Member Info for Germanicus

Having sold their remaining vessels and equipment for a little under US$ 2 million for a loss against book of US$ 6 million they will be left with around US$ 10 million of cash, a couple of licenses in Columbia which appear to be cash drains, a receivable from a debtor that is probably unwilling and unable to pay backed by now worthless collateral and outstanding loan notes and interest to the tune of around US$ 25 million. So safe to say there will be no value for shareholders. Management incompetence or something worse. They acquired 3 vessels from the controlling shareholder for the forgiveness of a receivable of US$ 8 million in 2017 and sold the vessels for US$ 0.7 million. They additionally acquired the Rider Barge from the controlling shareholder for the issuance of loan notes of US$ 6.1 million and have sold it for US$ 0.4 million. One might conclude that it was an elaborate scheme to extract the value from the Company and transfer it to the controlling party.

Seems a bit of a strange deal amongst the existing owners, which would make one uneasy. On the other hand the first set of vessels assuming US$ 5 million is the target for 75% of the cash flow over 18 months comes at a consideration to cash flow of 2.9 times (5 + 8 = 13 / ((5/0.75)/1.5)). Which looks pretty cheap. The other vessels are acquired for long term convertible notes with coupon of 6% and convertion prices of 160p and 225p. So someone obviously has some confidence in the deal. Given past performance I would be prepared to give management the benefit of the doubt.

An enterprise value of US$20 billion strikes me as an extreme valuation. I reckon De Beers alone could be worth that, Tiffany's has a market cap of over US$ 10 billion and trades at 20 times earnings. On that comparison an EV / EBITDA muttiple of 10 for De Beers would look like a bargain giving it an Enterprise value equivalent to the whole of Anglo at current prices. Anglo itself does not look so risky to fall so dramatically, its debt its low compared to its assets or market cap and its well geographically and product diversified. Am I missing something?

Given the macro environment pretty positive set of results. 2nd half production should be 8 - 22% above 1st half and given first half is 13% ahead of budget, hopefully at the higher end. EBITDA of 3 million so could be broadly cash neutral for the full year (given higher production in second half) after taking into account CAPEX of around 35 million. Cautiously optimistic on 2016 pricing. If they can see some increase on 2015 pricing and continue to reduce costs they will give themselves a reasonable foundation.

The coal price has taken a pounding by the suprising strength of US gas supplies, an unusual warm winter and the slowdown in demand in China. This has however finally forced suppliers to bite the bullet with significant cut backs in production in America, China and by Glencore in Australia. China appears to have run its coking coal inventories down significantly in the early part of 2015 and US coal inventories are well down from the levels of mid 2012. Countries like Vietnam and India are seeing strong growth in coal imports and US gas prices have increased 20% in the last few months with the decline in the oil rig count likely reducing gas production. All in all it is a set of circumstances that could easily wrong foot the market and unexpectedly result in a shortage of supply as large reductions in supply combine with increases in demand.

Hard to value as trading as almost an option on the coal price. If coal (particularly coking coal) were to stay at current levels then probably not much value in the equity. But if coal prices can rebound by 20% + should have significant upside.

Should beat that today......

https://www.platts.com/latest-news/coal/kiev/ukraine-november-coal-output-down-44-year-on-26957443 If that shortfall was continued on annual basis it would take out some 16 million tons of annual coking coal supply, over 1% of the entire world's supply. That should certainly help to tighten the market especially in Central and Eastern Europe.

The court hearings are to approve the restructuring

Technicals have pushed this share down to this level doing a 19 for 1 rights issue many people would not be inclined to take up their whole rights and therefore would sell them pushing the share price down to the issue price where the rights have zero value. Post the transaction I estimate the EV will be around EURO 500 million. That is too low for a company producing 9 million tons of coal a year, 2/3rds of it coking in a location where there is a supply shortage. A few possible positives for the company is a pretty sharp decrease in the Czech Koruna and Ukraine's (a fairly large coking coal producer) coal production has been impacted by the conflict there. Coking coal is currently at a third of its peak, if it can recover a small part of that the current valuation will appear absurd.

36 million write down not very material against net assets of 7.5 billion and the write down of goodwill is in the price given the discount to net asset value. You do have to wonder how they managed to lose all their banana trees though.

From the 2012 accounts: "During the year, Tanfield's holding in Smith Electric Corp was diluted by successive fundraisings.......... It is therefore now treated as an investment. As such, it is now being held at the lower of cost and realisable value. Whilst the realisable value of a private company is difficult to estimate, all valuation discussions in relation to recent fundraisings by Smith Electric use valuation ranges well in excess of £1.3m which is the recorded cost of the investment. The investment is valued at cost, £1.3m." In addition there is a loan to Smith Electric of pound 1.8 million recognized in assets.

Actually Tanfield recognizes pound 3.1 million in relation to Smith in its balance sheet for investment and receivables. Based on ending up with a 4 - 5% stake in Smith that may be around the value of the investment it ends up with.

One telling number from the results - they made 8.3 million profit on sales of 19 million, a profit of 78% on the balance sheet value. Would rather indicate that the balance sheet is (very) conservatively valued. Given the share price is already at a 30% discount to book value and the potential to add yet further value through development would certainly see upside from here.

Those set of results were well priced in. Trading at less than a quarter of book would suggest far worst than what I can see. The biological asset adjustment can genuinely be ignored giving an underlying EBITDA of around pound 12 milion. Annualize that, ignore surplus cash and you are still only on an EBITDA multiple of 7. That is after alot of problems in the first half and ignoring that the second half is the stronger half. Add in a new plantation and production plant to come on stream and it looks cheap even on an earnings basis.

but in my view does appear undervalued

Not really, the current share price should anticipate that distribution. Once the share price goes ex distribution the share price should fall by around the amount of the distribution.

Anyone who buys prior to the ex dividend date of the distribution, some time in the future.

The share price will fall to around 4.5p once the shares go ex rights on the 28th. The net asset value will be around 8.5p. Given the overhang of the new stock issued I would expect the share price to slowly move towards the net asset value. The net asset value should also have good upside as 1) Housing prices are rising and the planning environment is becoming more favorable which is positive for undevelopped land, 2) The properties are making there way through the planning process, 3) the value of property in the accounts is taken at the lower end of the valuers range so as the properties come closer to sale this should give an uplift. On top of this no valuation was done since December and therefore all the above should lead to a high value. Overall I would expect the share price to increase to around 8p shortly after the full year results are announced around April 2014 which will still give a reasonable discount to book leaving further upside.

Smith electric vehicles has signed a LOI for a JV in Taiwan. Good to see they are still alive but I would remain sceptical that there is much value left in the Common shares of Smiths.