Member Info for londoner7

Kejolo, I generally agree with your comments, but the impact smaller shareholders can have is in timing. For example shareholders tending their share today have no advantage over shareholders waiting until the 20th April. I would not expect the larger minority shareholders Artemis, Cavendish, etc. to come out before the updates at the end of March. So if you want to play safe, as you put it, why not hold off tendering until then? But there isn't a risk of anyone missing out. If Delek reach their 50% level the bid timeline is extended by 10 days so remaining shareholder still have the opportunity to tender their shares if they don't want to be part of a minority holding. Don't be frightened by the wording in the circular - it's a deliberate tactic, but understandable, Delek need a large number of small shareholders to tender their shares. Hence the 'health warnings' on every page of the circular. Surprised they didn't add a skull and crossbones! In practice there are always a number of shareholders who are off the radar. If Delek succeed, in time these shares will be mopped up and the accounts credited or cheques sent out. Londoner7

Hi Roth, Yes, I'm confused by the conviction that many posters have that it's a done deal. I remember your heads up on Skerryvore. Thanks for that. Regardless of what happens here I'll be watching to see who gets that licence. I know less about HUR than I do about SOU. I took a look a while back and as I recall the oil extraction process is unconventional. I'm afraid I stopped looking at that point. I used to do a scatter gun on interesting plays but the time required to monitor the investment was more than the amount invested warranted. So now I only focus on established plays where I can build up a substantial investment over time which I then watch like a hawk. I'm an electronics engineer but don't go near tech companies and forget first mover advantage. In the mid 90s I was part of a team in Cambridge that developed the ADSL technology for a US company Westell Technology. BT were excited about the technology but spent three years looking at it before moving it forward. I'm sure you've heard of ADSL but I guess you've never heard of Westell Technologies. Later I worked on a location system based on the mobile phone platform. As an engineer It was an exciting and lucrative time. The technology was acquired by a large chip manuafacturer and it's now in use in every smartphone using location. But the investors in the original company got about half of their investment back. As for companies with gas in the ground, AIM is full of them. Most have their moment in the sun. Some fly most don't and I'm incapable of distinguishing between them. I'm always on the look out but focus on productive assets, and measurable cash flow. I think the oil crash is over and we'll work back to the marginal cost of production mid 70s - I don't anticipate a technology reversing an incremental increase - and short of a black swan event (not a basis for investing) I don't expect the spike in oil price many anticipate. All the best, Londoner7

North99, Thanks for the clarification. I hope you make 'a few quid on an improved offer' and good luck with your other investment decisions. I've been watching SOU. Looks like interesting times ahead awaiting clarification on the TE8 result. Guess it comes down to whether the gas shows in TAGI flow. Best, Londoner7

North99, why do you maintain a small holding?

I have no doubt that Ithaca will be taken out and I look to the likes of Artemis and Cavendish to set the price. As a smaller shareholder holding out for the bid process to complete the best way I can play my hand to maximise my investment is not to tender my shares until all possible developments have played out and then review and decide a couple of days before 20th April. As shareholders tender their shares that information is passed to Delek so they have a day to day view on the progress of their bid. Like the larger minority shareholders they will be holding out till late in the process in the hope that nervous or less experienced shareholders tender their shares early. The fragmented natures of the shareholder register means that Delek depend on this. This is one of the few bids where the combined actions of smaller shareholders make a difference. If the tender response is poor my assumption is that Delek will sweeten the terms - 'Blue Horseshoe loves Bluestar Airlines'. If you are in the nervous camp and ready to tender early you are working against my interests so I'd prefer you sold in the market. But that’s just my opinion. There are plenty of posters out there who believe they have certainty on the outcome of the bid who will tell you what to do. Londoner7

NAV is based on an estimate of future production rates and commodity prices. So amongst other things First Energy will have based it on a 30K boepd gross from Stella at a 50:50 oil:gas ratio (I expect a higher oil ratio). On commodity pricing they are weighted towards Futures Strip Pricing because they believe it best represents current market expectations. The Futures Strip pricing scenario predicts an oil price 5 years from now of $61. Honestly, if you based your investment decision on an expectation of $61 in 5 years time you would not be invested in Ithaca in fact you’re unlikely to be invested in the oil sector. Incidentally, the Reserve Evaluator Consensus Pricing scenario has a price expectation of $77 in five years time. Closer to my expectations and more in line with the marginal cost of oil. To determine the value today of future cash flows First Energy calculate a discount rate of 9.6% - 10%. (The lower the number, the greater the value of the company.) In reaching this range they use the beta of ‘comparable companies’ which no doubt includes two highly indebted peer companies in the North Sea, Enquest and Premier Oil, which have been and still are, under considerable market pressure due to their debt load. So IMO this results in a higher beta than is warranted by Ithaca. Another factor in the discount rate is the cost of debt. Ithaca’s cost of debt is substantially due to the 8.25% paid on the $300 bond facility. A facility that Ithaca’s financial officer guided in the Q3 call would be reviewed in 2017 after Stella cash flows are established. Bottom line, First Energy produces a NAV range of C$1.00 – C$2.10 so we’re meant to feel good about an offer of C$1.95. So let’s narrow down the NAV to something which takes my expectations into account. The NAV under the RECP scenario at the 'low' discount rate is C$2.54. What I find very odd is that First Energy put forward a low case and high case of 9.6% and 10.0% respectively for the discount rate, as if it could be determined even close to that level of accuracy, with so many assumptions. For the reasons I outlined above, possible Stella production above nominal guidance, the expectation that the 8.25% debt facility could be refinanced from near term Stella cash flow, and the use of a dodgy comparable beta calculation, I can easily see 1-2% off the discount rate. Based on First Energy’s own numbers this adds between C$0.27 and C$0.54 to the NAV. I now have a NAV between C$2.81 and C$3.04. A bid premium would be in order. A modest 10% takes the NAV to between C$3.09 and C$3.54. Based on my assessment of First Energy’s figures, C$1.95 isn't tempting me to tender my shares! Artemis, Cavendish and others will produce their own assessment and will have 2016 full year financial numbers and an update on Stella to take into account. I have no doubt that Ithaca will be taken out and I look to the likes of

are available on the Ithaca website under a tab Takeover. There is no need for private investors to take or consider any action until the big boys come out. Delek need 50%, we can sit tight and await developments, including the update on Stella in a week or two. Delek are now commited to paying out on >50% acceptance at a minimum of C$1.95. As someone recently pointed out. Put the kettle on and put your feet up until the Stella update. Londoner7

PingPong1, An interesting point on the pricing v the Funeral Payment. Thanks for your other points. Londoner7

PingPong1 or anyone else, What do you think about this new concept? The Guardian piece below covers it well. It seem like a good move targeting a market that they would otherwise not get and able to use their facilities crematorium, vehicles etc outside normal hours so additional costs are the variable costs of labour. The downbeat commentary overshadowed some good numbers, particulary margins in the final quarter and crematorium margins in particular had a boost, although they were already showing signs in the Q3 bond report. Londoner7 An average Dignity funeral would cost about £4,000, at the higher end of the market, McCollum said. However, in late 2016 it launched a direct cremation service, Simplicity Cremations. The service costs from £1,495, where the company collects the deceased from the place of death and takes them directly to the crematorium, before returning the ashes to the bereaved. There is no funeral service. Both David Bowie and the novelist Anita Brookner opted for direct cremations. “It is a very stripped down service,” McCollum said. “Funerals are very traditional and people rely on traditions when they’re bereaved. This is an alternative form of funeral and it’s going to take a long time to be widely adopted but we are responding to a demand.”

A good write up in The Times this morning. Londoner7

Hi PingPong1, I did but sold that lot on Friday's pop. Still a core holding so a painful day, but it isn't my first and it won't be the last. On efficiency, it's easy to work out margins - they are up on 2015 on lower comparative volumes - and delving into the detail with the help of a spreadsheet I developed a few years back I note H2 crematorium unit costs fell 3.3% after H1 costs rose 8.1% against a tough 2015 H1 comparison. So I see a tight ship, apart from central costs. Bottom line: I topped up at the close. Londoner7

Down on revenue - perhaps the 53rd week post xmas isn't a busy time - but OP and EPS ahead. Margins across the board up on last year. But the drop in market share is an issue - good to know management are watching it (hope they do more than that) - and the commentary was terrible. The market did not like it at all. But as they say 2017 has started well and good numbers expected at the Q1. We'll see. Londoner7

Berenberg is one of the few analysts to make their research publically available. I find the detail of their analysis very useful in forming my own opinion. Other analysts keep a lower profile least they embarrass themselves. But dig a little and it's illuminating. Comment this morning: Peel Hunt said given its healthy growth profile it has reiterated a 'buy' rating on the stock. "The full-year results were once again a bit better than expected with the integration of Hope, as well as the organic operational performance all going well," the broker said. "Net debt has improved a little faster than expected and the group remains confident it can continue to find investment opportunities over the medium term." Note the comment 'a bit better than expected'. This from Investor's Chronicle following the interims last July: Analysts at Peel Hunt are forecasting adjusted pre-tax profits of £49m and EPS of 3p for the year to December 2016 (from £35m and 2.7p in 2015). So a 16% beat on a 3.0p EPS forecast last July is 'a bit better than expected' This from Numis this morning: Numis was also positive on the results, saying full year pre-tax profit was some 2% ahead of its estimates. The broker reiterated an 'add' rating and a target price of 82p This from IC in July 2015 Analysts at Numis have upgraded their forecasts and now expect full-year pre-tax profits of £30m and EPS of 2.2p (from £21m and 1.5p in 2014). Remember 2015 EPS was 2.68p so a 22% miss by Numis. Even after the interims they don't have a clue. Only on the Nov update having been told that expectations are ahead of broker forecasts do they adjust them so they can claim '2% ahead of its estimates' Who pays for this research? Fund managers who can't figure it out for themselves so are happy to charge their clients for some other clown to have a stab. Rant over! Londoner7

I agree great results down to an excellent team. With adjusted EPS beating forecasts again, it's worth remembering that this time last year analysts were looking for 3.0p EPS with Hope expected to be before half year - Hope completion was late contributing only 5 months rather than the expected 7 months. After the Nov update analysts raised the forecast to 3.3p. The final outcome was 3.49p. Cash flows are good with net debt some £20m below forecasts, and a beneficial reduction in interest of some £500K. The tone of the analysts call was great. Management clearly has lots of ideas for operational improvements in spite of the fantastic organic growth achieved in 2016, EBIT up 28% on revenue up 5%. My forecast for 2017 has firmed on the higher side of my pre-results range, and I’ve no doubt Breedon will go on to beat it, again! We got the expected update on dividend policy and a prospective move to the main market, which was no change but under review. Perhaps it's the cynic in me but the comment that the larger shareholders are happy with the AIM listing caught my eye. Of course they are when they get special treatment in share placing on big acquisitions not available to smaller shareholders and not an option on the main market. Looks like we've (knock, knock) cleared the 75p barrier. Or as Michael Caine might put it, "they've only blown the bloody doors off" Londoner7

Correction: Berenberg upgrade was to £319m not £315m so I guess they include 53rd week, which I discounted for 2015 comparison. On that basis I'm looking for £321m rev for 53 weeks, just above Berenberg, and a more comfortable beat on 2015 EBIT. A beneficial tax number last year leaves EPS closer to flat. Londoner7

Gary, During a recent call the indication from the board was that a dividend was being considered along your timeframe, the next year or two. I sensed some board members were in favour and others were not. Over recent years Breedon has demonstarted excellent growth through their roll-up strategy. Barr being a good example. Hope is a bit more than a roll-up, but an excellent fit for the business offering the synergies spogbat describes in his informed posts. So I'd like to see a continuation of using free cash flows to acquire suitable targets and maintain a comfortable level of debt, as it gears earnings. But I like the discipline that paying a small dividend (1-2%) instills in management. I wouldn't expect a larger dividend while the roll-up strategy still offers such good returns. I would be surprised if there isn't a comment on dividend and a proposed move to the main market in Wednesday's update. Londoner7

Nice pop on this morming's update from Berenberg but I'm suprised by the numbers and commentary. Commentary on the market seems to ignore the facts from ONS data. 2016 mortality ended within 1% of 2015, and numbers for 2017 indicate a significant jump in Q1 on 2016 - volatility continues. The upgrade to 2016 revenues to £315m assumes a 14% jump in Q4 which seems high to me but -1% on EBIT suggests a drop in margins. I'm expecting less on revenue but more on margin with EBIT slightly ahead on 2016. If Berenberg are right on revenue and I'm right on margin then the 2017 Q1 EBIT number will surge. Looking forward to Wed numbers. Londoner7

spogbat, A point you made on synergies just reminded me that in a call Breedon were asked about the possible benefits of as you say supplying Hope cement into Breedon and Breedon agg into Hope. They said that the £10m synergies they had identified DIDN'T include those possible saving because at the time Breedon didn't have sufficient insight into Hope's business to make that assessment. As I recall they said something along the lines of maintaining current supplier agreements but if it made business sense to switch supply they would. Moving from the base case can only be good for profits - beyond the £10m they originaly identified. Londoner7

spogbat, A point you made on synergies just reminded me that in a call Breedon were asked about the possible benefits of as you say supplying Hope cement into Breedon and Breedon agg into Hope. They said that the £10m synergies they had identified DIDN'T include those possible saving because at the time Breedon didn't have sufficient insight into Hope's business to make that assessment. As I recall they said something along the lines of maintaining current supplier agreements but if it made business sense to switch supply they would. Moving from the base case can only be good for profits - beyond the £10m they originaly identified. Londoner7

Thanks for the clarification on Tarmac. Interesting!