Member Info for damofarl

Capt value/Gavster-NBC;

Captvalue; yes I do consider it a buy, as whilst I feel a sell down was justified, the level overdone. Personally I feel the whole market drop is overdone, but the nature of TORO and it's ilk is that any impactful events are very much magnified by the nature of their leverage, and, I do feel, a reactive flight to 'defensive' stocks/cash, compounded by the low liquidity here.

Gavster-NBC;, Firstly, took the AT1 details directly from Chenavaras website, paraphrasing one of their regular and hoc commentaries to market/fellow professionals (when I have time I'll try and post a link). As for releasing to the market, well I don't agree, in that, there is nothing that has had a material impact that is not within the normal spectre of their business, and risk/loss thresholds.

Timing - I get your point, and I'll be honest I didn't do a linear track of SVB/CS collapse/default/takeover timeframe against TORO's reducing SP to validate a direct singular correlation/explanation, mainly because I felt the delay from SVB to CS, to the Swiss regulator invalidating CS's AT1 bonds wasn't a single moment, but an extended drip drip drip down, unfortunately, including a delay period where the bond market incorrectly felt their AT1's had some recourse (value). I think the immediate in step drop timing wise at CV19 was because everyone (except me!) sold pretty much everything everywhere immediately in fear of the unknown, and as such the disparity you infer I don't feel is valid.

Generally - I focused previously on the AT1s as I felt that was a major factor, but as I posted before, not the only factor. The rotating into higher quality debt (lower margin?), the Spanish residential loans (about 15% of portfolio to memory) not contributing , and the general negativity from rate rise/inflation concerns are all drip dragging us down. My view is that the market is perceiving this as a basket case because a number of areas are either not performing or underperforming without considering that all of these currently negatively impacting factors are part and parcel of their risk tolerance, their normal business. With stocks in this era, it is not unusual to see a NAV drop of 10% in a year, with a 21% rise the very following year & it's just part of the beast you have to be willing to accept.

I continue confident here, confident that for TORO its a blip, and that it is oversold within this specialist market - by example take BGLF which I consider the gold standard - despite no definitive statements of defaults/reducing income, their stock is down 15% since February.

Just my views, I'm no expert, but hope it helps.

Sisyphus; thank you for your excellent posts here.

I too am positive here, despite, like many sitting on a loss. I have numerous investment manager stocks, for 2 reasons. Firstly, I think they are beaten down/undervalued, and whilst the likes of trackers/low etc costs have and are excapating such, quality mgrs still have a place and I feel PMI is such; secondly, and partly because of the rise of ETFs etc, I feel the whole industry is rife for consolidation, for precisely the reasons you have expounded, efficiencies, reducing overhead)increasing margin etc. I do believe there are too many independent asset managers, with duplicated systems, premises, staff and costs which are ripe for pruning.

I particularly think this would be perfect for PHNX, as as well as a centralising overhead cost reduction, it would bolster the quality of offering/performance of PHNX's pre existing assets.

Gavster-NBC; did a little more digging, as to recent underperformance, which is directly related to the banking drops and particularly CS's bond concerns. Just prior to Credit Suisse bond worries, TORO held approximately 15% of funds in AT1 bonds. These Additional Tier 1 bonds have no recourse at all, if the issuing bank's solvency ratios fall below that required by their regulator, and in the case of CS, the Swiss regulator deemed them cancelled/worthless. TORO within a month did reduce it's AT1 holdings to 5%, taking a total haircut on those they held of Credit Suisse, as well as a smaller haircut on other AT's not cancelled but depressed by the contagion, as they scrambled to unwind their positions.

Machin for CFO........

LOTM; following your buyback context, that being true, well actually, we should do a fundraise and/or a leveraged debt raise of £100 mill PRONTO.

Uknrw; - "....I assure you all in good spirit and just putting a view across".

Yes and ditto.

Well we don't know there financial circumstances, but frankly if you can't get a mortgage on a finance directors salary, you either have elevated aspirations or poor family fiscal mgmt.

And if it's a boat, the shares as surety is still an option.

As for expensive taste, well they need to cut their cloth.

Rusty us always good. Maybe he doesn't like boats.....

If the SP had also doubled in that time, one would totally understand selling down ...

Aceofclubs;

Totally agree with your 'statement' statement.

As for the size of the buyback, chose not to have tunnel vision on that and take out of context for fear of accusations of nitpicking or being a conspiricist. But yes, a statement would have better bettered DEC's standing.

Notrex; aye, and enjoyed your levity! We should never forget how welcome it is here!

Uknrw;

I don't think that's fair comment, and in itself as leaning and unbalanced as that you are challenging.

Frankly, to use your justification, if your a finance guy, of a £billion Co (that most feel is about 25% undervalued), if you can't get a mortgage for a bigger house without selling free shares (whose SP correction to value would buy your house upgrade), investors really are in trouble.

Yes, diversifying/tax calls are often a consideration in director sales, but surely you sell the minimum for tax, and don't diversify when at a low, when you have such a successful, risk hedged undervalued stock - you'd use your stock holding as surety for a mortgage. Decision trees like that don't instill confidence.

Despite my dislike of buybacks, the buy back does instill confidence - DEC has probably made history in being the first LSE stock to buyback at the bottom of the market - confidence in that they ARE still generating free cash, and aren't tight to the wire.

In itself, I don't think the rate is excessive at all. Indeed I think this is a rather clever execution/structure - I don't really see it as a loan, so much as an offtake agreement at a 9.521% discount to prevailing spot price. It effectively guarantees a customer for product thus freeing up mgmt time. I like it. Trafigura to me are an odious outfit, but needs must, this a great deal for i3e.

Yes let's keep context whilst wary of tunnel vision.

Agricore; yes kerching indeed!

Initially I wasn't a fan of the fixed 2c divvy, as opposed to their fluctuating but generally higher preceeding dividends, but I'm a convert - I do think it provides a fixed baseline to consider progress from, and some certainty. Not a fan of buybacks generally, but being purchased from cash at hand, and to a lesser degree (I think!) a portion from ongoing cash inflows, they must be compounding the NAV, which despite 2 dividends since year end, has increased it's discount to a fairly fixed SP, by 5%.

And the mood talk from their commentary, seems very much on oppurtunity, not concern (of volatility/defaults).

I'm interested to see the next quarterly income receipts, but frankly, sat here a happy bunny, waiting to see which lasts longer, me or the buybacks!

Hi Captain/Gavster-NBC,

Captain;

"What is it with this share, it’s done nothing but drift down for the last year, and the longer term trend is equally bad.

Are the dividends enough to compensate for the capital erosion here, and is thhere any hope the trend might reverse?...."

Well that's the million dollar question isn't it? I number crunched through the last 3 years, and if you bought at the (spiked) peak 65c, without reinvesting the received 21c's dividends you would only be at break even. If you took a month either side of that peak a more typical high was 56c which after replacing SP loss, has yielded 6% net. Not the headline yield that flatters/interests so many granted, but neither the capital destruction you allude too. Trajectory? You have to decide, and whilst I share your jist, I do think that one has to consider the period I've used has weathered COVID/Brexit/Ukraine/bank failure and inflation-reccesion, which is quite a lot in such a condensed period. And as I've highlighted before when querying capital destruction in this sphere, 1) nobody should buy/hold with less than a 5 year time frame, and 2) one has to compare against the capital reduction in more mainstream stock, DLG and Persimmon for instance, to make a decision on whether this stock is singularly failing, or actually representing/holding up well compared to the market generally.

Gavster-NBC; I don't see (or feel) there is a loan defaulting from the latest update. Indeed, a read across from BGLF's latest update is that whilst Euro loans are earning less (than US), euro default rates are less, and reducing.

The 3 factors affecting this downwardly I see as

1 -The rotation into higher quality loans, which whilst reducing the risk, must also be reducing the (profit) margin generated.

2- An erosion of margins, due to rate rises, and to some extent loss, albeit transient whilst their loan base is reset into the future.

3- the Spanish residential loans are definitely impacting NAV/SP, having not generated the returns expected; these aren't generating, they are managing to end, to avoid a fire sale loss, a prudence which at some point should reinforce it.

Not overly concerned but definitely keeping a watching eye. The % of cash at hand and low leverage reassure whilst not inspiring/indicating that a catalyst for outperformance is imminent.

2#

....in the rate of lifespan production reduction?

Keep up the excellent respectful posts all, which are much appreciated.

TDCBC - if there were restrictions on debt covenants as you suggest, I'd actually find that reassuring in the context of my concern. As you say, the previous buybacks were stopped for an acquisition, and better to not buyback now in readiness ,cash/funds wise, for any further acquisitions, which is the stated model of Dec - but surely that should if been true previously, and cash accrued in readiness. I don't accept that for a Co. purposed to acquire, economise and grow that such an excellent opportunity appeared unexpectedly. DECs business model is built on the 'unexpected' being the normal. Then as now they should have maintained funds in readiness for the inevitable. The dichotomy between their assuredness then against now is my concern.

Unvrkw; I've never been a fan of buybacks either.

"...judging a company on them not buying back isn't reasonable considering all risks.."

I was judging the quality (lack of), of the mgmt whereby they used buybacks in the belief they were undervalued, but post accretive acquisition, and higher achieved hedge prices seemingly lack the same confidence. What has/is denting their confidence? What risks do you refer to? Surely they are less now than they were then? I thought the purpose of the hedges was to mitigate risks?

"I'd expect them to spend as little as possible and wait to buy more assets..."

Couldn't agree more. I'm not advocating buybacks (I detest them), but I am questioning the assuredness of a mgmt that deployed them previously rather than build cash, for acquisitions, part of their stated modus operandi, which, at some time are always going to come along. I for one would be delighted if they are building cash to acquire, as it will both reassure that they truly are generating increasing free cashflow, whilst deleveraging their debt and reduce reliance on hedging.

General....

Irrespective of our standpoints, I feel we all agree that inexplicably DEC's SP is linked to spot gas price movement totally disregarding the hedged pricing, borne of ignorance, albeit such does question their effectiveness. I'm not unduly concerned by hedging losses (gains soon?), It is their overuse, precipitated by the need to cover their highly leveraged debt obligations. Let's use all that accretive cash to reduce debt, to reduce hedges. Why do Mgmt seem to have little focus on long term offtake agreements, a greater use of which reduce the need/cost of, hedges.

Not concerned by capping costs, think these are well considered and feel the capping company is working and of value, indeed, if they were to utilise solar in their acreage, surely a solar JV would generate income/royalties to offset/cover such. Do wonder why they have non producing acreage, they don't seem to be utilising.

Ultimately I love the producing side model of this company, it's the financial engineering side that tempers my belief. Which side has precipitated the reduction.

I hold disproportionately more here than I would wish, so today I thought, should I cut back or ride out the drop.

And my primary thought was - if this business, with it's so so successful hedging against costs/debts/dividends, so adept at loan fundings, generating the sort of levels of free cash flow DEC promotes, why oh why, aren't they buying back their shares at less cost than their debt?

Their total confidence in the Company to buyback at higher levels, being undervalued, is absent now when surely, if the Company's belief is equally strong, they are even more undervalued.

Why wouldn't you buyback at these levels? Is it because free cash flows are absent to do so?

If their business model is so good, if they are so undervalued, why aren't they buying back (and I'm NO fan of buybacks).

My take on that unwillingness, is it's time for meto get out. For all the points Aceofclubs make which I totally agree with, this is about financial engineering, not gas production/pricing, and that's not what I signed up to.

This will be an Enron - you only need a pipeline shutdown/downtime for this house of cards to collapse.

Jim800;

That's two of us now that have mentioned the Ponzi word.

I hope nobody has to join me in my previous use of the Enron word......

Had a gander at the Q1 report. Basically business as usual.

A few take outs......US loans (50%) saw slightly higher default rates whilst Euro loans (30%) default rate was constant, with US loans better contributing to the NAV increase than the euro loans.

Dividend is covered 1.5 times.

The loan default rate for BGLF since inception is 0.08% which both makes a mockery of this stock's high risk/professional investor classification, and highlights BGLF's quality, not least considering the societal/economic events it has to experienced in it's lifetime.

A solid backstop to any balanced portfolio this.

Megla: I believe in Starmer marginally more than I believe in you, and considerably more than I do the clowns that instigated the WT, and the lack of governance that necessitated it's knee jerk instigation.

And I don't believe in Starmer AT ALL.