Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
My opinion -
banks get paid for rolling credit - that's a fact - so the credit will be paid - and then a new credit line made available via a new bond issue - thats how non equity financing works.
Thanks Blue
I think buyout is unlikely - who would want to roll $600m of debt in this rising interest rates environment ? Its a lot to take onto your balance sheet - who would be a likely candidate to fund a takeover ?
Well rolling 600m of debt is easier a 3.x interest rates than at 4.x - its worth 1p on the share price.
Thanks BL
lue
Yes Petrofac is up 8% !!!!
Oh its only a 1p rise ???
Thanks Blue
UKs very own Gamestop - private investors vs professional traders - - we need a telegram group - just that would make a few traders worried - then on a given moment everyone buys between 100 and 1000 shares - see what happens?
Thanks Blue
Calm down - its not even a commercial grade of deposit 0.1% > 0.3% - and its just surface testing - needs to be at least 0.5% > 0.8% at that density to become lower end of commercial - i'm not saying there is not a target probability emerging - but nothing that can be given real value at this time. This needs a lot more results yet. Its not a price mover IMO - thanks Blue
Claiming investors and speculators are guilty of GREED means you are either on the wrong web platform or in the wrong game!!
Petrofac Bonds look like a good bet. They are 45c in the 100c - so when they get paid back you gain 110%. Plus they have 20% coupon paid twice a year - plus if they do get taken over the bonds still travel to the new owners.
There's S600m repayable on 15.11.2026.
The question is what do they roll into ?
New debt has to be 16% to 18% range i would guess. So they have to repay S250m just to stand still.
That's maybe the underlying issue - look out 4 years and the debt position eats up and profit recovery and divi prospects.
Thanks Blue
OilHeadGame
You dont know if those trades are buys - they could be 1. shorts closing - OK its a buy but its also not - or Short trades being hedged / covered - via spreadbets / CFDs.
I open a spread for 30,000 Petrofac - the 'broker' takes the trade - the price moves 1p against me and the broker covers to secure the profit of 30,000 x 1p - £300.00 in the book.
Or its Friday and there's a war in the middle east - so i am getting my book as even as possible so i can enjoy the weekend - these are also possible reasons you are seeing these trades.
Thanks - Blue
CHESHIRE - you mention the shares & bonds decline - if i was a hedgy i would buy the bond for the 20% yield and short the stock for the hedge position. That way if the company goes bust then i have some insurance - plus if the bonds get repaid in 3 years i have lots of yield and i can use the fall in the equity too. So if the bonds and shares have fallen from around £1 the hedge is doing very nicely thank you.
OR - i could buy JD wood etc and sell Petrofac as a long / short strategy, deciding wood was the better looking horse.
So there's lots of reasons for the market mispricing the shares - but the bonds are a good indicator and falling more than 50% from face value is not great signal. Read the Fitch Bond rating report - it was not too bad i thought. Thats why i now own 10,000 shares. Thanks Blue
Mooh - the company is bust - please don't put any more of your ISA into this - bitcoin is expensive to mine and use as a utility payment system, and ARB is gone - it has no assets and lots of debt and the fixed assets on its balance sheet are probably worth about 25% of that quoted if you try and sell them on EBAY or wherever. So find another investment - thanks Blue
Sorry about that everyone - i will sell tomorrow and watch the share price rise 10%
Thanks Blue
I'm IN - 10,000 shares at 43.7
Thanks Blue
Worth reading FITCH on Petrofac ... extract here >>>
Fitch expects continued profitability pressures in 2023-2024 due to the combination of still subdued, but increasing, revenue, the lingering impacts from legacy contracts and unfavourable commercial settlements with clients mainly related to the pandemic. We assume low single-digit EBITDA margins in 2024 and recovery to mid-single digits in 2025-2026, on increased activity combined with continued receding impact from its commercial settlement in its mature E&C portfolio. In 1H23, Petrofac made good progress in resolving its historical disputes, which will support cash collection in 2H23.
Thanks - Blue
Shareprice sez kropz iz bust ??
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CLSK Bull - Which people do you follow for BTC price advice ?? Thanks Blue
They haven't removed the SUSPENDED flag from their automated Trading System - should correct very soon - if not already.
Thats OK - i just wanted to expand the thinking about company valuations in the market. Looking at the market they are still way too high on an NPV basis. Interest rates have at least doubled and the markets due to money supply / QE are holding up. But its not really warranted in my opinion.
Back to AL - the company may use an NPV discount rate at 8% - but an investment analyst may look at the cost of money to smaller high risk companies and put in 12% for example. - or higher even. I think the All In Podcast (recommended) was discussing a discount rate for VCs of 20% the other day - so it depends on who is building the model and what their cost of money and returns look like.
Thanks Blue
NO thats not correct.
The NPV (Net Present Value) of a capital project is a function of interest rates - so if interest rates rise then NPV falls.
If you increase rates from say 2% to 4% the NPV of your project gets cut in half.
This is what has happened to all capital consuming projects.
The problem is that if AL also need new fresh capital it will come at a much higher cost - so the dilution effect is much greater when the loans convert into shares.
Both of these things are happening right now to AL and you see it in the share price.
Yes the geology and extraction engineering are pretty constant - but the financial engineering is under huge stress right now.
Thats why the shareprice is down 70%.
But look across all AIM etc capital intensive projects and its the same.
It could be worse - they could be building offices !
Thanks - Blue
Also Chiselhurst - if the money wont start to arrive in the company now until 2025/26 then on a discounted cash flow basis and at 5% bond yields the value of the share has to fall back to take this into account - i guess DCF is why some professional funds may cut their holdings now.
Thanks Blue