Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
It is also not obvious to me at all how electricity prices feed into the fair value of those bonds in such a big way, unless they are very complex hybrid instruments; in which case, this is a more complicated and much riskier investment than it seems.
"Good assessment Trot. Although, thing I can't understand is SP seems to have inverse relationship with interest rates. "
That is exactly my question. If interest income has not dropped, are we meant to believe that the huge reduction in profit (from 108m -> 25m) is due to the change in the fair value of bonds under IFRS? That is a huge drop. It's not completely obvious and needs explanation before this becomes a no-brainer.
Clearly I am not understanding the nature of the underlying assets here. For a bond fund, the only way for profit to drop by this magnitude (from 108m -> 25m) would be if the value of the bonds themselves crashed by a similar amount OR if they defaulted or otherwise stopped paying coupons. I doubt that either has happened.
Given that this is primarily a debt fund, I cannot yet get my head around the enormous dependence on electricity prices. Bonds simply do not move in this way:
"Profit for the period of £25.8 million (31 March 2022: £108.9 million) primarily reflects the impact of lower electricity prices compared to the prior period."
No other bond funds that I hold see this dependence on the underlying businesses. That is their attraction...
Ok, this is more complicated than I thought. It's not really a debt fund. Their revenue is directly linked to renewable power sales. This sounds like the worst of both worlds, without any real control over the assets but beholden to them. And if power prices drop further, so will their revenue.
I thought this was primarily a debt fund, holding loans and bonds rather than physical infrastucture assets? if so, why is the management blaming the big drop on lower electricity prices? They clearly must have a significant amount of equity in these projects as well, which means it's not a debt fund...
This is starting to look interesting with the yield approaching 8%
My concern is what it will cost to refinance the £140m of unsecured debt due in 2024. They have an investment grade credit rating and Edison assumes it will cost around 5%, but what if SONIA is at 6% or even 7% by then?
Yep, momentum here has died, along with that in most other legal firms. DWF looking especially nasty, with lots of gearing. I won't be touching that one.
"I personally don’t care what anyone says, THG, BOO, ASOS do not deserve to be 90-95% down off highs. It’s just stupidity. No wonder Ashley is buying."
Another possibility is that it was stupidity for them ever to be priced so high...
It looks like the momentum has faded. Almost everything in the sector is now looking bearish, so I've closed 80% of my position.
"Now with O&G prices back to about average levels, I believe the WT may disappear pretty soon as it’s done many times on similar previous occasions."
There is absolutely zero (0) chance of that happening...
Either this is a fantastic bargain or somebody knows something that we do not. If it falls much more, which one of those is going to start to become irrelevant as the new investors also exit after hitting stops.
"Look at CU / Zinc prices 5yrs out Vs CAML SP."
Personally, I find that copper/zinc price forecasts are lousy, even 1m out, let alone 5y... IF they're good, I can see CAML much higher than £2.30, but who knows!
Guys, you can safely ignore 'Mr Porsche'. His modus operandi is to open short positions and then to descend on the LSE board and use the word dogxxxx a lot and whinge about the UK - as if he's going to have any effect is laughable... but he thinks he's spome sought of market oracle - more like a spiv talking his own book.