George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
Seemingly I was in a very small minority that liked the last update. And frankly I feel this one will mirror the last, nothing shooting the lights out, nothing worryingly detrimental, just a boring business as usual.
I do think they just need to stick to their knitting, and ride out the cycle, until the general market/economic fog passes.
I would like to see affirmation that cash at hand is static, ie income is sustaining the business day to day, and also a steer that that cash is on deposit earning an income itself, greater than the cost of lianst.
Hi Agricore, I pretty much agree with your post, having done pretty much the same calcs/considerations a couple of days ago.
Whilst inherently I am not a fan of debt fuelled growth/leverage, what I think is too easily and often lost in the mists here of leverage focused panic, is the income being continually produced. And as long as it is, it's ability to service the debt cost will see this rise phoenix like to prosperity.
The bond will be refinanced, any hey maybe at 8%, and maybe this time with a lien on property , because the rental income generated is enough to support such, removing the immediacy risk that seemingly worries so many. And despite being the current higher rate, using income to reduce the lower longer duration LTV linked loans would aid reducing/removing any LTV ratio reaches, why would you, when that income can currently earn the company more on deposit than the cost of loan?
I hold a number of property stocks impacted by concerns of LTV debts, and the common factor is people's focus on short term property prices, LTV concerns, in a vacuum of disregard of the constant income.
The lack of understanding on this stock can be seen by the reaction, hope of change demonstrated here to the change of investment manager RNs - anyone that had done any diligence on this co would know, it was a de facto status quo.
I personally don't desire or see the need for property sales to reduce potential LTV breaches, beyond the selling/repurposing of those that are no longer required/appropriate.
I remain an unstinting holder of RGL, and seemingly the only person on this board not remotely concerned about the bond/debt/NAV dystopia omnipresent.
Seatanks; on regular special dividends, I think this is the first time I've ever disagreed with you!
Whilst I agree, that fiscally they could easily/sustainably raise dividends, I'd rather they were quarterly incremental, with a one off annual 'special'. Yes because I like consistency but mostly because I don't like the hostage to fortune that the quarterly specials could create. As soon as one is missed, invariably people irrationality ignore it's special status are subsumed by the 'drop' the loss, and a worsening environment syndrome. And also because, I like Bismarck would rather debt is minimised/reduced.
I've put my thoughts on this before, but actually, because of the longevity of the Mobil deal, I actually think, numbers wise it is already a free ride/purchase, if one number crunches the agreement. It's zero cost. That said, I think purely from a good business point of view, to acknowledge Mobil's continual unstinting silent support, a revised higher 'notional' purchase price will be agreed, albeit that such in reality will be from Mobil's own earning on the transferring assets in such time. The net off is always going to mean it's going to cost less than the agreed price. Such notional increase maybe in my prev suggested 'rehabilitation' fund, and it, in my opinion will include a giving up of a percentage to the Nigerian state copartner to get it over the line, which actually could solve their lack of cash (even bankroll a loan to purchase a % from SEPL paid down against production) whereby the govt can claim they are taking control of the nation's resources for the benefit of the people. In truth, and I know this would probably appear unpopular here, if SEPL were to instead offer a % of itself rather than the deal, that would generate constant income for the govt, a vested interest in the govt supporting SEPL's ambitions(read approving acquisitions/expansions/other consolidations), whilst extolling that Nigeria is open and supportive of private investment, demonstrating that Nigeria's people are benefitting from it, and harnessing SEPL's professionalism.
Other than the assets of oil/gas, I really think that is great value in the experience/knowledge transfer that will come with the Mobil staff, which I think will drive a wider SEPL knowledge/ability base, and greater economies/efficiencies.
I disagree on quarterly specials, but otherwise, I don't think there's a cigarette paper between us in our belief in the enriching quality that SEPL represents.
34adsaddsa;
Your make a pertinent point about honeycomb. I too feel pollen hijacked the certainty/focus/profitability of honeycomb into the uncertainty of asset mgmt/PE. A classic example of trying to be all things to all people and ending up as nothing to nobody. That said, I'm a fan of POLN, mainly because the heritage honeycomb assets are still throwing off cash (due to their origination time and rising rates) but also because I believe all asset managers are undervalued in the context that their are too many of them, with high fixed costs that are ripe for consolidation/economies of reducing such overhead in their increasing shrinking in the face of the popularity (rightly in my opinion) of ETFs to deliver equivalent performance at lower cost.
But then I am a contrarian/esoteric/patient investor. For now I'm holding firm, but if/when it transpires that the old honeycomb is CONTINUALLY propping up/flattering the PE/asset mgmt side, I'll exit.
I feel I'm in the minority here, but actually I'm quite comfortable as is.
Some excellent posts today, thanks all.
I find the unsecured nature of this bond, even for properties more favourably considered at issue unusual. They are invariable linked to a (sellable) asset, and where they aren't, at a considerably higher coupon than this to reflect that all or nothing risk. My understanding of this is, that even at the rosier issue times, unsecured, the coupon would have been nearer to 10% to reflect such. That it wasn't, that it wasn't secured suggests to me their was a (special?) relationship, which to me bodes well to this being rolled over, albeit at an eye watering rate. But frankly, I'd rather renew the bond at 12% allowing time for the market, and stock market perceptions to normalise, than a 30% firesale haircut on selling properties.
And the market, RGL will normalise.
Good luck all, whatever your view. Really valuing the breadth of contributions here at the moment
Generalmonty; good spot that. And the long standing relationship suggests at maturity, there won't be a problem rolling it over albeit at a higher rate.
https://www.chathamfinancial.com/insights/debt-raising-and-refinancing-regional-reit
Craig; maybe it's the realisation that there would need to be a firesale of all properties at greater than 30% discount to book price before this wouldn't repay current debt/mkt cap?
Maybe it's the realisation, that even if their rent roll remained static over 10 years it would pay off the debt, with cash to spare, and deliver a free property portfolio to boot that would need to crash 70% not to equal mkt cap.
Maybe people are waking up to the long term value/income embedded here.
Some excellent recent contributions/thoughts. Thanks to all.
I'm a big fan, not remotely concerned at current trajectory; don't think bonds/AUM is an issue at all here, the misconception of there impact is, hence the SP being hammered.
I'll just keep Lurkioing, enjoying the dividends, and wait for the day the unrealised potential here, is realised. I've time!
Agricore; indeed, and that NAV rise is even more impressive considering it encompasses the dividend payment in September.
Monty888; wolverine make CAT boots (and Hush Puppies amongst others). DOCS would be a perfect fit for them
Holders can take comfort in the accelerated amortisation being undertaken by DEC.
For example, in the alternative performance metrics in their presentation, the ABS (VI) debt of $460m is now only $184m, less than a year later.....
Rylidan; excellent post - albeit that I see some of those weaknesses you suggest as actually being strengths. I think our difference only lies in timelines. Where you think govt constraints is a concern, I think therin the oppurtunity.
So there's at least 8 people here in la la land, who don't have a scooby. No one with any sense, and definitely no one that's been here more than a nanosecond, will think payment is arriving on Day 1. That's not ramping/deramping - it's just considered pragmatism as opposed to delusional desire.
Bismarck; in one of SEPLs more recent updates, it reconfirmed that the original banking syndicate were still on board, ready to go, which is the most important consideration to me. That it may have to be adjusted for interest rate changes, well yes I think that will be at a higher cost. But frankly, I'd take a 19% loan (short term) as the benefit will far outstrip even that elevated cost.
Frankly, due to the delay, depending on how it's reconstituted, they could almost pay for it out of accessible cash
Jrlomax; - "The first news we will here is that we’ve been paid the $151 million we are owed, along with cast iron guarantees around future payments"
Wow, someone is in la la land. From the whistle, it'll be at least 90 days until the first back payment, and probably a 3 year paydown