The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
I am pleased with the NPAT attributable to shareholders of $153.881m but as you suggest below it would be good to have further detail on the massive negative currency adjustment.
Jammer1- thanks for the explanation, I cannot see note 10 on page 25 of my version but I will keep looking.
Also somewhat low key and previously unmentioned was that Salene Chrome was placed in care and maintenece pending a business review after the Zim government banned the export of chrome concentrates. On its own this is a relatively small investment but this was heralded as the first successful investment in Zim and shows what can go wrong.
On a more positive note, the top shareholder actually increased their shareholding by over 13 m during the financial year.
....possibly they have bought some USD as a hedge for some of the big CAPEX purchases for Karo?
There has been a massive movement in USD/ZAR exchange rate in the 12 months and it is usually a "natural hedge" as the foreign exchange loss is offset by the reduced Cost of Sales in USD (although perhaps not in ZAR). But Sotolo is right that the figure is much bigger than expected.
As Visitor says we will have to look deeper.
For the final divi calculation i would like to know what is "adjusted" NPAT?
Overall the PAT of $167m is absolutely fantastic-WELL DONE THARISA
Excellent news today, I reckon basic earnings of 53.5 cents will give Profit After Tax of $154 million which is 9% higher than I was expecting!
I reckon the total dividend will be 8.5 to 9 cents.
So the Grindrod deal is confirmed.
Fortunately the BHSI actually increased yesterday, the increase was only 0.13% to 746 but let us hope it is the start of a trend higher. The Baltic Dry Index, which represents bigger vessels is actually up I8% in the last week.
S African 40-42% chrome concentrate price CIF China remained at $220-230/tonne last week. Although Chinese chrome imports in October were 967k tonnes, 35.5% lower than the month before and 30% lower than October last year, suggests China is still not firing on all cylinders.
PGM basket price holding up well.
Looking forward to the annual financial results on Monday 5th December (I assume there does not need to be an announcement on the JSE before that?)
….the death spiral continues,BHSI down again today, now 747.
To make matters worse, I had not seen the Q3 results for GRIN when I wrote my post below, sadly the NAV at the end of September was lower than I imaged at $ 20.19/share and paying the $5 special divi to non-TMI shareholders will reduce this to around $16.5/share ,if the BHSI does not recover by the end of December the NAV /share could be even lower so bidding $21/share , TMI will be paying a premium to NAV for the 14 million+ GRIN shares it does not already own.
...yes the Baltic Handysize Index (BHSI)is down to 763 today, that is a fall of 47.95% YTD.
As a very rough calculation TMI/TMIP can live with this. As at 30th September the unaudited NAV was $1.70/share (down about 5% from Q2) and based on current levels I think this will drop 10-15% at the end of the year to $1.44 - 1.53 which at the current 1.18 £/$ equals about £1.22 -1.30 which is equivalent to a discount of about 25-30% on the current 91p share price.
But the problem is now with the $21+5 offer for the remaining Grindrod shares as the Baltic indexes have plummeted since the offer was originally made in August. At the end of June the Grindrod NAV was around $30/share but falling charter rates/ship values could reduce this by say 20% at the end of Dec which would be $24/share and as they are committed to paying the $5 special dividend to non-TMI/TMIP shareholders (about $70m) this could reduce the NAV to about $20/share.TMI/TMIP is committed to buying the remaining shares at $21 so could have to buy them at a slight premium to their NAV.
If the deal goes through then the bigger Company will still be trading at a discount to the NAV but the deal will not be as successful as originally thought and the lower the BHSI goes the less successful the deal will be and the bigger the cost savings will have to be to justify the deal. DYOR.
Oufc, these are the percentages in the Reef .
So for PGM's the ROM throughput is 2.46 million tonnes/ year( 205k/month )x 3.06 grams/tonne x 81 76% recovery =6.034 tonnes or 6034 kg of PGM's.1kg = 32.1507 troz oz of PGM so 6034 kg =194,000 troz oz of PGM's/ year.
Assuming the recovery is the same for copper the calculation is 2.46 million tonnes x 0.10% x 81.76%= 2011 tonnes of copper/ year.
The same calculation works out as 2414 tonnes of nickel/year and 80 tonnes cobalt / year.
Of course Karo will not convert this to refined copper/nickel/ cobalt but even if they get say 70% payable then these are worth roughly about $52 million/ year based on current London Metal Exchange prices.
Sam/Krusty-yes it is a great sign that directors are buying but what is making me nervous is that the Baltic Handysize index dropped to 855 yesterday, 17 consecutive daily drops and down 15% since the end of the September NAV update and the lowest level since the TMIP was admitted to the stock market in May last year.
I know that the board is doing everything they can to lock in longer charters and reposition vessels to the most profitable routes but eventually the cyclical nature of the index will catch up to them.
Sam/Krusty-yes it is a great sign that directors are buying but what is making me nervous is that the Baltic Handysize index dropped to 855 yesterday, 17 consecutive daily drops and down 15% since the end of the September NAV update and the lowest level since the TMIP was admitted to the stock market in May last year.
I know that the board is doing everything they can to lock in longer charters and reposition vessels to the most profitable routes but eventually the cyclical nature of the index will catch up to them.
Hi RetiredBanker, I remember we had a similar conversation in September when I mentioned your net profit idea of £150m @ 1.15= $172.5m looked too optimistic.
I am expecting $142 m which would give a PE of about 2.3 and a dividend yield of about 6.5%.
Either way these are great numbers and as you say we will find our in early December.
Chrome stocks at Chinese ports were 2.524 million tonnes on 28/10 ,down 139,000 on the week before after delays in shipments from S Africa (probably a result of the Transnet strike which finished 10 days ago) and stronger Chinese demand.
Last week the S African 40-42% chrome concentrate price increased to $235-245 CIF Chinese ports.
Krusty/AdamS, thanks for your replies. For April-September 2022 I am expecting an operating profit of about $50m and a fair value reduction of the overall vessel portfolio of up to 10% (much less than the 17% loss on this Supramax sale,as the smaller Handysize niche is generally performing better) or a reduction of up to $50m so in total roughly breakeven. So I expect the previous 33% discount to book value to shrink a little but to remain above 25%. This is the vagaries of this sector! Anyhow, in the RNS today TMIP have advised we will know the figures next Thursday 27th Oct.
I agree that operating in southern Africa is not easy as we know on the THS site. In fact I think that Grindrod have done a good job working with the Mozambique Authorities to run the port of Maputo which is reflected in the vessel numbers over the last few years. We have all had bad share experiences, so you are doing the right thing by sitting watching from the side lines until you have more confidence in the business.
Like Krusty I will consider topping up before next Thursday if the price drops below £1.
AdamSmith, your facts are correct, the vessel was sold at a loss of $4.15m or 17% of fair value but you are basing the valuation on the last FY ending 31st March 2022. To be fair to the Company the same RNS of 12th Oct says the sales value of $20.1m is "broadly in line with the current carrying value based on 30 Sept 2022 Fair Market Value" . In other words, the value assessed independent value of the vessel has dropped from $24.25m as at 31st March to around $20.1m when the next valuation was done for the interim accounts as at 30th September.
This just highlights the earlier point you have made about the market being sceptical about the 33% discount to book value at the March valuation. The latest valuation looks like the total value of all vessels will have fallen between March to Set 2022 so the discount will probably reduce when the interims are out. This is nothing underhand or sinister, it just shows the reality that the value of vessels can quickly increase or decrease depending on demand/supply, this is generally reflected in the Baltic Index. Generally TMIP have shown that most recent vessel sales have been at a premium to the book value, if you go back over the last 12 months then I believe you will see this . Also with the expected takeover of Grindrod expected to proceed, remember in cash, then TMIP will be keen to raise some cash and possibly have not argued too much on the price of this particular sale.
When TMIP said this sale generated an IRR of 25% they did NOT say this was relative to the current book value, rather it will be in relation to the original seed purchase price.
Overall this is an experienced, professional and forward looking management team operating in a market that can trend from positive to negative relatively quickly. The Company has recently said that after a softening of the market earlier this year their specialist Handysize niche sector is picking up again and they are bullish for the sector for the next few years and this is reflected in the Grindrod deal.
AdamSmith, your facts are correct, the vessel was sold at a loss of $4.15m or 17% of fair value but you are basing the valuation on the last FY ending 31st March 2022. To be fair to the Company the same RNS of 12th Oct says the sales value of $20.1m is "broadly in line with the current carrying value based on 30 Sept 2022 Fair Market Value" . In other words, the value assessed independent value of the vessel has dropped from $24.25m as at 31st March to around $20.1m when the next valuation was done for the interim accounts as at 30th September.
This just highlights the earlier point you have made about the market being sceptical about the 33% discount to book value at the March valuation. The latest valuation looks like the total value of all vessels will have fallen between March to Set 2022 so the discount will probably reduce when the interims are out. This is nothing underhand or sinister, it just shows the reality that the value of vessels can quickly increase or decrease depending on demand/supply, this is generally reflected in the Baltic Index. Generally TMIP have shown that most recent vessel sales have been at a premium to the book value, if you go back over the last 12 months then I believe you will see this . Also with the expected takeover of Grindrod expected to proceed, remember in cash, then TMIP will be keen to raise some cash and possibly have not argued too much on the price of this particular sale.
When TMIP said this sale generated an IRR of 25% they did NOT say this was relative to the current book value, rather it will be in relation to the original seed purchase price.
Overall this is an experienced, professional and forward looking management team operating in a market that can trend from positive to negative relatively quickly. The Company has recently said that after a softening of the market earlier this year their specialist Handysize niche sector is picking up again and they are bullish for the sector for the next few years and this is reflected in the Grindrod deal.
Thanks Ilja. I am personally glad to hear that Maputo port is half run by Grindrod as I have shares in Taylor Maritime Investments Ltd (TMIP) which already owns 26% of Grindrod and is currently trying to buy the rest by the end of October. I suppose the dredging is needed to get the bigger vessels in and out.
Hi Ilja, thanks for the explaining that, it is always good to learn!
I know that you have previously commented that around two-thirds of the chrome concentrate now goes to port by truck rather than train but can you comment how the Transnet strike is affecting Tharisa?
Chrome production a little lower than I estimated, looks like no real improvement in the quarterly improvement in the Vulcan efficiency at 69.6% compared to the target of around 80%. But this is more than made up by the excellent PGM production of 45.3k ozs which continues to benefit from the quarterly rougher feed grade of 1.67grams/tonne compared to the expected proven/probable figure of 1.43/1.45.
These actual chrome/PGM production figures add $2.5 million to my expected FY PAT. Likewise it is great to read that the cash balance at the end of September increased to $143.4m and that ground breaking at Karo is planned for December, just hope this does not slip back.
Overall a solid performance which further reinforces the credibility of the management team.