Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
wyndum. yes, as a fire sale, i would have to agree. the value of all its assets would not raise much past £120m...but lets look at bae and their £7bn debt of bab***** and their £800m debt. if they were loss making, how much do you think their assets would raise in a fire sale...not enough to cover debt i would wager.
this is a growing company and although they have missed some very optimistic promises, we must not lose sight of the fact that they started on the cusp of covid. even profitable mature companies suffered let alone a fresh faced start up minow.
the valuation should reglect prospective earning potential. given the growth pattern, profits should be forthcoming by early 2025. analysts are, i am quite sure, poised to write good things about hw but as ever, its all about timing...something i have got disastrously wrong with hw....and i will stay with it as i feel sure i can see a few daffodils poking above the heavy snowfall.
What is the value of HW.
Given its current mkt cap of just over £20m, is this fair value?
The company, in reality, is just starting its fourth year of operations.
The first year, purchase of 4 assets from bankruptcy (yes took 2 years)...low cost
Second year, revenues of around £25m
Third year revenues around £100m
Fourth year revenues around £200m.
Order book of £1bn with current bids (for 2023/4 business) in place of at least another £1bn (my guesstimate)
Assets. IM worth north of £50m, subject to Febs outcome.
Assets. Significant refurbishment of yards both to the fixed components eg lock gates , buildings etc plus huge investment in state of the art, high residual value machinery. The total cost of which is probably north of £150m when the current £77m programme is complete. Yes, they only own Appledore freehold but they own the high value machinery.
Demand in its target industries is without doubt, forecast to rise significantly in the next decade. This ranges from Renewable (net zero). Defence (smallest navy since Henry viii amid growing global tension). Cruise (major operators posting large share price increase on rapid post covid growth). Energy (new oil/gas licences issued in North sea first time in years) & Nuclear investment likely to grow as need for fossil alternative.
Finance. Confirmed government backing for significant debt facility which provides adequate funding in the short to medium term.
Employment. Significant senior maritime executives hired in past 12 months. Growing apprenticeship scheme firmly backed by government.
Climate. The UK (plus others) are forcing contractors to price in the climate cost of contracts. Very positive for HW given its geographical position to demand plus its green credentials.
At £20m valuation, where is the risk...yes, there is always a risk but at £20m given the above, it would appear not just negligible but almost imperceptible.
To buy a business which is clearly growing, has well defined objectives and opportunities, has low debt (£c95m currently) vs asset value. Significant order book. State of the art facilities.
Strong political backing....would cost north of £100m in my book.
Of course, thats just my opinion.
In the last two years, asian shipbuilders/fabricaters have been acquiring northern hemisphere businesses/capacity.
China, Korea, Japan have dominated shipbuilding in the last 50 years. Two factors are changing that. Firstly, they are all experiencing a huge decline in working age population. Secondly and most importantly, developed governments moving towards pricing of climate in contract negotiations. This is very important as the southern hemisphere producers are very high in fossil fuel energy generation and shipping costs over large distances..
All just an opinion
At the weekend, the financial press will start releasing their predictions for 2024. Stock pickers will of course focus on large caps but a few will look further down the scale. With interest rates likely to decline, the focus will righly turn to the oversold domestic, debt ladened companies.
With a strong order book and funding seemingly sorted, this oversold gem may well come in for a mention.
If i were short of a company with a sub £20m market cap...which has £1bn order book, an asset (IM) worth c£50m once the legal dispute is put to bed and strong government approval for future funding...i might question just how much more i could squeeze out on the downside. HW has a future. HW will get to profitability. In which case, sub £20 mc looks too cheap.
For god sakes, give it a rest with the negativity. Ministerial permission is granted following numerous minsterial visits to site.
Funding is going ahead with a very high degree of certainty. Lowering costs and removing the need for any further dilution.
The current cash position statement is very encouraging as all previous concerns have revolved around financial difficulties of an immediate nature. Clearly, revenues are beginning to flow.
With today's US inflation beating expectations (following the UK) the stage is set for rate cuts by the spring, globally. The only fly in the ointment is The Red Sea issue. That aside, bond yields have collapsed. The 15 year Gilt yield peaked at 5% in the late autumn and has since dropped to 3.85%. The change came on Oct 27th. Since then, the UK FTSE real estate index has jumped 20% to a six month high as has the much maligned Aim index. These typically are highly geared UK companies that have been in the doldrums during the two year rate lift. They are now back in the limelight. Another index in focus is Aerospace and Defence. This finished at another all time high today. It started 2023 at 5200 and closed at 8544.
Given the significant market rotation towards high debt, UK focused companies, HW have been well left behind. We all know why.
It looks as though we have, as yet, untapped upward inertia should the news of funding come through as hoped for. With £150m 2024 revenues already in the bag, any news induced rally should be like pushing on an open door.
Wishing you all a very happy xmas and a VERY prosperous new year!
Stokey, yes mem and arts are wide in spectrum. I am not suggesting they have done anything wrong in attempting a new venture, just we are supposed to take it without the case being put. Four years of significant losses is down to me and my stupidity...i get that. But i still want the UK to give our young people a chance a real employment not just become baristas...hence i am still here believing in levelling up and a return to manufacturing
If a company wishes to navigate a channel of busuness, totally alien to its mem. and arts. focus, one would assume that the management will make a solid business case to shareholders. Investment costings, revenue expectations and risk analysis at the very least, to show the level of detail management had taken into consideration.
I am not sure if any consideration has been given to shareholders in my four years of investment.
Anyone investing in a company enters into a partnership with the BoD's. The investor takes the information made avaliable on existing and prospective revenues. Estimates the potential profitability and makes his investment given all that information.
When the expected revenues fall short, the investor is faced with losses due to market reaction (sell off) or take the excuse of unforseen difficulties at face value...and stay with it...as many of us have done on several dissapointing occasions.
Now that the company have devided to plough a new field, one completely outside of the contract with existing shareholders, an investor briefing with the afore mentioned information would be expected...but no. Suck it up
In the last 6 weeks, energy prices have dropped 30%. Thats oil and gas. Despite OPECs attempts to shore up the price, outputs from the US, Canada and Brazil are sharply higher. Demand is failing to meet expectations.
European gas storage is still around 94% and the French nuclear energy programme back to near normal after last winters problems.
It is possible to see analysts forecasting inflation below 2% as early as March next year. The decline in gas and electricity prices are starting to impact fertiliser prices. Lower transport and fertilisers will help reverse food inflation further.
Pressure is building on central banks as economic demand, a lag indicator following rate rises, is showing signs of weakness.
JPMorgan have upgraded the aerospace and defence sector today. The index for this sector hitting a fresh all time high.
Whilst the larger degree of optimism is aimed at aerospace expansion, they see the geo-political instability driving higher spending by European governments for the next 5-10 years.
LSE03...To back up your post, we should not forget the words of Samuel Huntington, the American political scientist and author of Clash of Civilisations. He stared that...
" The west won ultimate peace (WW11) not by superiority of ideas, values and religion...but rather by its superiority of applying organised violence"
Stokey. I think it only applies to advising institutions to ensure insider dealings are controlled.
This was not required pre big bang as we had a single capicity system (now dual capacity) whereby the market maker, previously called jobbers, were totally independent wholsalers of stock with no analytical or broking capabilities. So we had jobbers, brokers and merchant banks. All performing a separate role with no overlap of function. Bug bang saw all these rolls combined in the new super investment banks. In my mind, the biggest failure of a system that had worked well for a century.
Last Friday, Deutsche Bank issued a research note raising its ratings on Bae and Rolls Royce based on the heightened global demand in defence.
To back this up, this week also saw the annual Armed Conflict Survey by the Internation Institute for Strategic Studies (based in London) . The result was the worst outcome for peace in 30 years with it recording 183 armed conflicts. Fatalities have risen 14% ( pre Gaza!) and violent events by 28%. It would appear the flexing of power by authoritarian states of Russia, China, Iran, Turkey and The Gulf States is behind the surge in localised violence. It is without doubt this report gives warning to the developed west, not to rest on its laurels.
The report leads one to an obvious conclusion, defence spending here in the UK has to rise. Despite this government's previous promises to raise defence spending to 3% of GDP, it is still languishing at 2%. Our military chiefs have warned this is not enough. Our army is at an all time low and our navy the smallest since Henry VIII.
THE FTSE Aerospace and Defence Index closed at an all time high on Friday. As the value of big players demands ever higher PE ratios, I must conclude that this sector (defence) will eventually see investors, left behind with their crass ESG fad, pilling in and causing a tide which lifts all boats...including the minnows.
Just to explain to shareholders not so long in the tooth with HW.
Early 2022, the fcast was for around £50m 22 and £100m in 23.
Then a bombshell at the time of figs released that revenues would be way below fcast but mainly due to carry over. So, around £20m of revenues for 22 were now in 23. .but no upward adjustments to 23 fcast...hhm strange....then this announcement that they are likely to miss the £100m fcast which should have been easily achieved given the £20m carry over...so the excuse is once again that revenues will probably be carried over...if that were the case, why has 2024 fcast not been raised to reflect 23 revs delayed. I am still optimistic that the plan will work but as i stated at the last two investor events...JW is very poor at managing expectations.
If £20m was carried over from 22 and 23 comes in at say £85m...then my constant gripe with the company...that they are constantly putting the cart (spending) way ahead of the horse (revenues) is more evident.
The constant promise and dissapointment of the funding package is just another example.
We are supposed to hang around whilst the BoD invest a small value of the sizeable packages they have earnt in the past 4 years. Share the pain. Be more honest!