Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Machin; ordinarily I agree your point about buybacks. And particularly in view of your view "In my view, leverage has a greater influence over the SP...."
I sense (know) I'm considered a downer on this board (I consider myself pragmatic), but notwithstanding the Cos stated policy of maintaining minimum cash at hand, I have long argued that the sentiment that this is straitjacketed by leveraged debt is more detrimental to SP than the actuality (misunderstanding) of the debt, and that visibly publicised reduction of such, prioritised on highest rate, would improve the negativity on viability that the SP represents.
As one who has always felt that DEC's SAM is more about Smarter Accounting Management than Smarter Asset Management, the fiscally accretive nature of buybacks (however represented) is arguably the best money wise.
But I have long suggested, rather than buybacks, that a growing cash at hand (that could be deployed at choice to further reduce debt) would have a disproportionately greater positivity on the SP, in demonstrating that DEC aren't up against the wire. Interestingly my view has become slightly more nuanced on this recently, in that it is better for DEC to have that RCF in hand, for acquisitions, whilst showing probity and profitability.
On this board, I hadn't noticed any rough and tumble. Differing views, debate yes. I've not singled you out. I've singled out the hypocrisy of your post.
And I unstintingly question posters who focus in on the messenger, whilst choosing to ignore the message. I got your message - it's unviable without a white knight else it's administration.. What I didn't get was any context as to why you felt such. I prefer to focus on the fundamentals, good or bad here. I don' agree with a great number of the posts/views here, but I find the context invaluable in adding to my understanding/considering things I hadn't considered, precisely because posters give context to those (differing) views. I hope we can focus on the content, the context, not the poster.
404x; I don't think that's a fair comment. Canetoad didn't take your post out of context .We all got the jist of your post, the context, that you believe RGL is doomed. By quoting your grand standing end, and asking why, they merely highlighted the tunnel vision view your post holds. Nobody is doubting RGL is in a difficult spot. What you have taken out of context is the difficulties, by totally ignoring the opportunities. Many posters here have questioned the debt/viability. None with such nilhilsm and negativity.
I look forward to the oppurtunity to misconstrue/misquote/take out of context. Your opening post wasn't that oppurtunity.
I feel a 2c dividend is sustainable based on cash/production/oil price. Personally I'd be happy maintained at that level, and building cash for optionality)unforeseen eventualities. I like the conservativeness of mgmt, and much prefer their under promising and over delivering style.
Some excellent TT posts here the last few days, from across the spectrum. Thanks to all. The way these boards should be..
This commentary from Bloomberg tonight, might explain the recent downturn; -
"The troubles plaguing the US commercial property market moved to Europe this week, elevating fears of broader contagion. The latest victim was Germany’s Deutsche Pfandbriefbank, which saw its bonds slump on concern about its exposure to the sector and described the current turmoil as the “greatest real estate crisis since the financial crisis.” The plunge in German lenders’ bonds is the latest in a series of warning signals as loans begin to sour after rising interest rates eroded the value of buildings around the world. On Tuesday, US Treasury Secretary Janet Yellen said losses in commercial real estate will put stress on owners, but added that the problem is manageable. For offices in the US, where the return to work following the pandemic has been slower than elsewhere, the value destruction has been particularly bad. Embattled New York Community Bancorp was cut to junk by Moody’s Investors Service after flagging real estate problems while Japan’s Aozora Bank recorded its first loss in 15 years due to provisions on loans extended to US commercial properties. And some predict the full impact of the growing crisis might not be fully priced in"
EarlA; glad we agree that there is money there!
We just disagree on buybacks being the answer. Unquestionably they would be far more fiscally accretive than either an acquisition or cash at hand, but they won't deny the negative sentiment/concerns/SP in the short term - merely reinforce that it is a house of cards.
My assertion, and I know I'm in a club of one is, that by prioritising/minimising debt repayments and diverting to maximise cash at hand, DEC demonstrates 1) it is not against the wire 2) is meeting all debt and has cash at hand to reduce at choice, and in doing so will restore confidence that they are not merely moving the deckchairs around.
We know it's DECs policy to not have cash lying fallow. But that, by the lazy, is misconstrued, as having no money. By demonstrating simply, without moving parts, simple cash, confidence in DEC, it's SP, will recover. The ABS's speak to the sophisticated only - cash speaks to the simple.
Debt reduction isn't speaking to investors. Cash at hand will. Not buybacks
Continued.....
enough to prevent breach of LTV requirements.
Canetoad; whilst I know your considerations come from a bond point of view, they do a service to stick holders too, so thank you. For what it's worth, I think the bond is safe as houses and the drop an amazing opportunity.
Ethiopia; agree totally with your post which is my stand point.
Some general thoughts....
For the lazy, the Edison report 27/09/23 gives a quick glance at the debt breakdown.
The bond. If not paid, wll constitute an end for RGL, on confidence/perception grounds not on fiscal fundamentals. For that reason alone, it will be repaid. How is conjecture, but the obvious source would be a replacement albeit at a 10% cost; and despite LTV level breaches/concerns, there is enough property value to get such away.
And crucially, enough income (rent roll). Notwithstanding that many seem to have ignored the cyclical nature of RGL's arena, and that cycle being very much at the bottom, if one ignores property value depreciation but accepts (due to work from home), demand/occupancy reducing by 10%, it is hard to see the rent roll reducing below £50m pa. Which supports the £43 mill cost of refinancing and pushing back say 5 years, all the debt at 10%. Yes, there does need to be a plan, to clear debt, and the absence of such is my only concern here. Their ability to kick the can down the line isn't. I don' see Santander closing in on the loan at any LTV breach (I have that loan at currently 56% LTV and the reason for the SP/bond drift), precisely because they can renegotiate an extension/revision on better terms for them, supported by that cash flow. The reality being that RGL only need to pay £5m as a one off to reduce the LTV to compliance.
If not refinanced, the bond could be paid from a combination of cash at hand and cancellation of dividends, and whilst the later being a reit is linked to income, paying the debt would negative such so compliance would be maintained, for a dividend to be restored when that free income is.
Yes, I do think they are in a declining market, but there is still income/profit within such a niche. I don' think a firesale is warranted, I do think they need to manage occupancy/sales better. The Oakland property , which I know, is a good example. They have long had 3 floors for rent there , and whilst an excellently managed/provisioned property, it is just TOO far, too on the periphery of the market/city centre to be attractive office space. That 20% of the facility is empty will be hampering costs and margins. It will never be in the right place as an office space again. But similar offices in the area have/are being repurposed for accomodation, and it would be perfect for that trend. It would be a great property/location for those specialising in the homeless/refugee obligation provision area and as student accomodation. Targeted sales such as Oakland, yes, for prudence, but not for firesale purposes.
The rent roll, selective sale of just 1 underperforming property is enough to prevent
EarlA; the key regarding excess cashflow, from that you quote is, ',could', i.e not would/should/must.
If you read through the initial Fitch rating assessments, the fact that DEC is paying down on an accelerated basis, ahead of their contractual requirement is highlighted (amongst other factors) as supporting Fitch's rating.
Whilst similar, each ABS has slightly different requirements/obligations (for instance the level of output that must be hedged drops as the outstanding debt drops), they could re prioritise their repayments.
We may disagree on this, but my calcs from last financials suggest that they are actually repaying ahead of even that accelerated level, which ultimately is a positive. Prioritising the dearest ABS is within their ability - and would also release the initial cash deposit held in escrow against each as free cash.
Blacksteel; yes they do have time. What I am uncomfortable with, and seems at odds with their SAM (Smarter Accounting Management) is, that they are aggressively paying down the ABS's to their target 2030, despite having an average 6 year contractual life beyond that, and on a straight line basis. I.e. they don't seem to be proactively disproportionately paying down the dearer newest higher cost ABS's (and RCF), and letting the earlier cheaper (bargain cost) run out. DEC seem to be missing a trick on that prioritisation which seems at odds with their financial fleet of foot.
80k a day on average has been spent on buybacks since the middle of December; in the context of their stated plan, that is nether a company throwing off cash, or a company that is in trouble. Sometimes the SP displays sentiment, not fundamentals, but rather than trying to fight the tide (with buybacks), I feel you should stick to your knitting, and keep such money, build such money, to demonstrate, forge the sentiment, that one isn't up against the wire. Cash at hand will do more than buybacks at this point (however more fiscally accretive such might be). DEC has to drive the agenda, by doing what it has stated - pay the debt without fault or question, pay the investors (dividend) without fault or question. If you believe the DEC plan, they don't need another acquisition to enrich all holders. Just SAM the assets, hedge the gas variance, be the best/cheapest plugger there is, and the fundamentals of such will dismiss the fickle.
DEC has never promised a quick buck..So far, what they have promised, their long term plan, they have delivered. And if you bought into the long term plan, and not the quick buck, you won't go wrong. Build the cash at hand to demonstrate your strong, a tokenism I believe will regenerate the SP exponentially more than any amount of buybacks.
Mrg123; yes, oppurtunity.
But where do they get the purchase cost from? FCF? Another ABS? Another rights/share issue? An equity farm out? A new/extended RCF?
Current Henry Hub pricing/hedging, is allowing DEC to fulfill/follow it's plan. But it's not giving any wriggle room, without one or many of the above to do such.
Nothing the omnipresent posts on buybacks/borrowing for buybacks/ cuttimg dividend for buybacks, the way to attain the oppurtunity you suggest is no buybacks, build cash at hand, and use that to substantially leverage a new ABS - or just cut the current ABS repayment level, to its contractual end, not the planned 2030 end.
Grow the business/perpetuate the pyramid scheme depending on your viewpoint. For me, just churn the assets, realise the value so promoted, and then come out the other side with a clean, ESG lauded plugging business, with 50 years of average but steady and reliable utility like dividends. Kerching.
Scandiexpat; agreed.
However that same 'strangulation' provides opportunity for those that embrace it rather than fight it, allows an opportunity to differentiate and build a moat against competitors who deny the tide.
I note the latest dividend rns of 0.0162
Also noted the following footnote in the same rns, under the title 'Diviidend policy update':
"The Company continues to rebalance its portfolio towards tradable securities and has been able to make attractive investments within the Public ABS and CLO sector as opportunities arise within the market. To that effect, the Company plans to remove the previously announced cap on maximum cash balance, so the portfolio manager can have more flexibility to continue to re-invest based on prevailing market conditions, with excess cash being reinvested."
Not sure what to make of this....but do feel they are flagging expectations of lower divvys, in the short term to maintain/grow future yielding opportunities.
Trader76; agree, and what a comfortable place to be.
I believe the cash you mention will be maintained to cover that capital cost, with only a minimal dividend return of any excess (production to end / stockpile release). My 20/40/40 funding costs is based on costs to first production (income).
Worya; spot on. And thank you for piercing the echo chamber. I rarely post here for precisely the point you make.
The Trotsky; keep up the excellent posts, the breadth and depth of which, are also piercing the echo chamber.
Kentio; thanks your kind words. I am far from a specialist on these types of stocks, I just took a LOT of time before I first invested here/ in tiss type of stock.
BGLF was actually the first stock I bought when I started running my own pension pot, along with a few other CLO/debt stocks. Whilst taking a long term view, and adventurous, I was at start, and remain today, disproportionally overweight as a 'sector', and within individual stocks. I have never sold these types, having used the yields to diversify, to the point, over time, through their continual success, that most have 'naturally' reduced to around the recommended maximum of 5% per stock. BGLF, this arena has been good to me, and my only regret, is that I tempered my adventurousness, and erred towards the 'balanced' portfolio so extolled by experts. Frankly If I'd just gone 100% CLO type stocks, I'd be laughing my socks off now. That said, I do inherently believe in a spread, of risk and reward, and BGLF, supposedly so risky has been only rewarding for me. I'm going to hold to end, as I do think much of the current NAV discount will be realised for the patient.
As for your question on VTA - I revisited their lasted news/announcements on seeing your question. It's just my view, but the lower comparative yield isn't an issue, isn't a flag that they are inferior/struggling. Far from it. To me VTA are more conservatively run, and look to pay a constantish yield rather than one that pays (up or down) the success in any given period. On the one hand smoothing the yield against fluctuating income, whilst retaining cash for oppurtunity that may appear.
Other than BGLF (through Blackstone), I know of no other CLO type that has greater access to resources that VTA has (through AXA), and in that, I find it a slower surer bedrock of a stock.
Indeed, Happy New Year all FAIRies.....
Boringly, reassuringly, very much business as usual here.
On the buybacks, generally I'm not a fan, but I feel it is irrefutable they have worked here (because they weren't done at the top of the market (to inflate performance fees/renumeration etc), but done for the reasons stated - to reduce NAV discount. And in that it is quite noticeable than from being daily, without fail, they are now far more sporadic, and whilst nowhere near the totality of their mandate, with, amongst other things, currency fluctuations, they have obviously come up against breaching that buybacks should be at less than NAV.
The discipline in such, just reinforces the proactiveness, professionalism of FAIR to me, and my belief.
The spread is striking - minimal for this kind of stock, and indubitably a consequence of the buybacks.
And I have to say, I am now a convert to the fixed 2c quarterly dividend. Itt gives continuity/security, and must surely release mgmt from making short term decisions for a quick flattering return to making long term strategic income yielding.
And arguably BB's have returned in addition to yield - and whilst this may discount my long believe that there will be a special, in fact, the accretive nature of those BB's only reinforces my view.
I chuckle every time I think of FAIR - this supposed high risk/specialist/professional investor stock has been for me, a constant worry free rewarding bedrock.
Until the next update/divvy, good luck all FAIRies
VanVan; I don't think there has been a leak, I just think many people like myself feel, that BSE are super confident it is imminent. Suggestions are of greater %'s on costs, licence fee, community fee etc, but I really don't think BSE would have been so ebullient on it's recent mine potential update/increase....I mean why would you promote such so glowingly if yiu were concerned at proposed cist increases/were trying to beat them down, if you didn't have an agreement in principle. I just feel an announcement is awaiting, for BSE and the Govt's benefit, confirmed funding arrangements.
I don't see funding as an issue (BSE recently affirmed funders remained inside), and I don't see a share raise - I do see upfront loans from their long term customers, against guaranteed future delivery, at say 10% discount to product mkt price. That way BSE cements customers with low/peppercorn loans to fund development, customers get security of long term supply, at a discount - a win win for all.
For what it's worth, I see funding of Toliaria being 20/40/40 being cash at hand/ongoing income/stockpile release, asset backed lending (ABS's) and offtake agreements respectively.