Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
In todays trading, the AML SP changed in the same pattern as the FTSE 250/100...they all dropped at the same time...just showing the influence of general computer trading and general equity flow on SP, rather than specific company effects. What happened in the UK today that triggered a run up and then 500 point drop in the FTSE 250 and then a recovery?
@Swiss/LTHs
I agree...highly suspected C26 is working with Geely. If your on this board posting like this, not shorting, you advocate for their take over by Geely, try to push the buying price down but do not hold AM, and continually put down current management, you are probably working for someone who aspires to take over the company at the lowest price. I thought that the first time he posted in support of a Geely takeover bid...that connects all the dots.
As for the SP, it certainly doesnt reflect the value. We are to believe that the company was only worth the current MC back in May and June, well before the announcement...and then you add 650M with a large safety net from PIF, Merc, Invesco buying at full RI figs, and now the company is still worth the same or less as in May/June as if nothing happened. Nope...this current SP is meaningless and I'm concerned it is being manipulated for a hostile takeover if current management dont deliver for PIF, Merc, Invesco....if they keep to the plan and deliver then the SP will recover quickly in my opinion as those on the fence will jump in. It has doubled in the past in weeks so a lot can change.
I wish...to be clear, I'm a LTH not closing a short position. I had ADR shares and was prevented from participatibg in the RI...so had to sell and buy in again. I have some ground to make up before a DBX...hopefully we dont have to go through this RI again.
Cash burn in Q2 and exchange effect were pretty bad. The combination of AP/AR cash flow issues from production delays, with an increase in investment/interest payments really nailed their cash reserves...along with the exchange rate impacts...that was a bit unsettling given other past quarters. Not sure how well that was managed unless they knew the RI was going to happen. No wonder they took this deal. I'm not seeing any real "acceleration" from the PIF/RI, rather they backed off fcf in 2023. Seems like PIF was mainly giving them more short-term resiliency to deal with cashflow impacts from delays and the ability to stay on track with certain goals, while delaying the main goal of fcf to 2024. Overall I think the RI was a necessary move given the external forces in place for added resiliency...and the other larger deal would have been terrible for shareholders given the added dilution. On the upside, Q2 gross margin was still going up on an accrual basis, so the fundamentals of the core operation and demand are still pointing to long-term recovery, and the exchange rate will improve...while debt is paid down. That shows a lot of hope for the long term once supply chain issues are sorted. Also, it appears that they finally broke out of the long-term downward channel they were in for the past year....so that was good to see in the past week looking at trend lines.
@aml_007 or Son_of_Swiss. Thanks for your analysis of the RI. Exactly how were you able to purchase the RI issued shares in 2020...administratively how was that done? I'm outside the UK and purchased ARGGY ADR shares, that's a barrier too I suppose?
catching up on the RNS issue regarding funding. I bought a failing business and turned it around, so I can understand the need to leverage additional funding opportunities that may come along to mitigate risks and reduce debt. I seriously doubt he would give up such a large stake in aml and dilute for 200m at the current mc...that would be very foolish...and he didn't become a billionaire doing foolish things. Seems he would want to treat the new model as a separate venture and structure the deal around the size of gains achieved from bringing that model to market earlier, and then use part of the investment to reduce debt. I'm sure they are going to run financial models to help ensure that the deal is a win-win.
Whatever aml can do to become solid with updated models and control debt...even if it causes minor dilution at a future higher price, it could ultimately be a net benefit to the sp. Once they are cash flow positive (not actually profitable) and their sales are up with updated models and the ftse recovers (2023?), I think the sp will pop. ...the optics were bad though...I suppose they had no choice after the news broke, but they could have provided a little more detail in the RNS to better demonstrate that this wasn't for short term cash flow needs...and a little more on how the money would be used. The larger invesco investment certainly helped to show support in the long term plan.
@badflaw I appreciate your feedback. To be clear, I'm not saying that the ftse 250 caused aml to decline. The ftse 250 is only a bellwether/surrogate of capital flow in the UK economy/stocks. The model shows that the fall was 5x worse for aml...not the same...I said that, so I'm agreeing with you there. My point is that general capital flow in and out the UK stock market is really driving daily changes in sp given that this model explains 90% of the variance...and the significant changes often occur on the same day or close and the magnitude of ftse change impact the magnitude of the aml change (albeit that aml is worse) since sep 2021. It isn't daily/quarterly changes in aml activities as often cited by shorters here. The fact that aml fell harder is because of the state of the company from years ago...as it almost went bankrupt...so we agree there too. My point is, and the data bare this out, that the markets view of aml hasn't changed much for the past 2 years. If the ftse goes into recovery so does the aml sp like it did after the initial covid crash in 2020...if the ftse continues to fall, then aml will likely fall....no ramping here...just supporting other LTHs with data.
AML's longterm fate wont really change until it proves it has recovered, or is closer to recovering than now. In the meantime the data suggest that it will blow in the wind in rough synch with the ftse 250 index with some noise thrown in. My other point was that the 5x loss in aml mc relative to average ftse 250 firms mc change is no longer falling at that 5x rate. It has been falling and getting closer to 1X in terms of mc change (note you cant use percentage because aml is so small now). This suggests that the major correction for its condition/risk is near the end...but it may drop more with the UK stock market, as most stocks do. For example, today 6/5 the ftse 250 fell 277 points, in the past aml would have an average fall of about 40 p when there was a 250 to 300 point drop in the ftse since sep 2021, and as much as 75p; but today even with this larger drop in the ftse, it only fell 6 p (the lowest drop when this occurred in the past year) and 2X better than the performance of the average ftse 250 firm in terms of mc change. So some positive signs...in a dark storm. But don't take my word for it, pull the data and do the analysis in excel. It is pretty simple stats 101.
I think this link to ftse 250 capital flow also explains some of the timing in aml sp changes before the Covid crash in March 2020, the recovery of aml sp prices after March 2020, and the onset of the long fall in aml sp in September 2021 to today, that i did not see before. All patterns the same as ftse250 index. It didn't have much to do with internal aml changes, but the UK market in general. The market sees aml as higher risk, but that perception has not really changed much since after the major crash after the ipo since they lost most of their mc.The changes in the past couple of years are more triggered by UK markets in general. As the aml recovery plan unfolds to 2025 and they actually recover, I think they will no longer be viewed as such a high risk and the market will respond.
LTHs. tough times. Did a deeper dive into the SP. I built a regression model of the aml sp since the drop started in Aug 2021 and found that the ftse250 index alone can explain 90% of the change in aml sp. The model has a very high r2 of 0.95 (1 is perfect, 0 is no relationship). That indicates that virtually all of the ebb and flow in sp (90% statistically) has to do with the flow of capital in the ftse250. Problem is on average aml dropped 5x more mc than the average ftse250 firm because of its condition. But the market perception/effect on aml has not fundamentally changed since last September. In fact this impact is decelerating (getting better) over the months, and in July the model estimated that the drops would be commensurate with average performance of the ftse250 in terms of average mc change if trends continue. Since aml lost most of its mc already, the impact of the change on a percentage basis is still much greater.
Given the close ties between aml sp and ftse250, and unless something changes within aml, the all time low is probably going to hit when the ftse 250 bottoms out unless the aml sp hits support sooner. Unless there is a significant material change within aml, significant recovery probably wont happen until the ftse250 bounces from its atl. Bottom line, just as many have said previously, nothing has significantly changed within aml or their plan to warrant this sp drop...this is mainly the impact of the UK economic factors and capital flowing in and out of the ftse 250 and the fact that aml hasn't recovered yet as a business. Last sp positive run during 2020, aml's mc grew 3x more mc than the average ftse250 firm and doubled in weeks. So imho it will recover.
The 832K buy of AML shares by Invesco reported on yahoo stock data site in line with the Apr 27th RNS that was discussed a week or so ago. Why would Invesco increase shares to 12.9M if the sky is falling? Was their an apology yet from C26?
https://uk.finance.yahoo.com/quote/AML.L/insider-roster?p=AML.L
Karenable blog article uses past sales to suggest AML can't hit the 2022 goal, but fails to use the 60% increase in DBX orders and new 707 roll out, which are not in 2021 numbers obviously. Using just the growth in DBX orders up 60% and straight lining sport/GT numbers, you can get to plausible numbers above 2022 projected sales. Ironically the article picks at AML for a typo in the briefing slides, but the blog has many grammar issues and typos.
Also AML hit the analyst consensus metrics for Q1...so they are executing the plan which is fcf in 2023. The $300M+ D&A number is thrown around a lot, but that does not equate to cash flow. If they hit their sales numbers then they will start seeing positive fcf to run the business and increase equity before being technically profitable after taxes. Once the risk subsides and bonds end, then they can get better terms...and then be profitable too....but they have fcf to run operations in the meantime. The sky isn't falling...
When they are running with all DBX models, updated sport/GTs, and hybrid/EVs...then let's see if Ferrari's Market Cap is 35X AML's. In the interim SP changes don't mean much for LTHs.
Thanks Carpy for highlighting the recent buy by Invesco, I hadn't noticed that. When you review the recent RNS or compare Invesco's holdings between the RNS post on Feb 2nd and recently it is clear. Ironically the decrease in percentage cited in C26's post refers to the decline in the proportion of shares that were lent out. So the lent shares actually dropped from 145k back in Feb to 57k in Apr...not a negative trend....and as you indicated it is a tiny fraction anyways.
@C26 Let's be professional and cut the personal attacks... It is obvious you and your aliases are supporting short positions.
Back to your previous post to me...you don't use market cap as a metric to scale business operational financial metrics unless your objective was to mislead (next time just use Tesla's cap and make AML look really bad)...nice try. As a rough indicator, try revenue from their annual reports for scaling the size of ops and you will see that Ferrari's debt of 2.6B euros is commensurate with AML's debt based on their future growth projections (24/25). .... i.e., the sky isn't falling quite as bad as you claim.
C26 You are underscoring my point about Ferrari. They are a good company with a PE above 40...much better position than AML currently....yet if you take a good company like that and shrink them down to AMLs size/goal of 2B (revenue) their debt would be similar to AMLs. So I don't see that as their main issue if they continue on course. Imho the key is to grow and focus on increasing their adj EBITDA margin. if they get their margin up then they could be like a smaller Ferrari financially. They are better than they were and mainly on course, so for my part I don't think all these people will allow their good work to go into ruin and ridicule when they have come this far....imho
LTH. On the debt issue, i thought it was interesting that if you scale Ferrari's long term debt and scale it to a 2B operation (the 24/25 target for AML) the number is commensurate with AML's current debt. Not bad given their retooling and investments. If they can hit their growth goals and achieve better adj EBITDA margins on their operations and efficiencies they can handle the debt. It is doable. The demand is good...my main concern is their adj EBITDA margin...if they focus on increasing the margin, they will do well. I was really hopeful when they began to focus on lux SUVs given how that helped Porsche. Taking 20% market share out of the gate and rolling out the 707...and the demand for other models makes me more confident. I also thought their strategy to partner with merc and not reinventing the wheel in key tech lanes was smart for the price of the dilution. In terms of SP...it is going to blow around in the wind...it is a small stock in a bad world market...If you look at volkswagen, many car stocks, SP500, etc the patterns are similar in the past month...went up, deaccelerated, then dropped...shorting on lots of stocks started in Nov...whatever...I'm in for the LTH...curious to see the SP in 3years...btw thanks for all of your postings and info (even the bad spin helped know issues to research and get the facts) it has been very helpful. thank you to all