Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
But it is always how they have done it. The payout is for the period they have just reported on, so it is 4 months from reported figures for that quarter. If they suddenly said the next divi was under a different tiemline and would be paid out next spring that might be a warning sign, but not continuing to pay on the same tineilne as they have done for many years, that feels like clutching at negative straws.....but each to their own view
Sadly this downward rerating has lasted 9 months and these results show it is business as usual and delivering great results and cashflow but the share price doesn't look like it is going to move much. I am even more convinced it is because of a rerating based on the new interest rate environment, where risk free rates are now c. 5%+ and so a high yield business that has some risks and is in the O&G sector has to deliver at least 10% over the risk free rate, so a 15% yield required to reflect the risks and this equates to a 90p share price. I think this is the new normal until risk free rates are back down below 2%, which could be several years away. I have a large part of my portfolio here and so would love to be proved wrong by the market, but in the meantime will reinvest divis and get even more shares for my divi reinvestment
FCF yield is 32%, up from 22% this time last year??
It is a function of market cap and so is higher due to lower market cap than last year, shows that market cap is only 3x FCF which shows how low the share price is in general and compared to last year (excluding debt, so not based on Enterprise Value)
Off market trade brokered between 2 institutions and at a discount to market price as such a substantial amount and only reported late. Could have been known in the market hence the market makers trading down the price earlier in the day but general demand brought it back up before Ex div date?
The business is now much larger and has many more acquisitions to incorporate and also based on some of my clients the auditors just don't have the staff to complete these assignments at the moment and are pushing back deadlines. Might have been nice to have a holding RNS saying results will be in early Sept though, they normally really good at that sort of stuff.
I think this share has had a complete re-rating downwards partly due to the new interest rate environment. If this share was being priced by the market at say a 10% yield above "risk free rates" (for all the positive and negative reasons discussed here many times), then when interest rates were 0.25% (risk free rate) it was priced at 10.25% yield, giving c. £1.30 on a 17.5c divi p.a.
Now risk free rates are 5.0% (can get this on up to £1m with HSBC now) then the DEC yield is 10% above the risk free rate, or c. 15%, so that equates to 90p a share. May need to wait for interest rates to come down significantly
Would love to be in those US investor meetings later today to hear what is said by Mgt about all of this. If anything new would need an RNS though - you can usually come up with some rational reason why share price may be dropping, but I am also totally perplexed as to why it has fallen this far apart from the macro items combined with a massive vacuum in demand after the share placing so the sellers have control at the moment and algos follow /create the momentum when this happens.
I wonder if there are restrictions in the covenants of the debt packages that mean if the business has under a certain amount of liquidity then they cannot use any spare facilities to make share buy backs. They have $100m of liquidity, but that is not cash on the balance sheet, that is spare capacity in their RCF, so it is further debt they can use if they need to for operational purposes, but probably not share buy backs. Given this business has a falling portfolio of assets unless it makes more acquisitions, it must prioritise earnings enhancing acquisitions over share buy backs. With hindsight lots of people on here seem upset it was buying shares back at much higher prices, but that was before the acqn opportunity came along and then the best thing to do was to make the acquisition rather continue with a share buy back programme. Unfortunate timing in hindsight, but cannot give up excellent aqn opportunities. This drop based on gas prices has been completely exacerbated by other factors (automatic selling?), but I am completely flummoxed by what has led it this low, it is pretty depressing but I am hanging in there
But you have no debt repayments, no covenants, no ESG debt commitments, and they have always kept debt leverage below 2.3x which means it is a much more stable business than a highly leveraged one. Having seen all the UK businesses go to the wall in the last few years with highly leveraged balance sheet I would take a capital raise every time, especially when it is earning enhancingat an EPS level even taking into account the dividend expectations.
But the whole business model is based on making more and more acquisitions of unwanted retiring assets, otherwise this is a business in wind down mode. So of course they are going to make opportunistic acquisitions through placings rather than time consuming and much more expensive rights issues. I think if private investors don't like the Board taking advantage of those opportunities through earnings enhancing acquisitions (show me one they have done that isnt) they probably need to look for alternative investment opportunities!