Member Info for Kingfisher68

Decided to make my second investment in darkest Peru (that's a Paddington Bear reference). Cash balances. Undemanding PE & EV:EBITDA multiples. Decent dividends. Modest share buybacks. Increased sales in Q1 2024. 5x top-line growth 2020-2023. But you know all this already.

£0.72 per share dividend in past 2 years so there's an argument for this stock being £7+ before too long (unless we have some bad news such as reduced dividend, AUM declines etc). Valuation margins are not demanding. I'm holding for the long-term based upon available information.

New to this share and reading some mixed messages about Karo. Can someone please summarise the situation there, or point me in the direction of a good summary. In particular, capex to date, capex outstanding, ownership situation (if not 100% THS), production numbers, projections etc. THS looks cheap on many metrics.

Something must be happening here to cause this spectacular share price increase?

This stock has risen 10% in the past fortnight. Any idea why?

Hurry up, Godot mate

Around £0.42 per share Prosperus, but you'll lose 20% withholding tax (see discussion below). Richard Bay & Newcastle thermal coal prices fairly flat at the moment so I see this share price drifting until the stock becomes xD. Maybe even a case for selling at £5?

What do you think are the best opportunities?

Consensus on this group chat seems to be that HOC will trade in a £0.90-£1.15 range, so buy-sell-buy-sell ad infinitum at these levels. Maybe we're underestimating the upside here. The key factors seem to be: (1) higher gold prices in latter part of 2023 and Q1 2024, (2) Mara Rosa (Brazil) to provide 83,000-93,000 Au ounces of lower cost production, and (3) silver prices may be set to move north. Additionally, we cross our fingers for some good news on the exploration side of the business. 2023 EBITDA was $274m (an unchallenging 3.7x multiple). Consensus 2024 EBITDA is $385m. But the bulls believe 2024 EBITDA could be in the $400m-$500m range with some favourable tailwinds. This would see the share price move up towards the £2 mark. We've doubled our stake today.

There is the perfect storm here of increasing sales (+9.8% H1 2023-2024), improved profit margins, strong operational cashflow, significant debt reduction (£21m down H1 2023-2024) and low valuation multiples. If the company can maintain its performance of July-December 2023 then we have a fabulous deleverage story over the next 3 years. This stock has been held back by low profit margins, high debt levels and pension deficit concerns for too long. All 3 of these factors seem to have been addressed and the near future looks bright. Strong arguments can be made for the share price being nearer £2 than £1 within 18-24 months if management continues to deliver. We doubled our stake this morning. DYOR.

This remains a high-risk stock but the results this morning were decent. TGA is now trading on an EV:EBITDA multiple of 0.7x and a PE multiple of 3.2x. Dividend yield 17.6% (before 20% withholding tax) and share buybacks of ZAR500m starting this week. Ultimately nearly everything depends on the Richard Bay (and Newcastle) thermal coal prices, but there seems to be a management team prioritising returns to (the brave) shareholders. It seems like volumes will be maintained through new workings (RSA) and improved productivity (Australia). Entering a third geography would be pure guesswork but cash balances are a healthy $543m (DEC 31). Don't bet the house here. Strap yourself in and enjoy the ride.

Interesting analysis. Some comments/questions so that I can tweak my own modest financial model.

1. Domestic sales - seemingly 3.826million tonnes in H1 2023. What approximate sales price and operating costs?

2. Finance income - ZAR545m in H1 2023. Recurring? Not a small number.

3. Cashflow H2 2023 - assume TGA paid for Ensham (ZAR4.1b?) and dividends (ZAR1.4b). Capex presumably higher in H2 2023 (maybe ZAR2.2b).

4. Thoughts on DEC 31 net cash number? For reasons stated above, presumably significantly lower than JUN 30.

Possibly time to revisit this old favourite.

Richard Bay coal +3.35%

This has been my most profitable listed stock investment ever, but I'm currently not holding any.

At first glance this looks cheap. MC of $775m, net cash (June 30th) of $705m & EV of around $70m. 2023 earnings should be around $256m (middle of range announced today), implying a current PE of around 3x and a tiny EV:EBITDA.

Everyone is getting excited about the final dividend. Interim dividend was $0.52 per share (£0.41) before the South African withholding tax folks took their hefty slice. A similar final dividend and we're looking at a gross dividend yield of just under 20%. What's not to like?

The flaw in the logic is that we're looking back in time to the heady days of, err, 2023. The company calculates an average coal price of around $123 per tonne. The trouble is, Richard Bay thermal coal is now $92 per tonne. Get your Mystic Meg crystal balls ready to determine coal prices in 2024 and beyond.

What are the economics of the South African operations at $92 per tonne? Are they still profitable? And what are the economics of the 'new' Australian operations? We need to see segmental information when the accounts come out on March 18th (and then look at 2024 coal prices Down Under and run our spreadsheets). Is the dividend sustainable? How has the cash position changed since June 30th? And what's the latest with the South African railway system?

There are a lot of variables here and I'm not in the mood to catch this falling knife just yet. It all boils down to one's view/guess about coal prices going forward.

There are several reasons to avoid this stock, primarily fund outflows in recent years and the gradual shift towards institutional clients (where the fee margins are lower). Losing the CEO wasn't a positive and there seems to be a market shift towards non-active fund managers (I'm a fan of tracker funds myself too). Total revenue was down 7% in 2023.

But:

1. Rumours of a takeover abound.

2. Modest AUM increases in recent periods.

3. Underlying PBT up 36% in 2023 (ignores exceptional items).

4. PE ratio of 5.8x (according to my modest spreadsheet).

5. EV:EBITDA of 1.1x (ditto).

6. Dividend yield of 11.2% (includes 'specials').

This is a profitable company (after exceptional items) with strong cash & financial asset balances paying regular and high dividends. It is trading on cheap multiples and is ripe for takeover. It isn't what it used to be but then neither am I.

Where's that BUY button?

Strong upward momentum today. Anyone know why?

Broker upgrades this to 'neutral'. Share price rises 8%. What a day.

Lest we forget, nearly £0.60 of the current share price (according to my estimates) is net cash! Let that sink in for a moment. The EV:EBITDA ratio is almost certainly

The biggest question mark here is the low thermal coal price environment (92.50 now). TGA was 'sale of the century' when the share price was £1.50 and coal prices were 4x the current rates. We all filled our boots and made small fortunes. But now this stock is a definite 'watch'.

What is the economics of the South African operations at low prices? Ditto the newly-acquired Australian operations. And do these economics allow any kind of ongoing dividends? A 10% dividend yield in perpetuity would be great but this isn't guaranteed. I would argue that a double digit dividend yield is necessary to justify holding this stock.

We need to see and review a set of recent financial statements to answer some of these questions. There are also lingering concerns over South African logistics i.e. moving the coal using the crumbling, unreliable, strike-ridden South African rail system. Infrastructure risk gives TGA the occasional kick in the teeth.

I have a good feeling about the company's management team. They are open and they are pursuing diversification (but don't buy on the fluff around Dubai). However, management can't control the Richard Bay thermal coal price. I'm completely out of this stock but look forward to the day when I return.

Both, one or neither?