Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
Good point are clearly still seeing value than just trying to cash in and run. Plus they will know the business far better than most so promising. However, this might suggest to me that no further M&A is on the imminent horizon as I would imagine they could be inside of such developments.
Volumes are still down though as to be expected in August. Traded only c20% of average volume and we are half way through the trading day. I wouldn't expect too much of a catalyst here until next set of results absent of further acquisition announcements, which could be likely in either midstream or because E&Ps that aren't hedged are hurt by spot prices and need to recycle capital to new projects - aka buyers market and DGOC have c$600m of dry powder excluding further deleveraging since last set of results. Outside of acquisitions I think it needs to get through a couple of sets of results of really demonstrating to the market how they're protected from spot prices and can maintain margins via their realised prices. But between now and results in Feb shareholders are paid c5.5% at today's price to wait which isn't a bad return in the current market environment and outlook.
Poorly communicated messages to the market about price reductions in c13 gyms, however this is part of the model to adjust pricing to increase membership in more price elastic areas. If you track the pricing of various gyms you can see pricing has increased in over half of these and gyms such as Monument London are no longer advertised as already reached mature gym status (i.e. 43% EBITDA margin) and this was done in c6 months vs the 2-3 year average management guide too. So there were concerns of reaching saturation and a race to the bottom on pricing, however aside from Pure Gym and GYM competition has fallen away as the low cost gym model only works at scale, 3 smaller operators have gone into administration this year and no.3 and no.4 players have opened no further gyms this year as its all about location of which GYM and Pure Gym have dedicated property teams so ahead of the competition. PwC recently put out a report on UK gyms highlighting the last 5 years of gym growth is nearly all driven by low cost operators and are guiding to the UK having capacity for c500 further gyms like this over the next 5 years, which would mean GYM would have an estate of 248 gyms by then. This also excludes the small box format gyms that management guide to having the similar 30% ROI to their traditonal format, of which they could have 57 in 5 years taking the total estate to c305. GYM is also at the inflection point of self funded growth from FCF as lets remember if you exclude expansionary capex GYM sits on a c12% FCF yield and as recently as July there was a 0.3% average increase in pricing across the estate. If the next set of results continue in the same way as the last FY and trading update it should help bring back confidence in the stock. Finally in terms of people no longer going to the gym because of macro conditions, remember this was a company that was born in a recession with the first gym opened in 2009.
Those algo trades you speak of are RSP trades, which are just the low touch trades by market makers and traders so are all computer driven, all retail trades go via an RSP as no trader is going to be bothered with a high touch approach for small retail trades. Of course some retail investors are buying not disputing that but the seller depth has been far greater recently. If you go through the forum posts here and elsewhere over the last few weeks and you see people concerned about spot prices, bargain purchases below EBITDA, plugging liabilities etc. and the panic caused by Oarfish who again only looked and P&L and not cahsflow shows there is a higher degree of misunderstanding in retail investors. For those buying, I would agree looks like a good entry point as you're buying at the same price as mid-2018 when production was >30% lower, with similar realized prices because of hedging and EBITDA margins at c55% vs c40%.
Large amount of retail holders selling either banking profits or misunderstanding along with general market weakness and you haven't the institutional buying because largest holders (mostly multi cap UK income funds) are facing a lot of withdrawals currently. Will see some more buying pressure when DGOC switch to the main list (250) as managers with no AIM mandate and trackers will be buying. Downward pressure is technical and not fundamental as the SP has never got near FV
The low gas price environment doesn't affect DGOC as they're hedged for c18 months at around $2.70 vs $2.15 spot and are currently looking at longer term hedges to produce stable cashflows. Plus no point looking at the PE ratio due to non-cash charges in the P&L, not really any point looking below the adj EBITDA number (which removes bargain gains on assets). Plus the whole purpose of this stock is to return to shareholders in the form of dividends of which their policy is to pay out 40% of FCF which is basically all of CFO seeing as maintenance capex is running at c$12m pa. Using basic NPV10 valuation gets to around 170p if you were to overall this with (admittedly not great valuation method) a dividend discount model with say terminal yield that is c1% higher than the large integrated O&G gets to somewhere around 150p. Which would suggest at the current run rate somewhere within this range is fair value but completely excludes potential acquisitions and whether they continue to pursue acquisitions in the mid-stream space too.