Member Info for Hexam

I agree completely with what you just posted Wildboar. It’s just the mining related numbers that I’m saying are easy to understand.

Never trust what a chartist says on BTC (or share prices).

But that’s the thing, with bitcoin mining it is just maths and simple maths at that. If you don’t understand that then you don’t understand bitcoin mining.

Btw I’m just talking about hashrates, coins mined, revenues and costs - not the mining itself as obviously that involves some very complex maths!

BTC mining is a very simple business to understand - you don’t need to be an expert, it’s just a straightforward numbers game. What is difficult is predicting what BTC does itself. Anybody saying they know that should be ignored.

With apologies to LTHamigo (you’re quite right) and others not interested in ARB :)

Really should be asking that question on the ARB board not here but the short answer is they sold their prize (and biggest) asset, the facility in Texas which they only just finished and moved into, for about half of what it cost them to build. They did this as they had all but run out of cash and could not raise it any other way. They now have about $80m of debt but their remaining assets probably aren’t quite worth that much. At the current BTC price they should now have enough cash to last about a year but not much more as they are currently losing over $2m per month. They really need BTC to double in price to stand a chance of making profits again - but of course that could happen.

That said the stock is trading heavily on sentiment now, not fundamentals, so could easily see some sharp rises and falls like there have been in the last week or so - especially on any seemingly good or bad news.

So for me it’s a business with little long term value but there may be some good short term trading opportunities which is what I’m relying on to get me out of trouble as a LTH deep underwater - rather than from the sp ever getting anywhere close to its former heights which I think is exceedingly unlikely.

Could say a lot more but this is not the ARB board and it is only my view - and I’m sure you’ll get some very different answers from the ramping crowd if you did ask the question there!

RI - I think we are agreeing, it's not necessarily a bad thing (even if we are only left with ROW and not both).

I just think it is very difficult to place a valuation on such a business as clearly we are still a long way from pre-pandemic BO levels (as the presentation highlights) and crucially we do not know what share of that business we might end up with (10%, 50%, 100%)? My feeling though is that unless we get completely shafted then the sp of that business will be quite a bit higher than 3p.

It's still just one of many possibilities though so chances are it won't be this scenario at all!

RI - I'm afraid you can't use a multiple of EBITDA (unless you use a much lower one) as this measure doesn't include anything for rents. Need to use EBITDAR (as CINE calls it) which allows for rent or earnings. It's also unlikely I think that we'll retain 100% of that business - though that would be nice!

HNS - Same reference as you but I'm looking at a different line (on a different page) i.e. profit before tax, not just operating profit, and this can be found on page 99 for 2018.

Mature businesses like CINE are valued on profits, not revenue, and the ROW profits look to be a lot better than UK. Like you though I'd still rather have a share of more of the business although the larger the business that remains then the smaller our share of it is likely to be - so swings and roundabouts.

HNS - The accounts actually split out the profits each generates.

In 2019 the profits (before tax) were $212m split:

US - $122m
UK&I - $5m loss
ROW - $95m

In 2018 the profits (before tax) were $349m split:

US - $288m
UK&I - $5m loss
ROW - $66m

In 2017 the profits (before tax) were $155m split:

US - Not applicable
UK&I - $55m
ROW - $100m

So consistently more profit generated by ROW compared to UK&I despite the lower revenues.

I could be wrong in my interpretation and you could be right that it is Regal only that is being considered for sale but IF we are only left with ROW and IF the accounts are a reasonable reflection of relative profitability and IF we are left with a decent share of the ROW business then the current sp in my view would look very cheap indeed and personally I'd bite their hand off for it but there are a lot of IF's there! There are still many unknowns though so we'll just have to wait to see how it plays out, whatever route they end up taking.

Well the ROW business appears to be much more profitable than the UK business and made more profit pre-pandemic in just one year than the current total mcap. So doesn’t seem so bad a possible option to me (depending on what share of it we might keep).

Nk2022 - yes they said group not groups and if you read the RNS they defined exactly what they meant by that which is the businesses in Chapter 11. At least that’s how I interpret it. I can’t see how they are referring to just Regal.

I agree that on the face of it selling Regal only perhaps makes more sense but to me that doesn’t fit how they worded the RNS. They could have simply said Regal or the US businesses or whatever. Instead they said the Chapter 11 assets as a whole.

I’m just trying to interpret what they have actually told us, not judging it at all.

As to Amazon and Disney I don’t think a studio would buy CINE (or any cinema chain) anyway but that’s a different debate which has already been done to death here - but if they did then why not the UK? It’s small, but not that small and it’s already a market for both obviously for other services.

HNS - the chapter 11 definitely includes the ‘UK’ (and Ireland and Jersey). It is only ROW that sits outside.

Wolf - I think you may have cracked it! Give that man a biscuit :)

Of all the various scenarios that have been suggested this one (i.e. selling everything apart from ROW) seems to make the most sense. Crucially it explains the odd parts of the RNS where it talks about the sale of assets being "focused on proposals for the Group as a whole" and "any sale transaction for the Group as a whole would not include the sale of Cineworld itself".

This appeared to leave an empty shell of a company if carried out but given your suggestion I re-read the RNS and in the first paragraph it actually (I think) defines the 'Group' as just all the businesses in Chapter 11 so EXCLUDING ROW and it is the ROW that would be left - not just a shell.

This could still be wrong but to me it's the final piece of the puzzle in terms of explaining the wording of the RNS and its core options which appear to boil down to a choice between:

a) Re-structuring the company
b) Selling all the assets of the businesses in Chapter 11 (i.e. everything but ROW)

It also explains better why they carved out ROW in the first place (I thought initially it was to sell it but it seems it may be the opposite)!

Of course it still leaves lots of follow-up questions, most notably what happens to the debt in any such sale transaction (or restructuring) and what are the implications for existing shareholders under both options - but it's a start!

By the way the other data centres are current in the accounts at around £10m (with £3m or so of that mortgaged). Of course they could be worth much more than book value or, like Helios was, considerably less.

“How is it possible that it is a 30 million mktcap company?”

Because it’s a company whose assets are probably worth less now than it’s liabilities, that will show a loss this year of over $100m and has no realistic way of making profits again unless BTC climbs significantly higher (which could of course well happen).

It’s really not rocket science, just a basic understanding of the financials is needed.

LTH - I don’t think the debt could be counted as a loss and even it could the value would only be 25% (or whatever the effective tax rate is) of it.

That makes sense but surely at most the value to the purchaser would only be the tax rate applied to the interest? Current interest on their loans I think is about 5% and assuming a tax rate of, say, 25% it would be worth less than $100m a year - a long way from $6bn unless I’m missing something?

I agree though, it’s a does reduce the cost a bit assuming they have profits to offset.

My question was actually more general and fundamental. I know tax is being worked on a lot but cannot understand why taking on debt should impact a purchaser's tax bill - other than by just offsetting the interest payable against profits each year to reduce the annual tax bill.

“Hexam, a big studio could purchase the debt to use it to lower their tax bill for instance making it effectively free for them to take over”

Sorry, I don’t understand how the debt would lower their tax bill at all, let alone enough to make it free?