Positives and Negatives26 May 2019 09:16
Still away but I’ve now had a chance to read and digest the RNS properly. My initial quick run through made me feel that there was no reason to rush to buy the shares and that view hasn’t changed now I’ve read it properly.
As has already been posted, a lot more detail and a lot more honesty which potentially allows us to make better investment decisions going forward. Most of the heavy lifting has been done so if they can deliver on sales and get paid for it then I agree that there is huge upside. That’s why we’re probably all still here, a couple of negatives not already highlighted though are firstly the debt :-
Cash and cash equivalents of $3.5 million (2016: $11.5 million). Borrowings reduced to $20.9 million (2017: $24.5 million). During the year the Company successfully restructured the BGFI debt facility. At 31 December 2018, the loan has a 6-month interest only period, followed by 48 monthly repayments of principle and interest. Interest is payable at 7.15% p.a. The loan is secured by a pledge over the revenue stream of certain customers, a pledge over attributable gas production volumes equivalent to the monthly instalments and the ceding of GDC's right to future insurance claims for the tenor of the loan. The Company has provided a letter of support to BGFI to support the facility.
Cont’d
The debt has a worryingly high interest rate and will need around $6 million a year for 4 years from now to amortise.
If we break even in everything else (infrastructure costs) where will this money come from ? Are VOG currently in breach of the covenants to secure this - could the debt be called in ???
And secondly if the shares and shareholders have taken an absolute pasting and now are considerably undervalued in Rogers opinion - why hasn’t he bought any since the few he purchased in the placing at the end of 2017 ??
These things mean more negatives than positives from an investment perspective currently...
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