Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
TB - the job of the CEO is to run the company, managing cashflow, making a profit and complying with the declared strategy. Managing SP is way down the list and often outside his control.
Where do you get you figures from? If you’re using revenue figures with derivatives factored in then you’ll never understand them.
Bismarck, My view is that your first paragraph is what we're all waiting for: "If DEC can sustain the current divi and maintain a reasonable level of BBs for a prolonged period (a year, 2 years, 3 years?) surely during that period market will gradually start to realise that the business model they're using actually works and the SP will recover?"
Lots of people (including on here) cannot differentiate between a company that is making a profit and distributing a dividend all within oft stated strategy and one that is failing because the yield looks "too good." The dividend is affordable going forward (see Andy's post) and debt is declining post a surge for Tanos acquisition.
Now there are a few headwinds: ESG concerns, fear over capping costs, debt levels etc - but what DEC are aiming for now is sequential financial reports with maintained dividend and declining debt (which is why they correctly won't borrow more to enhance BBs). They have issued an RNS saying they don't know any reason for the SP fall. So I guess either believe them and sit tight whilst earning an excellent dividend or don't believe them and sell up. Simples!
As for the SWS article - look at the fair value quoted £1.86!
A BB RNS today would have reflected a BB yesterday which would have been a bit of a gamble.
If they buy today (assuming they have the petty cash to hand) the RNS will drop tomorrow.
If they don't buy today then I guess they aren't doing any more for a while.
Summary of today’s posts would appear to be:
Can we stay solvent / patient longer than the market can remain irrational?
Buys in both SIPP and ISA today to ensure grand totals divisible by 20.
Lots of eggs in the DEC basket now but every divi de-risks the long term holding yet further.
GLA
Gav,
I was considering whether it was worth rounding my holdings up so they were exactly divisible by 20 as well. Currently SIPP has 17 "left over" and ISA has 18 "left over."
However, if lots of holders don't do this then we're forcing DEC into a sizable BB (assume average left overs is 10 then multiply by number of holders - quite a significant number I'd guess).
Terry, another final attempt at explanation. Which of the following 2 options looks best?
1. Borrow money at 10% plus (current RCF rate) to buy shares with a 20 % return whilst increasing your debt, decreasing your liquidity and tying yourself to at least 5 years of debt repayments?
OR
2. Buy shares with cash at hand (accept a lost opportunity cost on the money) get 20% return, don’t increase your debt, don’t decrease your liquidity and don’t tie yourself to 5 years of capital repayments?
Rusty and I think option 2 preferable. Do you really think option 1 is better?
Terry - as discussed a few weeks ago they didn’t have the cash available to do bigger buy backs. H2 report stated they only kept a few million in the petty cash. Borrowing more to do bigger BBs then would not have been as cost effective as buying now with cash at hand.
They deliberately run tight cashflow to maximise paying down RCF and were doubtless conscious that most of us (and prospective investors) wanted to see a reducing debt trend.
IMO they’re still going a nice balancing act with cashflow / debt / BBs.
Trek - thanks for link.
Guess first impact on SP will be a US bank buying DEC shares in the UK to create ADRs. So, initially good for SP (esp after 20:1 consolidation). Will soon be at £20 per share! :-)
RNS covers the administrative details but doesn’t explain the practicalities.
Like others I’m sure it will eventually be good for increased exposure to US investors and hence upwards pressure on SP but haven’t a clue how it will actually work.
Will US investors buy shares in sterling? Will exchange rate fluctuate during the day? Will we have done shares priced in dollars and some in sterling? Will we end with 2 classes of shares (bit like old RDSA and RDSB for shell?
MV if we knew what was behind the SP increase (it’s more than just US inflation figures) you could make an informed decision.
I’m starting trailing stop losses later this PM as I don’t see that any of the fundamentals have changed.
Yes the world needs SAF but little evidence VLS will be a major player in providing it or the technology to make large volumes of it.
Notrex - where are you? Still downloading Moonie videos? Still calling for the BoD to be sacked? Still unable to differentiate between a SP falling for interest rate / ESG concerns and a badly run company?
As per Fawlty Towers “Come out, come out wherever you are.”
Only other positive not covered by Trek was an unambiguous statement that they do not need to replace production. Polite way of saying no acquisitions in the near future perhaps.
Alexandro - comparing H2 output with this statement gives 134 against 143. That looks like less than 10% to me and covers a production decline not an asset decline.
So KRG have access to v cheap oil at about one third of international prices. Do you think they want the ITP back open? Does the profit KRG might make (if Iraq give them any) from international sales outweigh the savings they’re currently making on our cheap oil?
Not paying any arbitration award, not repaying outstanding Genel / DNO debts from previous years and having a monopoly on local cheap oil might seem a more attractive option - certainly in the short term.
To all those brave / clever enough to buy in last week or this morning. Not me - I’m still sat on original stakes in ISA and SIPP.
This morning it looked like individual sells were actually bigger than the individual buys but that seems to have flipped late afternoon .
Repeat tomorrow please! Just a confirmation that dividend is maintained would be a start, news on increased production and KRG paying down debt would be a bonus. Accretive acquisition or BBs even better.
Guess the only slight disadvantage in the timing is that they’ll get loads of questions on pipeline opening that they won’t yet be able to answer.
Presentation will be all on internal sales and debt repayment - unless they have acquisition or other location updates. Fingers crossed.
Gavster,
Although last presentation was in Sep, it was based on figures up to July. So mid Nov will give an extra 3 months worth of data and perhaps more importantly a chance to explain debt strategy, derivative accounting, decline rates, need for (or lack of need for) acquisitions, cost of capping etc. All issues which seem to confuse many potential investors.
In terms of decline rates, there have been lots of comment on that ranging from “it’ll last way beyond debt repayment” to “it’ll run out before debt repayment.”
If you believe the graphs in Sep presentation we’ll still have gas after all debt has been repaid.
Bismarck - I’m happy with BBs with “spare” cash though don’t think they should borrow to find them (lots of debate on this in previous posts) but not sure they will attract new investors which better debt levels might.
We’ll soon find out….
Trotsky - guess if there is spare cash forecast then it’s a toss up for the BoD whether a slightly increased dividend or a substantial reduction in debt is best for SP.
At almost 20% already I’d be happy with a couple more quarters of just paying down debt to make profitability / viability look better.