Stephan Bernstein, CEO of GreenRoc, details the PFS results for the new graphite processing plant. Watch the video here.
If you listen to the company presentation that went out with the results it looks more likely that they will announce a share buy back. This is more tax efficient for UK shareholders and given the current low valuation (PE of 1.6 current year) makes a lot of sense.
Looking at the numbers today are quite eye watering. In the first half of the year PAT was R351mil or £18mil. In the second half of the year thanks mainly to the higher coal price PAT was R6,587 or £330mil. So far this year the average price of coal has been significantly higher than the second half of last year. Even if the price falls such that we enjoy the same profit per tonne sold as we did for the second half of last year we are on a forecast PE of 1.7 for 2022.
Given we started this year with net cash of R8.7 billion compared to a debt balance at the start of last year, I would expect the dividend to more than double.
The turnaround looks to have been incredibly successful. The results today are pretty stunning especially from a cash point of view. Yet no comments on this board which shows how under the radar this company is. That is reflected in the share price which is ridiculously cheap.
It’s probably Premier Milton reducing their massive holding again. If you look back over the last 6 months the share price is very volatile. I think this is an excellent company and so I’ve taken the opportunity to increase my holdings.
How do you justify your high fee?
We are very hands-on in getting the best out of the firms we invest in and there are a number of costs involved in that. In some cases we combine a number of similar businesses to create a single industry leader that is able to grow much more quickly than the individual firms would have been able to on their own.
Ocean Technologies, a 3.3pc position in the trust, is an example of this. We bought two companies in 2019, combined them, then added a series of other firms to create the group. The mix of expertise from these different firms means the combined business now offers everything from remote training to human resources software for ocean tankers, which are essentially floating workplaces.
Why do the shares trade at an 11pc discount?
We are not well known. But we hope that, as more investors recognise our good performance, it will be reflected in the share price discount narrowing.
What have been your best and worst investments?
WebPros, a web hosting software firm, is one of our best: we have made 15 times our money. On average, we make three-and-a-half times our money on our investments.
The worst were two financial services firms, wealth manager Broadstone and Monument, a small bank. We lost half of our money in both cases and don’t invest in the sector any more as a result.
Do you have your own money invested in the fund?
Yes – I and other Oakley partners own around 12pc of the trust’s shares.
Part 1
A select band of private equity investment trusts offer a heady combination of market-beating returns and cheap shares – and are increasingly catching the eye of DIY investors.
Oakley Capital Investments is one such fund. Shares in the trust have risen by 123pc over the past three years, double the return of the global stock market, yet they trade at an 11pc discount to its assets.
DIY investors have taken notice and bought in over the past year; they now account for around a fifth of the £689m trust’s shareholders.
Oakley Capital Investments offers access to private companies, those that have not yet listed on the stock market. But it comes at a price: the trust levies a 2.46pc annual charge.
We speak to the manager, Steven Tredget, to find out how he seeks out hidden gems across the world – and how he justifies his fee.
Who is the fund for?
People who want to invest in private businesses that are not easily accessible elsewhere, be they large institutional investors such as pension funds or DIY savers managing their own money.
Why are you attracting more DIY investors?
People are learning that a lot of the best businesses in the world are staying private for longer before they float on the stock market, with the result that there are fewer attractive listed companies to invest in. Coupled with the relatively impressive performance of private equity funds during the pandemic, it is leading investors to shed some of their preconceptions of private equity as an “asset-stripping” exercise.
How do you pick companies to invest in?
We build very close relationships with the businesses and entrepreneurs we back and help them grow. In nine out of 10 cases we are the first private equity backers of the companies we invest in. We typically buy in when businesses are growing fast and are profitable but still little-known, when we can help their progress. This can be through our expertise in mergers and acquisitions or help with expanding internationally, for example. Investing at such an early stage means there are risks to our approach, but it enables us to tap into those rapid first stages of growth.
Is there a common theme to the investments you make?
We think about the megatrends changing how the world works when determining which companies to invest in.For example, the boom in online spending: Britain leads the way and European countries have a lot of catching up to do. So we are investing in the companies that will expand as digital consumption rises across Europe.Idealista, Spain’s answer to property website Rightmove, is a good example of this, as is Facile, Italy’s version of comparison service Moneysupermarket. Both are top-five positions in the trust.
Gewillia, many thanks for your considered and honest reply. Also many congratulations on your investment in FUTR. I also invested in this but joined the party relatively late and so didn't make anyway near what you did. I guess its experiences like that drive FOMO.
Like you I'm happy to accept high risk for higher returns. I generally believe time in the market is better than timing the market, however, on occasions when valuations look very high I might take a bit out, especially on those investments where prices can drop more than the market. Technology Investments Trusts where pricing can be more volatile than the market are a case in point. I was in ATT quite heavily in Feb 19 when Covid reared it's ugly head and fortunately sold a month before the market crashed and big discount opened up on their shares. I was able to buy back about 40% cheaper and the prices quickly recovered. Currently, I am about 85% invested, having withdrawn the 15% recently at what seems high market values. I am waiting for an opportunity to buy back into ATT or other technology based funds including MNTN. MNTN is clearly a quality fund as are many of BG's. If I invested now and came back in 5 years I have no doubt I will have done very well. I do wonder however if I will get a better opportunity to buy in over the next few month. As you suggest lets check back in March and see whats happened.
I agree Laughton. The key point being this is short term dip due to short term problems and therefore an excellent opportunity to top up with some discounted shares of a company that I think hasn't excellent medium and long term potential.
Can someone explain to me how profits are so low in Q4 compared to previous quarters this year.
The gross basket price was $4,059 down on $4,576 in Q3 and down on Q2 but much higher than the $1,654 price in Q1. Why is Q4 Net profit only $14.7mil i.e similar to Q1, against $41.3mil in Q4. I know production was down a little bit but that doesn't explain it. Thanks
I was a little surprised but very pleased to see the share buy back. That is good business given the current discount but often I think fund managers ego gets in the way in these situations. Let’s hope we see more before the discount narrows.
This discount to NAV happens to IT's and in particular to ATT. The market is often imperfect in the short term and this presents opportunities. In the last 18 months I have bought AAT several times when there has been a substantial discount and then sold when it has closed. The discount generally appears when there has been a drop in the nasdaq. Now is a great time to buy and I have added more to my position. I suspect within the next 3 - 6 months the discount will have narrowed to less than 1%. I'm in no rush as over the long run this IT does very well.