George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
I put together a simple spreadsheet to look at the original Kist offer, as it was based on a part cash / part stock offer, and the stock prices have been changing ever since. Interestingly, whilst the offer would now be worth £3.98 per share in real terms (due to the underlying value of a KIST share), it only represents a 13.6% premium to the current SQZ price. Aside from waiting to see if a better offer comes along (and it would need to, imo), it struck me that the KIST offer is much more weighted to a cash component than a stock component. In contrast, the counter offer from SQZ seemed to be far more stock weighted, than cash, which seemed non-sensible from a SQZ perspective. Surely if you were trying to buy an asset with very high accretive cash growth you'd either need to pay a heavy premium for that, or you'd need to pay with stock that was also highly cash accretive. I find the KIST offer a little like buying an unbuilt house when all the foundations and plans have been approved but expecting to pay little more than land prices for it. Having been an RRE holder before (Disc: not a KIST holder) and knowing AA's style very well, I'd prefer the companies to genuinely merge and seek to exploit the best strengths of each, but it probably won't happen, and will either end up with a hostile takeover or no takeover at all. As the share prices of both rise, the KIST offer looks worse as the majority of the offer is based on a fixed cash element. I haven't done the maths on the SQZ offer for KIST but suspect that looks more attractive as the SQZ price rises (but equally the KIST price has moved well up anyway)
Can I just check my thinking here - if SQZ announce a hefty dividend to remove cash from the company (to deter KIST from being able to buy SQZ with SQZ's money largely) won't the SP then drop by a similary hefty amount once ex-Div, and the Co would remain cheap, relatively, and therefore remain a natural target? I'm just trying to think through what I'd really do in this instance if I were the BoD...
If you listen to one or two of the recent interviews with Serica CEO, he makes it very clear that the proposed dividend is about a progressive, regular dividend and being able to reward shareholders with some income, including through times of lower commodity prices. So it's very clear that with todays very high free cashflow generation, an exceptional dividend could be declared on top of the standard (progressive) dividend of 9p/share. I'm not a big fan of buybacks, not least because the rationale for the buyback is rarely explained. At least with a dividend you can choose to purchase more SQZ fi you want, at a price and time that suits you. I have no issue with the concept of buybacks but the company needs to clearly demonstrate that the purchase of shares is well timed, opportunistic, is a better use of cash than other investments you could make, and will result in incremental shareholder value over time. (Also, the comment that you get an immediate 10 percent EPS gain on 10 percent buyback fails to note that you've just spent 10 percent of your MCap to do it, and still the question remains whether those 1.1x concentrated earnings are the best use of the cash attributable to your holding).
In case anyone has not listened carefully to the recent interviews/Twitter Spaces recording, Serica are quite clear about their regular dividend being something that is there to reward shareholders even during times of lower commodity prices, and should be seen as progressive. At times such as this with very healthy cash growth they could announce a special dividend (though they claim many holders dislike the tax treatment), share buybacks, or M and A. Doing none of these and instead letting the cash pile grow is, after a while, not comfortable as it raises the risk of being a takeover target. Reading between the lines, I think they want to reinvest for growth and find that perfect deal (perfect would be something they can add value to, rather than something that is already fully exploited), but I suspect if they cannot find something soon they will have to reduce cash through buybacks and/or a special dividend.
It strikes me that any 'windfall tax' will be there to appease the public mood more than anything. It's a popular idea no doubt, but of course people forget that the UK Gov can only tax UK companies, and those that provide Oil and gas to the UK are vital players right now. The O&G industry will be making that very clear and government will understand that. But they won't escape the pressure unless they do something to appease the public. But what form will that take - a tax on declared profits, is it retrospective in any way (can't imagine), does it only hit companies above a certain Market cap or trading size etc.. I suspect they will implement something, but whether it raises much money or not is another matter; it's likely to be sidestepped by the companies as the Govn clearly want to be seen to be doing something more than actually impacting the sector.
This board has been a bit quiet recently.. I've been 'in' Netcall since early last year and very happy so far. Also hold MONI for those who care to know. According to Netcall website, they annouce 6 month results tomorrow, so just wondering what people are expecting for this update and the year ahead? Recent pullback on the price seems to be taking it back to a norm/still slightly above norm position assuming a consistent growth over the last few years (avg around 40% share price growth per year if you take the last 5 years). I'll be adding to my position if the price lowers <50pps anytime soon. (STRONG BUY opinion is a general opinion, but currently holding and watching for the right topup point).