Member Info for Cigam

Genghis - as someone with experience in commodity finance, I can assure you that prepayments are a very common way for producers (i.e. TGR) to fund their working capital requirements.

It basically means you have a committed off-taker who is prepared to pay you up front for product. This helps to fund mining operations without the involvement of a bank which may carry restrictive covenants and security over the business.

For the buyer, they get to purchase the product at a reduced price which means a greater margin for them. It also locks in their access to the commodity, which is useful for securing their supply.

I was impressed that TGR were able to structure this kind of arrangement, as generally this is only done between larger commodity traders and producers.

Shame about the current weakness in share price; however this will come good once higher production numbers (and revenues) start to flow.

Not surprised to see the drop after the retail sales figures, but we should bounce back over the next few weeks. If the SP stays low into September then Mike Ashley will be buying more shares, as his put options will be close to their strike price down here.

No idea why there's no capital letters in that.. but you get the idea!

so i've read through the whole annual report for fye23 and think there's a few salient points:

1. getting the first two mines into production took a lot of effort from the tgr team and they obviously had to contend with adverse weather events along the way. the reality on the ground is that there was no infrastructure in place at the mining sites when they started - no roads, no running water, no electricity. all of this had to be built from the ground up and (in my view) this is why it's taken longer to get to the 30,000 tpa production level.

2. the suni resources acquisition has sucked management time and effort away from the integration of tsg into the group. shishir has clearly stated that they couldn't pass on the opportunity, so they dropped tools on the tsg project and went for the suni acquisition. now that this has been completed and the mines are up and running, i think we will see progress on tsg.

3. it seems that indian foreign investment regulation is a bit of a minefield and there's quite a few hoops to jump through for an offshore company (tgr) to purchase a local business (tsg). also, they need a new valuation for tsg and i'd expect that they want to avoid having to actually pay hard currency for the business. initially, the purchase was meant to be a share swap but perhaps this is difficult to do with a uk plc.

4. in terms of related party transactions - i for one was concerned about this given the large share of revenue going to tsg/pranagraf. however, i assume that tsg are buying the graphite for a reason (i.e. to make flame ******ant materials) and then selling finished goods to customers. so, if tsg was owned by tgr then the intercompany graphite sales would fall away and be replaced by tsg product sales to third parties.

my main point is that tsg is still small and is reliant on graphite production from tgr. i don't believe it's some huge business which tgr are hiding away from us because the family is greedy and doesn't want to share it.

i think this year either one or two things will happen - 1) tsg is finally purchased/integrated into the group; or 2) tgr sets up a uk based graphite centre and moves tsg here. i've no doubt there's major value in the downstream business in time, but i think many pi's are overestimating how far along that company actually is.

fundamentally, there needs to be a resolution on tsg this year - particularly now that madagascar is fully up and running and the suni acquisition is complete. i'm looking forward to seeing how it all plays out.

gla. dyor.

Agree with Knowbody on this. Someone who takes a short obviously has a view about price direction or the trajectory of the company. They don't have any inside information that institutional longs don't know about.

Maybe they think they can make a quick 10% on the UK CPI print tomorrow? Maybe they think the UK macro situation will worsen?

Investing is about doing you research on a company and taking a view/position. Sometimes you will be right and sometimes you will be wrong. I certainly wouldn't be short down here, but these guys are clearly willing to take the risk.

I've finally decided to take the plunge and get back in. The prepayment news has removed some uncertainty for me and this is also an arrangement that can scale as new orders are received. Monthly production is growing and margins are solid, so I think they can now scale the business slowly but surely without too much more dilution (never say never with small caps and fundraising).

Holding this one for a good year or two to see how it goes.

GLA.

If the company is back to historical levels of profit (c.£100M NPAT), I just can't see the major shareholders giving it away for £12. At that level, EPS would be £0.84 and a normal 20x PE would result in a share price closer to £17.

That would therefore be fair value and a profitable company would always command a premium to that. As a result, I don't think anything less than £20 would be seriously considered.

I think the new CEO has much greater ambitions than a simple inventory reduction and cost cutting exercise. If they can improve profitability and stock turn, plus reduce some overheads, there is no reason this company couldn't throw off £200M net profit. Then we are talking about a serious re-rate in the share price to the mid £30's.

Just my two cents but I'm definitely holding through 2024/25, as that will be when the real money will be made here.

Some insightful points here Genghis and I agree with your comments. In terms of the high receivables balance, it's interesting to note that £2.6M of this was advanced to Battery Minerals to secure bank guarantees and payment of capital gains tax (in respect of the Suni Resources acquisition). There is also just over £1.0M in VAT refunds due from the government in Madagascar.

The actual trade receivables are nominal at £710k for FYE23. Obviously they need to be collected but they aren't going to move the needle much.

My key question is around the £2.6M advance for the acqusition - is this actually coming back to the company? You'd like to think that it is given its classified as an asset, but I'm not clear on the mechanics of this.

Further to the above, if you read Note 23 (Related Party Transactions) there appears to be quite a bit of business done between TGR and entities controlled by the Poddar family in India. As a result, it would be useful to know how much product they are selling to third parties and how much is being sold to related entities.

Just for transparency, I don't have a current position here but like to keep an eye on how things are progressing. I used to be a holder in the 105p range but sold out at breakeven before the big drop. Looking to get back in at some point but just waiting for more clarity on the cash runway.

Range will improve once stock comes down and they start to be more selective with buying. That won’t happen until into next year though, so best to judge them at that point rather than now.

The sample site was a way to get rid of excess stock that they clearly thought would be difficult to move on the main site. I think you’ll find the

No he was the seller of the puts - so he has already cashed in by earning income from the buyer (who paid him a fee to enter the option).

If the price keeps going up nothing happens for MA. The put will expire worthless and MA will have earned some nice fees for selling the option.

Very true - also happens in reverse like with the recent director sale.

Intrigued to see what's going on though...

Agree with you there. Maybe not by a wide margin, but any upside surprise would be welcome for the sector.

Are out tomorrow morning at 7am. Consensus is for 0.2% growth month-on-month, but let's hope for another positive surprise after yesterday's inflation print.

Seems like the retailers are having a good summer so far. Fingers crossed that comes through in the data and gives the SP another leg up.

Insightful stuff from a new account bashing online retailers (THG, REVB, etc). Time for the filter.

He's sold put options to generate premium income. Basically, it means he is bullish on the stock and is happy to buy from someone at the strike price (which will be lower than today's price). However, if the strike price isn't hit by the expiry date (Sept-23 for example) then the option expires worthless and MA has made money regardless.

For the put option buyer, it provides a floor on the price and protects their downside.

It's important to note that these options are to be physically settled if exercised, so MA has committed to buying the stock from the put option buyer (rather than paying cash to settle the difference in value).

I’m also happy with how the sample site is going, plus it’s creating a buzz on social media for the ASOS brand. I know someone mentioned it earlier, but the £2 charge for a return is an interesting strategy for the business. Perhaps they are trialling the policy on the sample website before rolling it out to the main platform?

Rabnesbit - you do realise that the current management are in the process of fixing the various issues you describe? They didn’t create them and I firmly believe they’re on the right path to righting the ship.

As the recent trading update alludes to - this is not a quick process but they are making great progress. So you just have to be patient and wait for the results to come, which I know many private investors struggle with.

Https://www.similarweb.com/website/asos.com/#overview

82M visits during the month, down slightly from 84M in May. Still solid engagement levels though, which bodes well for Q4 figures and working through the stock position.