Member Info for Hamilty

Sadly Ronald I'm not sure management are behaving in this way deliberately to keep the price low for buybacks (that would be brilliant) - I think they're just slightly clueless on capital allocation. But happy to be swayed and would be delighted if you've got concrete evidence to prove me wrong - about time management returned this share to fair value!

By 13x I think I actually mean closer to 11x - my brain is very tired!

Obviously doesn't make sense to do buybacks using debt with an interest rate of 12% if no plans to sell the power plant - coal prices likely to stay elevated for a while, meaning profits take a while to get back to previous levels. Extra debt would imperil OPG's equity value in this scenario, you're right.

However, would make a lot of sense and add a huge amount of value if they bought back shares with a view to shortly thereafter selling the power plant (for which OPG could potentially get a lot of money - RNS from 20 August 2020 shows a fair value was seen by the media at that time as £102 million - £122 million).

If OPG were to sell the power station and deploy the proceeds into renewables, the company could quickly see its market cap rise to above book value (say to £200m, or 8x current market cap). If the company spent a mere £6-7m buying back 25% of shares prior to making this pivot to renewables and then pay off the expensive debt using proceeds from the power station, the share price could easily rise by more like 13x (very rough figures, but hopefully illustrates my point reasonably clearly).

Incidentally, I know the Guptas have a controlling stake, but anyone aware of any action shareholders could take to encourage them in a more sensible strategic direction / oust them if fail to see reason?

This stock is hugely undervalued - my strong preference is for the company to take on debt to fund buybacks (say 50% of the float / 25% of all shares outstanding), sell the power station and then use the proceeds to buy renewables - this would not put the company in any jeopardy and would help the company get rerated (which only a shift to renewables could). OPG currently trades on less than 15% of book value - renewable energy companies in India such as Zodiac Energy trade well above book value. This could be an easy 7-10x in a couple of years if only the Guptas can get their act together reasonably soon (which unfortunately I doubt). I think very highly of their skills as power plant operators (amazing how good the results have been despite high coal prices), but sadly they seem unable to understand the most basic rules of good capital allocation.

Have been following this thread for a while and enjoy hearing what everyone else on here has to say, so thank you all. I agree with Pearls that SGI has possible significant upside. However, I also believe that the share price still has a long way to fall before eventually recovering:

1) The business is currently loss-making, and this full year will be the same. The RNS mentions that turnover will be about £12m. Although I assume this figure excludes sales of fractions via Showpiece, and although profitability on turnover has improved, £12m turnover is simply too small for the group to be trading profitably for the year, even discounting the loss of close to £1.5m for the first six months. Ultimately, it is the PE that counts.
2) You must remember that SGI is essentially going to go bankrupt unless Phoenix cancels the debt. This is certainly a possibility, but we simply don't know. Having watched a lot of interviews with Gary Channon, he makes a big deal about Phoenix always making sure it gets its money back in a worst-case scenario. Unless the company can get back to profitability, Gary and the team may well lose faith in the company and call it quits. The fact that they hold the debt means they can and will get their money back should the company fold, and everyone else will be left without anything.

Sorry Pearls but I fear you are incorrect. FT article actually mentions Showpiece purchased the work for £315,000 from Tanya Baxter: https://www.ft.com/content/b8735abd-d67a-4eb5-b44f-06dae86094f8. Carpe seems spot on with £400,000.

Well over 50% of pieces sold as of this morning - 48,778 pieces sold, 31,222 to go