.
Total = £4.9m
In addition, it is my view that whilst December delivered a big increase to the revenues recognised in the year (£150m) the actual trade receivables and more importantly the cash flows associated with payment will have their greatest influence at the start of this year. The giveaway is the billing date for the initial November usage (from 3rd December) which can be found on the YU energy website under Ampower news (https://www.yuenergy.co.uk/news/a-warm-welcome-to-our-new-customers).
This reflects a billing date for December that would fall in early January which means no trade receivables and certainly no payments. IFRS accounting does not prevent YU from booing the revenues against estimates which they were clearly keen to do but the downside is a misunderstanding on cash on hands driven by cash flows.
It will of course all come out in the wash as FY accounts and trading updates come through.
The reality is that the vast majority of those one off costs are now behind us allowing 2022 to be the first true year of major cash generation. Once that shows itself I expect a big re-rate in the valuation if not before.
Thank you oldtramp.
Yes, I did see that also which confirms that BME knows both docks. That said QE has been back to Rosyth in 2019 so I suppose not guaranteed. Still fun trying to find out.
As far as I can see INFA is one big contract/announcement away from a significant change in valuation fortunes and there are many directions from which it can come.
My very best wishes to you also.
Here's the direct link for those that don't use Twitter.
https://www.bmeservicesltd.co.uk/case-studies/item/64-queen-elizabeth-aircraft-carrier-blastrac-mod
Hi there Oldtramp,
I don't tend to frequent these BBs anymore but I am in admiration of the efforts that a few of you guys are making to get into the detail on INFA. Long may it continue.
Your efforts are particularly inspiring and whilst it may well be known already I offer this add on to your latest.
That BME should know about Rosyth seeing as his company worked on the QE aircraft carrier in that very yard. Interesting times at INFA for sure.
https://twitter.com/BigBiteNow/status/1440626960195993615?s=20
Hi everyone,
I think it's important not to lose sight of the fact that ABDX has yet to demonstrate to the market what their new automated capacity means for them as a business.
BBI couldn't deliver on the numbers for AVCT in what is a tightening market margins wise. ABDX could. That demonstrates some competitive advantage.
The latest broker note for AVCT has the test costs running at €2 (euros) per test dropping to €1.50 as orders increase. For ABDX to be in the mix they must be expecting to manufacture at size. Otherwise, it wouldn't work. So they must be in for a quantity that will as they said in their last update, bring "meaning manufacturing revenues."
This contract when it finally demonstrates itself should act as a showcase for what an automated ABDX can deliver. Earnings in YE June 2021 were reported as being between £11.4m to £17.0m but that sum was heavily affected by the timing of deliveries/approvals as opposed to actual orders.
Again important not to lose sight of the fact that the majority of ABDX new automated lines only came online in their Q3/Q4. (Jan - June 2021). So the full benefit of that capacity and the cost savings it can deliver won't be seen until this financial year, which started on 1st July 2021.
The outsider in all of that is the AbC-19 test and the stockpiling that if successfully sold will have a significant effect on the business in this financial year. I remain open-minded on this because like with all things with this covid pandemic testing market there has to be a market shift before the masses get it. Antigen LFTs being the best examples with so many not believing they had any place in the market last Summer only to be proved wrong. Covid is difficult to measure as an investor but the UK Gov have themselves signalled the need for surveillance testing so a market exists in the world. ABDX don't need to sell many to make strong margins that would outstrip their contract manufacturing arm.
That doesn't make them a given but the UK-RTC has stuck by their guns and continue to prove up the test and they aren't stupid and so they aren't doing it simply because they are stubborn. Something is telling them it is worth it and just because the market won't currently buy into it doesn't mean it can't turn out to be a significant market for the group.
ABDX isn't an easy hold right now and is being beaten up for everything that can go wrong and given no understanding for what could go right. That signals an opportunity for the brave. I have my lot and given what I have just said I am happy to watch it unfold with the knowledge that ABDX will likely as minimum manufacture solid numbers for AVCT whilst in the background the AbC-19 just might deliver an unplanned for but most welcome surprise.
If you haven't already I would encourage a thorough read of the 2020 Annual Report. It is full of real gems of information about the strategy and gives lots of signals as to where this is all heading.
Page 12 covers the digital partnered portal,
"The portal allows us to access a huge pool of disengaged businesses quickly and effectively, with minimal intervention"
" In less than 12 months this grew from zero revenue to c.1,600 contracts per month (with revenue booked of £3.5m per month) in H2."
First-year only. Clearly, the 2nd year is bearing even more fruit with record monthly bookings in H1. I would expect this to only keep on growing as these partnered commercial agents and brokers expand and gain trust in the model and YU.
"Partners have been lining up to work with us in significant numbers, attracted by our speed of delivery."
Minimal work means lower overheads for bigger growth.
On page 23 there is a wonderful "REVENUE GROWTH FROM BOOKINGS" example demonstrating what each £1.25m of monthly bookings brings over a 5-year journey as the renewal process repeats itself. YU are honing in on customer service as a differentiator hence their aim for 70% renewals in 2021 (60% in 2020).
Like I say lots of positives in there which add to my enthusiasm moving forward.
YU might NOT carry the same sexy
I think right now this all about producing the goods and continuing to place the company on a firm and reliable standing. With CEO Kalar holding 53% the dividend will naturally follow but what I am seeing is better all-round management from the new executive team.
As I said in my series of tweets earlier the company has specifically mentioned 8-12 small suppliers that represent opportunities for the company. For me, these should be the priority for any cash that is on hand.
That said the business model and infrastructure for significant further growth is now fully set up so the dividend could well make a return sooner than later.
What I really like is the energy and innovation that YU is bringing to the market once more. The partnered portal combined with the rapid execution is attracting multiple partners. YU look as capable as ever of causing the sort of disruption they have often spoken about but unfortunately failed to achieve as the business got caught up in its own success and made critical accounting errors.
For me, that is all now firmly behind them and the energy is back along with the intent. They are now accomplishing what they said they would back in 2017. On the downside, the market is awful at the moment and even great news is being watered down by the market. However, YU#s disruptive utility sector angle should continue to attract investors even if a serious downturn does take effect be it these things are never smooth or continuous.
YU might carry the same sexy looks as some other AIM stocks and the illiquid nature of its trading certainly puts some off and needs to be looked at by the company. However, if the success really does come through as I expect over the next couple of years it should start to work in our favour. It's been a while since I had this sense of excitement over a company. Everywhere I look with it there is opportunity and reassurance. The management team clearly knows it too with their language which is as bullish as I#ve ever seen it.
I trust that helps.
Agreed. The move to solid profitability is not only about the actual profit milestone and what it means for the true passing of the historical problems, but also it's a marker that says more cash can be steered towards growth. Of that non-organic growth should be the biggest element and that means revenues that are immediately earnings enhancing as opposed to new contacts that tend to come with 3 months lag.
Lots to like about YU right now.
I will post this here for those that have access to Twitter and because sector/YU minded investors may find it of interest. I promise not to make it a habit.
I really do think that the market is being far too reserved in their assessment of YU. I thought the trading update yesterday indicated far better progress than can be taken at first glance. Something I have attempted to get to the bottom in this series of tweets.
I don't believe Good Energy is a true like for like comparison but it is in the same sector/trading market and its debt/profitability are being judged to be c. double the value of YU despite YU already demonstrating a far more rapid expansion phase. Perhaps the market would like to see more evidence but I whatever its thoughts I am very excited about how this company has re-focused itself, recovered from 2018 and improved its operations/quality of management.
My respect for CEO Bobby Kalar and his energy for this company has certainly returned and I expect the market to follow suit shortly.
In a nutshell, I think YU can do £140m in revenues in 2021 and deliver a nice profit at the EBITDA level. That will be a watershed moment for the business and if accompanied by acquisitions (which I fully expect in H2 2021) then will demonstrate to the market that YU is actively expanding non-organically and can afford to do so off its own back.
8-12 of the 20 or so small suppliers are earmarked as suitable bolt-ons delivering between 2,000 - 5,000 new meters each.
The Bristol Energy deal brought in 4,000 meters but more importantly got YU onto the public sector DPS platform. If I then add in the new digital partnering platform which added £21m in 2020 from a standing start and more importantly £3.5m a month in contracted revenues in H2 2020. That's more than the whole business achieved in H1 2019 with no doubt lower overheads to achieve (digitised).
So all in all lots to get excited about with YU even if the market requires more time to build trust in the longevity of the numbers. Just a shame that the chatter is so quiet but I would think that will change markedly over the next 6-12 months.
https://twitter.com/BigBiteNow/status/1413433308902535169?s=20
Here's the SP Angel update for ease of access.
https://www.yugroupplc.com/wp-content/uploads/2021/07/YUG__08072021_Note.pdf
Afternoon all,
Some tweets of mine on the latest SP Angel note released today on YU. The broker target price of £5 held for now but the message is clear it's going to go up.
The interims will be of great interest in terms of the monthly bookings going into H2 but the June figure is so big that it is clear that there is strong momentum in the business. A quick calculation of the H1 average against the first 4 months delivers a May figure of £11m. So again plenty of reason to believe that H2 momentum will be even stronger than H2 2020.
YU management talks about being confident of meeting market expectations. All the signs point to them beating it by a sizeable margin.
https://twitter.com/BigBiteNow/status/1413166395165192199?s=20
@LuckyLuciano,
The $10 per kg is calculated from the table provided by the finance director which I included in my article.
You need to deduct the "direct cost of sales" ($73.4m) from the "total cost including sustaining capital" ($110.51m).
This gives you the 'overhead' cost for 2020. They are the operating and administration costs + sustaining costs. You would need to read the wording around the table to understand the exact costs that are included.
BMN provide the sustaining cost separate from the C1 production cost. Also, if you run the $73.4m figure then you will see that it comes out at $19.10 per kg. The reported production cost (pre-audited accounts) in Feb 2021 was c. $18.30 per kg. Some adjustment is then required for things like inventory sold in 2020 which is the point at which its cost to produce is included.
As a back check if you take the $5.38m in sustaining capital for 2020 and divided it by the 3,842mtV then that would be $1,40 per kg which is far higher than the difference between the pre-audit C1 costs and the actual 2020 outcome.
The capital expenditure for 2021 is a mix of BE items, capex and sustaining capital ($4.4m). Hence why I highlighted the difference to 2020.
Hope that helps.