Member Info for LorenzoLynch

Pompey,

I’m not suggesting anything.

I just analysed the company and shared my thoughts, because I’d like to encourage a balanced discussion and I’d like to learn more about the company. I think it’s a relatively complicated company to evaluate, so I imagine both myself and others have overlooked certain things. I’d like to establish the former. Imo, the earnings are nowhere near as simple, or as attractive, as they seem at a glance.

I think there’s an opportunity here in the long-term, but I also think the market is being a bit too forward-looking with the valuation, but that’s obviously subjective.

I expect a regression in headline earnings, and I think that will shock the market in a negative way (dilution, increases in taxation and the end of the ‘reversal of impairments’.

What are your views?

Bold,

My understanding is that it’s a 12% chance of finding MULTI TRILLION CUBIC FEET of gas at MOU-5, with PRD estimating a 50% chance of commercial success.

For me personally, that’s a quite possibly a 12% chance of retirement at 31, and a 50% chance of making some decent money.

I like those odds.

All imho. Do your own research.

Part 2:

Personally, I think it’s somewhere around fair value, with all things considered.

All in my honest opinion. Do your own research.

(Genius) Mac,

“I am half cut on Beluga and even I can see that last year the company made $45 before tax!!”

I’ll use fairly round numbers here, because I’m a busy man. Moreover, I won’t argue the toss on impairment by losses (which I think will be much higher in future; it was c.£10m higher in FY22).

I will strip out the warrant revaluation, non-cash impairment reversal and Forex losses etc as I want to understand the underlying earnings of the business.

Revenue = $151.5m

Less cost of sales = $82m

Less impairment on property etc = $3.5m

Less general, admin and expected credit losses = $15m

My adjusted op costs = $100.5m

My adjusted underlying operating profit = $50m

Less finance expense of $31.5m (this should obviously fall each year moving forward, if they pay down the debt each year).

= $18.5m PBT

Assuming a tax rate of say, 20%, moving forward = $14.8m net profit

In the annual report they stated $44.93m PBT and $42m net profit. I don’t think this is an accurate reflection of the underlying earnings moving forward.

Do you think they’ll pay c.6.5% tax every year in future?… because I certainly don’t.

I also don’t expect an impairment benefit of $33m every year (and importantly, this can’t be used to pay down debt to my knowledge).

Note, in FY22, there was a ‘reversal of impairment’ of just under $21m… and PBT was still only $27m with that non-cash benefit… if we use your logic and fail to adjust the earnings ourselves.

On the contrary, cash generation from operations was exceptional in my opinion, but this doesn’t tell the whole story as depreciation is a very real cost for a company like this.

While they’re paying down debt, it prevents them from investing in the fleet etc. This lack of investment, I believe, will result in a backlog, so just when the debt has been reduced, I think there will be a need to invest heavily in replacement capex. According to GMS (not me; the idiot), this pent-up need for replacement capex is accumulating at a rate of, say, $24m per annum, if we take their depreciation figures at face value (of course there are better ways to forecast this, but it’s beyond my double-digit IQ).

Lastly, those finance expenses aren’t going to disappear overnight. It’s going to take years, not months, to pay down the debt… and the high level of debt inherently introduces risk to the company (for example, in the event of a black swan, like GMS being responsible for a environmental disaster… or a collapse in oil prices… and so on).

Oh, then we likely need to adjust earnings down on an EPS basis to the tune of c.8% to account for warrant dilution.

… or we could just go full caveman like yourself and shout ‘$45m profit before tax’ from the rooftops whilst ridiculing others who have a view which doesn’t align with your desire for GMS’ share price to rally.

Personally, I think it’s somewhere around fair

Artybav,

Good find!

It will be interesting seeing how many those new shareholders are going to hold onto their shares. It looks like quite a few are selling atm (as expected).

Any idea how many of these ‘dividends’ are expecting to take place in the coming months?

Then I suspect there will be the warrant shares to churn through…

…Then they might sell off the remaining shares which they have announced they’re going to hold onto for now (which makes sense, as the SP would tank if they said “we’re going to sell or distribute every share”).

I expect there to be a lot of selling pressure here in the coming months, coupled with a c.8% dilution, from the aforementioned warrants.

Trendz,

Thank you for the info.

My estimation of FCF last year is c.£26m vs c.£10m in the prior year, even though earnings were higher in the prior year? Surely I’ve missed something here.

Where did you get those estimates from? I just checked Eurocell’s website, and the estimates there are lower, with underlying net profit (assuming 25% tax) at:

• FY24: £15.15m

• FY25: £18.5m

However, if we factor in a £3m hit to PBT next year, the estimate of underlying net profit would be £16.28m I believe.

So I agree on the p/e of around 10 now, but expect it to around 9.4 at the end of next year, if the company trades in line with expectations.

Continuation…

I actually missed that they claim to be trading in line with market expectations (on an underlying basis, before tax).

Anybody know exactly what these expectations are please?

Myself and my dad were invested in Eurocell for a while, and we both made a nice profit after selling near the recent peak (my final sales were at £1.70).

What caused us to sell?

In short, the capital allocation.

It made no sense to us why the £15m buyback continued as the share price rallied and the trailing p/e found itself around in excess of 20.

Moreover, how can a company realistically pay for a £15m buyback and over £10m in dividends in a year, with earnings of c.£9.6m?

Moreover, headwinds were evidently en route.

It looked like poor management to us; as if they were gambling on share price appreciation due to falling interest rates.

We think it would have been more prudent for them to reduce borrowings (thus enhancing net margins) and/or invest in growing the company whilst driving cost efficiencies.

Each to their own however. Just something to remain aware of imo.

I have no idea where earnings are heading, but today’s update seemed downbeat, vague and elusive.

The £3m hit isn’t chicken feed either imo; just shy of a third of last year’s net income according to Stockopedia and the numbers on this platform. Furthermore, hasn’t revenue fallen, not increased y-o-y?

All in my honest opinion, do your own research.

The company seems to have a lot of potential though imo, if management start to invest/spend wisely.

Runthoseprofits,

I dug much deeper into GMS last night and noticed that they basically paid no tax (well, very little, to be exact) last year and they benefited from a huge reverse impairment (non-cash), so I don’t think that last year’s net profit is an accurate indication of future earnings in the short and medium term.

I still think the stock will generate decent returns moving forward for shareholders, but I don’t expect the same kind of fireworks as some investors.

I’ll be sitting in the sidelines for now, but good luck to you all.

I obviously can’t predict where this is heading, but I think it will continue to rally for now. I do, however, expect a pull back when the warrants are executed (I can’t think of any reason why they won’t be, personally) and if net profit doesn’t benefit from paying almost no tax and/or from no reverse impairment.

To those of you who found GMS before the turnaround, well done. That must have took some serious bottle, and your returns are well deserved!

All in my honest opinion. I’ll be keeping a close eye out for any buying opportunities.

To conclude, I think the SP will be much higher in 2-3 years than it is now, but I also think there will be better opportunities for me to open a position.

Thank you both,

It looks like Seafox issued 150m of their shares to shareholders last time around (the SP briefly fell from c.17p to c.15p at this time), but they retained 100m of them.

Obviously I have no idea what they’ll do next time, unless they sell all of their existing shares and those from the warrants (surely they’ll execute, because they’re at such a huge discount to the share price?), the overhang should be less severe and should be briefer (if at all).

That said, what still bothers me is that at any point during the next 6 or so months, they can effectively cause me to lose 8% of my holding on any given day.

Point taken on the paying down of the debt; this is where I also see the upside coming from.

Any idea if profit margins are similar on wind farms for them? Just trying to predict how the company will perform in the event of an oil price collapse.

These were my only concerns during my initial research.

Was considering a small holding here at 15p, but decided against it when I saw the huge number of outstanding warrants.

I’m not overly familiar with them, and need to continue my research, but my understanding is that these warrants will result in a substantial amount of dilution and then (almost certainly) a huge overhang, as those shares are sold off by the lender who executes them?

If somebody could advise on this situation or give their view, it would be much appreciated.

As warrants are new to me, I might of course be viewing this situation incorrectly.

Bold,

So now you’ve been caught out, you’re selling your imaginary shares?

Your (lack of) contribution, will not be missed.

James,

We all share disdain for the dilution, but what was the alternative?

If MOU-1 was tested straight away and was a duster, the company could have gone under… at the very least, the dilution would have been extreme.

I’d rather have 40% of some serious money than 100% of nothing.

It’s called hedging your bets.

PG owns so many shares that his primary concern was always going to be survival of the company.

We have many opportunities to generate some serious upside now.

I’d much rather be in this position, than to have simply gambled on MOU-1…. We’re not all traders/gamblers like yourself mate.

So the broker ‘Citi’ are forecasting a 3% decrease in their ‘consensus estimate’ due to consumer weakness (usually a cyclical/short-term matter), and consequently value the company at 36.67% less than they did previously?

Not sure I’m aware of this form of this mystical form of mathematics…

Could help an institution or two buy in on the cheap though… hypothetically speaking, of course. Surely they won’t have any friends in The City.

So the broker ‘Citi’ are forecasting a 3% decrease in their ‘consensus estimate’ due to consumer weakness (usually a cyclical/short-term matter), and consequently value the company at 36.67% less than they did previously?

Not sure I’m aware of this form of this mystical form of mathematics…

Could help an institution or two buy in on the cheap though… hypothetically speaking, of course. I’m sure they won’t have any friends in The City.

Porters & Bold,

“get a grip lorenzo with conspiracy theories i have sharesin this **** show i am invested. but ramping costs people money and needs balanced. but you want an echo chamber and that's good for nobody”.

If you think a company is a *hit show, why would you invest in it, and not deploy your capital in a superior company? The fact that you are both invested in the company proves that you are in fact bullish on PRD, and expect it to be a profitable venture. Actions speak much louder than words.

This, finally, answers my question, so thank you both.

Your (poorly concealed) agendas are to instil fear into shareholders, so that the share price falls, thus allowing you to purchase shares on the cheap. It’s as clear as day.

I’ll give Anti-venom some credit though. At least he avoided (wisely) evaded/ignored my question, whereas you two ended up straight in the net.

Bold,

You and Porters always seem to post within minutes of each other, oddly… and have a very similar demeanour… very suspect.

I don’t usually use the TG group, so I have no idea what you’re talking about there.

I just asked you to prove that you are a genuine shareholder, and as anticipated, you couldn’t, because you don’t actually own any shares.

I can’t even imagine what it takes for a grown man to pretend that he owns ‘200 k’ shares in a company online… real clown behaviour.

Bold,

200k shares is much more than me, so it sounds like you’re rather bullish to me.

Any chance of you providing some evidence of your holding in the telegram group please, including the date of your purchase?

It would really evidence your sincerity.

Anti-venom,

Correct, but you’ve posted on here countless times in the past.

Ok, so once again you’ve explained why you’re not interested in investing in PRD, but you haven’t answered my question:

Why are you so concerned with PRD? And why are you again posting on this BB?

What motivates you to do this?

This shouldn’t be difficult to answer. I follow the board, because I’m invested, and I’m invested due to the attractive risk vs reward on offer.

My understanding is that swabbing is successful in achieving a flow rate on approximately 70% of the occasions it is used, so I’m not ruling MOU-3 out just yet.

Porters,

Whether some people are ramping or not is irrelevant.

There are people ramping on the bulletin boards of almost every stock on the entire market, so why have you chosen to be so concerned with Predator Oil and Gas?

It’s a very simple and direct question.

Why not post on here? Well, for the same reason you don’t post on every BB on LSE… because it would be a waste of time.

Therefore, it is clear that you have an agenda which motivates you post on here. What is that agenda/incentive?