Member Info for bluetigeruk

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 ??

Thanks Blue

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

In terms of value investing - have you heard the saying "in the short term the market is a voting machine (opinion machine) in the long term its a weighing machine (returns machine).

My vote goes to the story i tell myself that currently GGP is sounding out a listing on the ASX. And with that listing - may come the need for some $$$ depending on what happen to their development partner. So the market knows that probably cheaper hares are coming and in volume in the next 18 months. So there is downward pressure on the share price - i will sell you however many shares you want at 8p 7p because i can get them back at 5p in 2024.

If you were the GGP board and you had to raise money sometime between today and say 2025 - when would you do this? I guess once the first cash flow arrives from the miine partnership - so once the weighing machine starts, then maybe we can get money at 10p or 15p - once this event is behind then with cash flow the share price will probably start to move.

In summary - you cant just take the Value view - you also need the Market view as well - both make a share price.

Thanks - Blue

Its a competition - if a bid arrives they want to fill that business - its pretty basic - i want to buy £100k of HEMO - who has the lowest price? The dealer (me) will speak to the market (its a big order) and i will get price and size - so i will ask MM1 what's you price in size - they say 2.00 to 2.25 for 100k - 1.90 to 2.40 for a bar (1m) and 1.70 to 2.75 for 5 bars.
So note i have not told them whats my price to BUY £100k.
They just know there is a big Buy or Sell order coming - and do they want to make they guess 1M x the spread 0.5 pence to trade - thats £5k for saying Yes or No.
Lets say their book is Long £25k then they will either end up with £125k long if i sell to them (better ask Risk) or £75k Short if i buy (as Risk again).
I can go around and ask more MM - and i probably will - but lets assume MM1 Bid the worst price but Offered the best price - its an offer so its a contract - I would then say - OK can you make the price for 4 Million - and MM1 says OK its 1.75 / 2.70 - and i say can you go 1.80 / 2.65 and he can tell me to FO or say Yes - he / she then says hold on 10 seconds - phone goes on hold - i think then shots out to Risk - Bid Offer on 4m HEMO its 100k - OK ?? Risk says Yes - then i say I buy 4m HEMO at 2.65 timed 2.45 etc .... and then the trade goes into SETS for settlement. Thats it - for me all done - i report trade to broker - broker reports to client. We take a 0.25 / 0.5 commission more if you are a PI.
Then RISK tells MM1 to get book into limits - say + - £50k - and then the MM1 goes hunting for offers to reduce the book - probably by raising the offer to the market a bit - the other MM will know what has happened so they may square off their books at this money - so you see a few blocky trades go through - or the price attracts a few sellers who think mmm HEMO is up 0.25p today good price to sell a few. That's how the market worked when i was there - happy for anyone more up to date to clear up any differences. OH and as a PS - the MM then rings you at 3.30PM and asks if you want a beer after work - that's when after 3 or 4 beers they ask if its a regular client order and if it is would you like to go and see some strippers take their clothes off - all paid for by Winterflood Securities or whoever he / she works for.

Hi - i was s dealers assistant before going into sales - so the MM will fill any orders they can because it makes them money - give them a bug buy order they will wiggle the price around a bit to fill it - its how they make money - give them a large sell to place they will wiggle the price around a bit - its how they make money - they only make money by selling or buying - in a stock like HEMO they wont have very much freedom at all to run a large book position - almost nothing - probably around £25k - £50k and so most of the time they need to just encourage order flow by dropping the price until buyers appear - if there is a bid in the market the price will jump even as much as the other day and when the bid disappears the lower prices looking for buyers will prevail. MM don't care much about the company or its prospects they don't build up huge book positions - their risk manager wont let them, they seek order flow through their book as that's what pays their wages. Most of the sell action you see is probably - in fact certainly - auto trades being algo managed - they just match up buys and sells and put them through the book. There is a MM overseeing the book and if a bid appears or the market gets FAST then yes a human will oversee this - but day to day - its just an algo running. And finally the MM are overseen by the Risk Manager.

Share Tips / Recommendations and Research don't come for free !

Can someone help me to understand why the new CFO would want to receive 50,000 shares / units / shares in a company that is about to have its cap table wiped out on restructuring ?? I don't understand, is this some technical requirement under Canadian insolvency law or something?

Thanks Blue

Why $70 ... ??

Surely its better to use a standard deviation from the mean trading price over say the last 6 months - or year - or whatever time range?

If the price is say + 2SDs then it can be considered as abnormal, maybe?

Its nonsense anyway - gas prices in europe peaked in August 2022 and they are now only 1/8th of that price spot - and long term 55 > 80 $ is the trading range for the past 5 years at least .

Inflation adjusted oil price is even more interesting - adjusting back from Feb 2023 - the mean average OP from Jan 2000 for NYMEX (illinois Sweet) is ... ta da ... $74.50 vs todays spot of $70. So why the tax escalator? Well its clearly political virtue signalling, not really based on any maths.

And finally, price spikes happen all the time, its good old supply vs demand vs supply. For example last month we had a fresh tomato spot price spike as Morocco and southern Spain received a blast of cold and cloudy weather, delaying the ripening of their greenhouse tomatoes - same for eggs - they are commodities - where is the Government fiscal meddling in these markets?

I am very happy to receive the counterfactual argument back that these taxes are good rather than bad, i do get they fund Government intervention in the electricity market but government meddling inside of markets has a long history of being either wrong, or right and wrongly delivered, or confusing to the market participants - look at the current move from zirp to NORMAL interest rates and how its blowing up banks because they expected Government led policy to last forever.

OK rant over - time to do some useful work !

Thanks Blue

They wont sell any shares, they will sell the assets.
The shares are worthless, as they have too many liabilities / debt.
The assets will be sold to repay some of the debt owed.
Shareholders will get nothing.
Thanks Blue