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I’m as frustrated as the rest of you, but I think the claims of PG and Lonny not having shareholder’s best interests in mind are wide of the mark… they are shareholders, and quite sizeable ones; especially the former
I’m hoping that somebody with a wealth of experience in this sort of situation can explain the reasons for this in greater detail
I see this as a cause for frustration, but not a cause for concern. What matters is shareholder returns, not transparency. Negotiation supersedes comms for me
Raggedtp,
I always avoid investment trusts, but it sounds like you’ve found some bargains. I’ll take a look. Thank you.
I was a shareholder until the offer came in. My valuation of SCS is (rounded down slightly to account for psychological resistance at round numbers) £3.50 per share. That said, this is based on several assumptions, and is a fair value figure which I would expect to achieve upon economic recovery. While I don’t have a crystal ball, I think we’re approximately 2 years away from that.
That’s 30% upside in 2 years; a satisfactory return for the buyers, however, when opportunity cost is taken into consideration (there is much more upside elsewhere imo) and the return is adjusted to account for risk, for me, selling my shares was an absolute no-brainer.
SCS is an exceptional company imo, but I think the offer was equally as exceptional.
Any suggestions on where to reinvest this cash? I’m far too concentrated to redistribute into my remaining holdings.
What’s more efficient, paying down debt amid rising or sustained higher interest rates, or paying dividends, which requires the company to pay dividend tax AND interest on borrowings? It’s this efficient and wise financial management that is causing the turnaround in CARD. It wasn’t so long ago that the company was paying a huge dividend, whilst being burdened with huge debts and the share price was nose-diving. You can’t have it all. If all you care about is a dividend, there are plenty of options out there for you. In 2020, when I started investing in CARD, it was 30p a share…. The share price is c.250% higher than that today, due to better financial management…. But yeah, I’m very disappointed because I haven’t been paid a dividend. I really don’t understand the logic (or lack thereof) at all. I also wouldn’t be paying a dividend. Get your calculator out and work out what this stock would/will be worth when debt free AND paying a dividend AND on a p/e of 12 (or more) AND inflation has subsided AND earnings have continued on their upward trajectory due to CF benefiting from investment strategy AND the economic outlook is more positive. That’s what I’m focusing on
I was expecting some estimates on volumes of gas for the sands we discovered in the MOU-3 and MOU-4 drills. Can’t say I’ve got much value from the CPR, due to my lack of understanding. Seems to me as though it’s primarily stating what volumes are required for CNG development, but with no real reference to the potential upside at Guercif?
Strictly,
I think with TW trading so closely to NAV per share, there’s some serious downside risk if the housing market takes a turn for the worst. Conversely, some alternatives are trading at a significant discount to NAV per share. I think those stocks are a much safer place for my money, personally.
In an economic climate like this, mitigating risk is always my priority. The dust seems to have settled recently, but I’m not counting my chickens just yet.
Accipiter,
That is almost certainly a factor. Boring stocks never reach silly P/E ratios, yet sexy stocks often do. Lots of clueless and emotional investors out there. Also, tipsters play a big role in this. I imagine MOON has been tipped in several investing articles
FlyingDave,
Can you please refer me to the RNS which stated that PRD was fully funded for ‘extended rigless testing’? I can’t recall reading this and I’ve just been through the last few RNS’
BillyRayVal,
I already appreciate your posts and you seem like a very intelligent man, but I must say, I think putting 100% of a SIPP into one stock (let alone a stock in this sector) is one of the craziest things I’ve heard from an investor. I’ve read several books about Warren Buffett, including one which summarised all of B.H’s annual shareholder meetings and I have never heard the man say anything that suggests investing 100% of your capital into something would be a remotely good idea. According to W.B, investing rule #1, is that you should avoid losing money. Rule #2 is ‘never forget rule #1’. Even going all-in on a company like Apple is high-risk imo; and that’s a company with an exceptional moat, global exposure, lots of cash, addictive products & services etc.
While Buffett, like myself, does not believe that diversification alone reduces risk (it mostly just reduces volatility), his focus is always on ensuring ‘security of principle’. With PRD, the downside is almost limitless imo (I haven’t calculated the absolute downside here), so it appears to fail this test.
I can’t recall the name of the book I’m about to mention now, but it’s a fairly well-known investing book which makes a lot of references to W.B. It contained a study on diversification and potential returns. The ‘sweet spot’ was around 6-8 stocks. Below 6 saw a significant increases in risk. Above 8 saw almost no decrease in risk for each additional stock.
It’s obviously up to you what you do with your money. This is not financial advice. I’m just explaining why I typically own 6-8 stocks. Humans are not infallible. Even with all the confidence in the world, with investing, I think it is prudent to always exercise some level of caution.
I have every faith in PRD btw, but risk (especially in this industry imo), as I understand it, can only be mitigated to a certain degree.
Olderandwiser,
I can’t speak for PG, but taking into consideration what he’s said in previous interviews, I think he’ll drill MOU-5, as a success case here would result in us receiving a a much greater sum for the sale of the license area (perhaps double… not a bad return for 8-10 days drill and some testing). An MOU-5 success would also likely attract bigger players as the theory that the whole license area is gas charged becomes much more plausible. As for testing for flow rates, I think this will depend on what discount buyers would require for a sale based solely on volume (I know I’d want a sizeable discount if I was going to take on that risk).
What’s the quickest and easiest way to monetise the whole license area? PRD doing placings, drills and using cash flow from a CNG operation, or a big E & P firm coming in, drilling and testing at pace, with us receiving royalties from them? For me, the latter is a win-win situation, and enables PG to crack on in T & T. It’s certainly what I’m hoping for.
All in my honest opinion.
No experience investing in this industry, but this is the likeliest scenario imo.
Debsjack,
While your question is addressed to Strictly, I must say that this often is on my mind. The British housing market, to me, seems like it’s in a never-ending bubble. I think it’s a cultural thing tbh. It’s simply where British people like to park their money… for now. FTSE stagnation is probably partly caused by this. In China and Italy, they typically spend a lot on fashion. In Singapore, investing is very prevalent (according to what I’ve read). The list goes on.
Where I think things will change from here onwards, is simply due to mortgage rates increasing. This isn’t just going to have an impact in the short-term, it will also suppress prices in the medium-term imo. That said, there will be an opportunity for extra coin to be made for HBs when interest rates start to come down again. As is the case with stocks in any given industry; there will be times to buy, and times to sell. Timing is key, imo. For now, my intention is simply to hold for the recovery to fair value, but that’s because I’m a contrarian. As for house prices increasing in real terms… well, that’s an incredibly complicated economic matter, but the question to ask is simple: where will the surplus wealth come from? Artificial intelligence could do it eventually, as other goods and services will become cheaper, but then you have unemployment on the other side of that equation. There are many other things to consider, of course: corporation tax, labour costs, material costs, stamp duty, the RDT, skilled (and well-paid) immigrants arriving here, HMO’s, the rise of alternative living etc. The number of variables to consider are seemingly infinite.
Nigel Haemorrhoid Goblin,
In other words, you don’t have the nuts (risk appetite) to invest prior to the completion of testing? That’s understandable. Personally, I’m glad I was loading up at 5p-6p, as I think the reward for taking such a risk could be monumental. Reckon you’ll get a good entry if the Guercif results are stellar? Good luck to you, but I can’t imagine there will be much sales volume if that materialises. That said, in a success case, maybe Greasy Fred will sell you his ‘free’ shares for 25p a pop, assuming his price target doesn’t move again?
All imho. DYOR.
This is why I hedged my bets by having skin in the game, whilst being able to average down in the event of capitulation. This should be a lesson of humility to all, not just the bears, as the inflation data could have been very different today. Nobody can time the market to absolute perfection. The full affects of rising rates haven’t been felt yet, so I think it’s a bit premature to assume that it’s only sunshine and rainbows ahead, but I can see less potential downside in HB’s than I did previously, that’s for sure
Myself and my friend (also invested here) were starting to have doubts about the success of MOU-4 last night, but we agreed that even if gas shows were likely in the MOU Fan alone, we would have been content. It was a glance over GRH’s and Keith’s recent posts that alleviated our concerns. We were staggered at the level of confidence both of them had. Truly unwavering. In contrast with what I said yesterday, it is now my opinion that the potential upside here (especially realistic upside) has increased significantly, and risk has been greatly reduced during 2023. I’m in utter disbelief at what appears to me to be a monumental difference in share price and potential value. I’ve never seen anything like it. I genuinely just questioned whether I was actually awake or still dreaming.
Do your own research and be aware of the risks, as always
Watching,
De-ramping is never a concern for me. In fact, I welcome it as I like to see my stocks being heavily scrutinised, just in case I have missed something, and I love an opportunity to top-up (although I’m too heavy here as it is, so I’m sitting on my hands, for now). I am, however, let’s say, rather suspicious about what occurred on Monday in regards to the SP
… quite essential characteristics when it comes to investing, if you want to be successful.
If the RNS stated that there were gas shows at MOU-4, would that mean that we’re definitely heading to a £10+ per share special dividend? As it didn’t, does that mean that we don’t have any gas that will flow commercially in the entire licence area? We simply do not know what resources we have, but we should start to get a good idea soon. Either take the risk, or don’t, it’s really that simple. If any of you are aware of any risk-free potential 100-baggers, please enlighten me.
I can’t recall any of the alleged ‘rampers’ on here saying that this is risk-free venture. On the balance of probability, I’m more than happy to hold onto my shares, and I wasn’t going to sell at c.15p, so it doesn’t bother me in the slightest that we’re around 10p now. The reality is quite simple imo: POTENTIALLY, there is huge upside here. In the 2 years I’ve been invested here, that hasn’t changed. Not even for a minute. Likewise, imv there has always been a significant level of risk, due to the nature of this industry, and that is, imo, reflected in the market cap.
In my opinion (which has little value to me, let alone anybody else, due to my lack of knowledge in this field), risk appears to have fallen since I first invested, whereas the potential upside has not. I think it’s pointless to speculate too much in either direction at this stage, although theoretical valuations are essential, otherwise how can you balance risk vs reward?
As for the RNS, I seem to have a different interpretation to most on here. Could it have been more informative? Probably, but I think a lot of people are overlooking the information that was released.
Lastly, I must ask, are any of you who speak with such certainty risking 80%+ of your net worth shorting PRD? And thank you for showing so much concern in regards to my financial affairs and the finances of others, but a bank transfer would be more appreciated, and certainly much more useful.
Thank you all for your contributions.
Onwards and upwards, I hope.
KeithOz,
Fantastic post. Clear, concise and incredibly useful. Thank you.
I don’t want to get ahead of myself here, but I’m new to this game (always said I’d never touch an exploration company, but risk vs reward here was too exceptional to ignore), so there’s a question I’d like to ask yourself or somebody with similar experience in this field:
If, for example, a sale is agreed at £5.50 per share + 10% royalties for the remainder for the entire licence area. Assuming that a £5 special dividend is announced, what could we likely expect the share price to do in this instance? I wouldn’t know where to start valuing PRD in such a situation, but I’m wondering if the market is typically exuberant when deals like this are struck, or if such royalties are barely priced in (say, £6.50 per share). I know this is impossible to answer with accuracy, but I’m assuming either yourself or somebody else on here has witnessed something similar take place over the years
DarkEnergy,
Bellway accounts for 11% of my portfolio and Redrow accounts for 9% of it. I’m 5% in the red on BWY and 7% in the red on Redrow. I’ll be averaging down along the way, with room for me to increase my holding in each of them by 50%. I’ll be selling them both at a p/e of 11 on underlying earnings, once earnings have recovered. Well, that’s the plan, but many other factors will determine exactly when I sell. On reflection, I should have waited a bit longer to buy so aggressively, but it’s easier said than done and the lower these go, the more money I’ll eventually make. I like win-win situations. How about yourself?
FFO,
There are a lot of Venezuelans who would disagree with your view on cash in a hyper-inflationary enviroment, but yes, this isn’t relevant here, I was just giving an extreme example. Commodities and precious metals are the best assets to own in such a crisis. With land, you can sell it for x amount of the new currency, for example, gold. The relative value of land, remains… with cash, it doesn’t. A benefit of having a strong land bank is that as land prices increase during the next housing cycle, certain housebuilders won’t need to buy at those elevated prices. Personally, I’d like to see my HB’s convert a significant portion of that land bank into cash once the housing market is on the rise again.
20% of my portfolio is HB’s, so I’m in full agreement with you on the robin’s analogy. I understand what you’re saying on the cash flow front. Like Buffett, I also only invest when the upside is incredibly obvious. I think where me and you disagree, is that I see BWY’s surplus land bank as future cash flow. I’d rather own a company that only has to worry about developing houses, then own a company that needs to buy land and then develop. Balance is key though
Strictly & FFO,
I just took a much closer look at the inventories of both PSN and BWY. It’s an interesting read. Most of the inventory for both companies is simply land, as you pointed out FFO. The value of PSN’s ‘work in progress’ equates to less than 4 months of revenue by my reckoning