The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
I reckon the farm-outs will demonstrate (or fail to demonstrate) the value of the assets. I'm not convinced I have to say, and not sure why Keyes feels it necessary to increase his pay packet to $200k/yr either. Anyhow, as before, I do hope you profit from Frontier and if they can achieve a decent farm-out (in Oman, the other two assets are pretty immaterial), then this will undoubtedly be higher in the future. It probably will rise tomorrow as well, as FRI is relatively unknown, but not one I can feel comfortable investing in. Casper - Appreciated Best of Luck, El1te
Hi Oilriches - I've been conducting some further research into FRI and unfortunately I haven't been able to become comfortable with it, despite its promising technical movements late today. The fundamental position is too weak for me, on both a funding and asset level, to the extent where I'm finding it difficult to ascribe any meaningful value to the licences that FRI actually has. I therefore have had tos crap the review, which is a shame, as there is another company that I will review tomorrow that merits it better. That said, I wish you the best of luck and hope it rises strongly. In case it's of use, I've typed up the research notes I got done as there may be interesting facts: http://www.theel1tetrader.com/2000/06/frontier-resources-draft-notes.html Best, El1te
That said, I appreciate that the market will love this stock, despite the pretty weak overall fundamentals (in my view). Will compile a write up on my site tonight and post the link here when done. El1te
Depends how long that farmout will take. Chances are they won't be getting any backcosts considering that they haven't had to spend much at all. I'd expect farmouts to still be a few months away. I'm not in here but have been tracking. Expect them to raise a few hundred thousand if the share price rises meaningfully. Need cash for G&A if nothing else. El1te
Just be careful. Frontier almost certainly need a cash injection, and a decent sized one at that. They are probably running on fumes at the moment. El1te
Brokers have kept 8.7p EPS forecasts for this year, and management have been very vocal on meeting those targets. Would put DRV on a modest 11.4x forecast earnings or 8.7x forecast 2015 earnings. Of course, it all depends upon Driver meeting those H2 numbers, but with high contracted levels for H2 already booked, it should be achievable. The management here also have a good track record, and the H1 results has only been the first real slip up. El1te
The ultimate question is actually whether or not Henderson are in fact selling. - Nov 2013: Henderson acquire a lump of shares (in the 250p placing). Holding = ~16.7% - Jan 2014: Henderson holding down slightly to 15.99% - Apri 2014: Holding increased to 18% (roughly 2% in CFDs) - May 2014: Holding down to 17.73% (still 2% in CFDs) Not convinced that this does mean that are selling, rather moving their holding about. After all, why would they take part in a 250p placing and then start selling for a loss - they took up a large stake in the placing, which suggests confidence rather than a flipping of the stock at a profit. I remain convinced that ~200p is an excellent entry point, especially given the rapid re-trace of late. El1te
Well done on your previous investments here - I think you would have to be very lucky for this to drop to 150p! Henderson tend to have peculiar movements in some of their larger investments (and after a good run) - sometimes they just top slice on the way up, other times they shed the lot. Have also seen them place a large amount of shares with (an)other institution(s). Personally it doesn't concern me as the recent drop has been on low volume, and THAL should definitely find support at around this level. You make a good point regarding H2 implied (assuming I've understood correctly). I also use that method somrtimes to check the run rate, albeit it's a little harder when Thalassa has a few lump contracts such as for the D-PMSS system. BlueDealer - I believe he is referring to the following. The final results bundle together the H1 and H2 results. If the H2 results are excellent, but the H1 results bad, then the overall full year results can skew perception as investors tend to just assume a broadly symmetrical performance between H1 and H2. However, we have the H1 results, so if we subtract them from the corresponding final results line, then get can fairly accurate work out the implied H2 result. If the H2 result is excellent and that is not a 'blip', then you should use those H2 results in forecasts, rather than the whole full year results. El1te
May be of interest - did not realise you were invested here, Jolly http://www.theel1tetrader.com/2014/05/thalassa-holdings-buoyant-journey.html El1te
Moved it off a buy tag this morning. As expected, it's on target to make £1m pre-tax profit this year, but the EPS figures appear low because arouns half of the profits are filed under 'non controlling interests' for accounting reasons. Therefore, the EPS figure doesn't tally with overall profitability and actually gives off the impression that Titon is pretty expensive in terms of earnings. For that reason alone, I've ditched the holding short of the 90p-100p target. The market won't wake up to high PERs and probably won't bother to look at underlying profitability. Bit disappointing, but at least it is a profit
I appreciate that, but it's highly unlikely that TTR will be able to offset anywhere near the level of costs that NPT are able to. See my post on Wednesday at 19:54. The best thing the company could do is to come up with an impact assessment based on the last FY results. That would provide much needed clarity.
It is definitely on Net Revenue. Indeed, if you actually look at Simon's response asking about whether it's on gross profits or net revenues, Simon does not explicitly answer, yet he admits that NetPlay's have said it'll be on net revenue. I think it's down to the terminology used in the legislation. Technically, all net revenues that a company earns are gross profits. If you want further clarification, this line was from NetPlay's results: "As a leading operator within the UK gaming market, NetPlayTV will pay such POC tax on the majority of its net revenue." El1te
Hi Tipster, I believe that the underlying business (that is separated from the Italian business on the books) is almost entirely UK based. A quick double-check against their website, and that seems to tally: "Most of our customers are based in the UK". I'll try to confirm that though. I know they are following international expansion, but I was under the impression that almost all of the revenues are from UK customers. I wouldn't say that many of their costs would be reduced by any stretch. They'll still have to maintain the same levels of advertising, and employ the same amount of people to maintain their revenues pre-tax. El1te
Apologies for the multiple responses - only just read this further clarification. Just look at 32Red's figures, the 15% tax charge would have been £3.72m. The problem for 32Red is that it's business model is completely different to that of NetPlay. NetPlay's primary medium is via TV channels on which it hosts live casino games etc. It therefore inherently has contractual offsets with the TV operators. 32Red on the other hand does not have these same contractual agreements because its business model is very different. Therefore, for Simon to expect a massive contractual offset at 32Red is severely misplaced. Of course, 32Red can pursue cost cutting as NetPlay are doing. However, the bulk of NPTs cost cutting is to actually close down one of their production centres completely and to utilise their other one, which would remove a large chunk of their operating expenses. I'm not convinced that 32Red could embark on such radical cost-cutting measures, once agian down to the difference in business model. NetPlay are expecting to offset over half of their charge, but once again, that it down to their specific business model. On that basis, I'll beg to differ with ST as simply expecting these offsets to follow across is not a logical assumption. Hope that helps - by the way, I have no short position here, nor do I intend to open one. It is just best that investors are given full information. El1te
See the post below. Unfortunately, all that ST has essentially succeeded in doing is clouding the matter today by spreading misinformation. His assumptions are incorrect and it's concerning that many would have bought in today without fully understanding the POC tax. Best, El1te
Does anyone have any contact details for Simon? He has yet again completely misunderstood the POC tax. It is not a tax on the gross profits line - it's a tax on the net revenues line. Unfortunately, that makes the figures within his article incorrect. I'm a little surprised he hasn't picked up on that. El1te
It's worse than that unfortunately. It's on net revenues (i.e. the £25.4m figure in 2013 minus the small Italian net revenues of £0.6m). Therefore, the tax rate for TTR last year would have amounted to a substantial £3.72m. Unfortunately, that tax rate cannot be passed onto the consumer, as it rises with net revenues. The only way to counter-act it is to boost margins to offset the tax. The tax will cripple TTRs profits if it goes ahead, hence why I am trying to make it clear. The recent drop in TTRs share price is not really a coincidence. TTR need this not to go ahead, but considering that the UK-based gambling companies already pay that level of tax, I doubt that the politicians will retract it. They may lessen the rate if they get pushed into it, but that will still take away a material slice of TTRs profits. Note that the tax is set to come into force in December (as it stands), so this year's results will be largely unaffected. However, the market is forward looking, and will price TTR for the years ahead where there is the potential for the company to be making much reduced profits. Hope that clears it up. There seems to be a lot of misconceptions about how the tax will be applied. Just to make clear, its on the net revenue line on the balance sheet. El1te
I wrote a brief article about it on my site a couple of days back (although back-dated the article to April 2013). Link is below. NetPlay is much better placed than TTR, by a country mile. I haven't been invested in TTR, but have been in NPT, although I took profits on the day of the results in order to allow me to quantify the POC tax's impact on the PE ratio etc. Haven't yet re-invested as sentiment seems to be weak at present. NPT is on the watchlist though. http://www.theel1tetrader.com/2013/04/netplay-tv-quantifying-point-of.html El1te
I don't believe that ST has fully understood the nature of the POC tax, and that current broker forecasts do not account for the introduction of the tax. With the market being a forward looking environment, even if TTR produces excellent results during this calendar year (because the tax isn't implemented until December), it will trade on a low rating. Bottom line is that if the POC tax is implemented, TTR's market cap will look very high. El1te