Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
Timings. The pipeline increased 17% since last reported in November 2023 giving comfort in our underlying medium term forecasts assumptions. New strategy changes margin potential We also note the development of strategy facilitated by the fund raising. In addition to the investment drive in the UK, the company will continue to focus on both the UK and North America as its core markets with a manufacturing of the cell stacks in Bathgate, Scotland and Vancouver, Canada. Other manufacturing capability has already been expanded to partner and existing strategic investor Baojia. Outside these core markets Invinity is moving to a manufacturing strategy based on a licence and royalty model. This will reduce the need for capital deployment while allowing better margin through royalty payments. We have modelled a growing proportion of non-core market royalty sales starting gradually from FY 25 and increasing to 50% of all business by FY 28. This initially grows the effective gross margin from 22% to 28% in FY 26 but by FY 28 we think the underlying gross margin of 25% would be improved to 38%. Forecasts adjusted for new model We have adjusted our forecasts for the equity raise and resultant dilution. We have also adjusted for the new strategy with an assumption that new sales from FY 25 onwards will be increasingly split between core and non-core markets and non-core will receive royalty revenue but will avoid the manufacturing capex required to deliver this. However, we have also increased opex to reflect additional spend on marketing and the expansion at Bathgate. We have additionally added an investment income stream to reflect the minority investment in UK projects. Dilution significantly offset by other gains As a result, our headline revenue forecasts from FY 25 drop as half of revenue is replaced by royalties, but operating profit rises to reflect a better overall margin. Additional investment income starts to appear in FY 26 and there is additional investment in the UK projects from FY 25 together with the £2m manufacturing spend in Scotland. The fund raise adds cash but also shares which rise to c400m shares. While this represents considerable dilution it is significantly offset by better operating profit, investment income and lower capex. As a result, our central case valuation falls to 86p from 134p and still represents considerable upside on the current share price.
FUNDED TO CASH GENERATION AND MORE Invinity’s major equity fundraising is targeting a minimum of £50m with half already committed by the UK Infrastructure Bank (UKIB). A second strategic investment of £3m has been committed by Korean Investment Partners. The raise will see Invinity to net cash generation, with £30m of the raise supporting the company’s scale up ahead of this year’s launch of the next generation Mistral flow battery. The raise will boost the balance sheet, reducing counterparty risk and unlocking sales and bigger deals, critical to maximising the potential Mistral.
Investment in UK Projects to Unlock Further Opportunities The funding will also allow Invinity to take minority stakes in long duration storage projects in the UK with at least £18m allocated. This will increase equipment sales, add project returns and help establish the company as a leader in the UK market. As investments in physical assets this value remains on the balance sheet and, along with the endorsement of two new strategic investors, supports the company as a counterparty. Invinity is targeting 96MWh of projects which would deliver c.£43m in sales. As one of the most rapidly decarbonising electricity systems globally the need for long duration storage in the UK is growing and we see leadership here as resonating in other markets. More intermittent wind generation will see storage duration and cycles lengthening which plays to Invinity’s competitive advantages against lithium-ion batteries. Additional support for long duration storage is now likely with the government consulting on price support. A potential move to zonal pricing could create more local price volatility benefiting long duration storage.
Strategic Investment Follow Major Due Diligence The funding will also support accelerated manufacturing scale-up of Mistral which completed performance testing in February. This will include a £2m investment to increase manufacturing facilities in Scotland and further expansion of manufacturing and supply chain in North America. The support of UKIB shows how helpful a policy bank can be to clean energy financing and its ability to develop Invinity as a national energy storage champion with global reach clearly demonstrates the additionality it seeks. Invinity will move its domicile from Jersey back to the UK further cementing its position as a UK company. This is UKIB’s first investment in a public company and this investment comes off the back of more than 6 months of detailed third-party due diligence. It is a public market investment with private equity diligence and as such we think the information content of the investment adds significantly to its monetary value.
FORECAST CHANGES Comfort in current trading Invinity has given a current trading update and for FY 23 remains on track to recognise at least £21.6m of revenue in 2023 and we remain comfortable with our £22.4m forecast. FY 24 is likely to be significantly second half weig
GPH shd be trading at £3 on current performance, Shore have a conservative price target of £5.50 by 2026 as the recent new port investments ramp up and hit the bottom line. Very undervalued..
I tendered all my holding for the buyback at £10.50, got scaled back to 54% which is better than the initial offer of around 36%. Pretty happy to get out with > half my holding at this price, having bought in under £5. Letting the others revalue towards £10 and then run this to see if the green energy recovery boosts the unlisted holdings over the next couple of years..
CCC, i share your frustration. The reality is in the financials, something that rarely gets proper scrutiny here or by the company itself.
ATM had c. 750m shares in issue in 2021, it's now currently 1.54bn - so plenty of reasons for a dilution of the share price. There are probably more to come as i doubt the Lithium partner will just settle for loan finance, they'll want equity participation.
Cash from these additional shares has been used to finance capex, hence the bigger scale of the operation, and the by-product feeds, but some has also gone towards financing opex, plugging the shortfalls in the income statement as ATM has operated at a loss after tax since in listed in 2017. And the current forecast I can see on BB is for that to continue for the next 12 months (in fact the loss forecast for 2024 is -4.4m and for 2025 -10.2m). This may/will change after some clarity on the Li partner and what that will bring for Li sales, but currently that's unknown.
So ATM has traded at a loss for 7 years, is forecast to do so again this year, and the recent financing will probably be used up for pre-agreed capex by this time next year. So unless AV can finally delived some +ve free cash flow in this FY, as things currently stand, ATM will need more finance in 2025. And that's what the market knows, and is pricing ATM accordingly.
Valuation wise, even if they hit the BB revenue estimate for 2025, at the current share price and mkt cap, ATM trades on 2.7 times sales, which isn't cheap for a mining stock (the average is well below 2, and closer to one for the majors). At 6p, the ratio was a lot higher - in anticipation of a big increase in sales over the next couple of years, linked to the strategic partner and ramp up in tin volumes. The latter isn't now expected until April 25 at the earliest.
So effectively, ATM trades on a high multiple, is forecasted to be loss-making for another 12 months (as things stand) and has taken six months longer than first announced to secure a Li partner.
But 2024-25 could be 'transformational' for ATMs fortunes. Well, the jury isn't convinced right now.
There's no disputing the size and value of the resource it's sitting on, but unfortunately for AV and it's patient shareholders, the market isn't interested in valuing it on it's reserves. Whish makes sense, if you don't have the finance or what seems to be the urgency to monetise those reserves over a reasonable time frame. 7 years is long enough to wait for some investors, clearly.
When asked in the interview about the scale up of the operation (so-called phase 2, which no one seems clear about as still an objective for ATM, maybe phase 1.5..?), he states that this should be 'self financing from here' (at 6.15 mins).
Really? Last I saw from both ATM and H&P was this was forecast to need finance of > $400m, but hasn't been mentioned for some time.
ATM is still not profitable and doesn't produce +ve cash flow, so where does this kind of statement come from and what backs it up? Unless something dramatic has happened with the company's cashflows that has t to be reported.
Is this for real or just another off the cuff statement made on a call that don't stand up to any scrutiny. He's been gulity of this in the past. What backs it up?
He frustrates the cr+p out of me as well. Still waiting for that 'transformational' year for ATM he's been spouting on about since 2021. And he expects that to happen with a cohesive funding strategy to finally deliver the value & potential that is so clearly evident in the mineral resources the company is sitting on.
One positive in the latest hyped news release, finally a recognition (& mention) that ATM has to deliver +ve free cash flow in this FY. Only taken six years to realise this is actually quite important.
Finance, never been one of ATM's strong points.
I still argue that there's a good deal to be done in selling ATM to one of the many so-called interested parties - waiting for AV to deliver has become tedious.
December, Crescent Point Energy finalised its acquisition of
Hammerhead, which resulted in a $175m distribution to REL and the receipt of 8m shares
of Crescent Point Energy (CPG). In addition, Onyx's valuation also increased from 3.00x
to 3.20x Gross MOIC. However, the decarbonisation portfolio dropped 22.9% in value,
driven primarily by its position in Enviva, which lost 85.4% of its market value due to
missed earnings targets, plant-level operational disruption, and ongoing restructuring. In
addition, FreeWire lost 75% of its value due to reduced growth projections as the
company works to preserve cash in a challenging fundraising and growth environment
for EV-related businesses. With the exception of Infinitum, the remainder of the
decarbonisation portfolio continued to suffer from fundraising headwinds caused by the
impact of rates and lower risk appetite from investors. RSE says that these businesses will
remain susceptible to market volatility until they reach profitability.
Having updated our model, our live NAVe falls by 1.2% from $15.76ps/1248pps to
$15.57ps/1233pps, down 2.5% since 31/12/23, reflecting overall weakness in the listed
holdings, with a notable 57% fall in Tritium, 48% in Enviva and 10% in Crescent Point.
RSE continues to show its commitment to capital returns, with its announcement today
to return $200m via a tender at a 16% discount to the 31/12/23 NAV. The tender price is
fixed at 1050pps, a 31% premium to last night’s close and a 16.4% premium to the current
price. If approved by shareholders, this would lead to an estimated uplift of around 8.7%
to our live NAV. The potential impact of the remaining buyback capacity would be to add
around 1.7% to NAV in the absence of the tender. But it becomes more powerful if
deployed post tender as the £22m would buy back a larger proportion of the remaining
shares at potentially a bigger discount to NAV (we argue that post returns of capital the
headline discount should widen to reflect the smaller amount of cash on the balance sheet,
with the price constant, and the NAV enhanced). At current prices the combined impact
would ab an estimated overall 12% NAV per share increase. The price has responded well
to the tender news, and is up 13.5% to 908pps (@9.30). This implies a headline discount
of 26.3% to our live NAVe. But stripping out cash and listed this is a 106% discount to
the remaining unlisted holdings (this is the metric to focus on in our view, and should
remain constant before and after any capital returns). This remains very good value in our
view and thus overall we remain Overweight
Exert from recent JPM note on results/tender offer:
RSE is proposing to return $200m (£158m) of its excess capital to shareholders via a tender offer at a fixed price of 1050pp,
a premium of 31% to the closing market price of 800pps on 7/2/24, and a 16% discount
to the 31/12/23 NAV announced today of 1253pps (see below). RSE expects to launch
the tender before the end of this month, closing during March. The number of shares
purchased is expected to represent ~36% of RSE’s existing ordinary shares then in issue
(excluding any shares held in treasury). The tender requires shareholder approval at an
EGM, which is anticipated will be held in March, and will be subject to other legal,
regulatory and customary conditions. Since the announcement on 23/5/23 of the
authorised increase of £30m for the share buyback programme through to
31/12/23,126,023 ordinary shares have been bought back at a total cost of £18m ($22m)
at an average share price of 567p/$7.13. As of 31/12/23, £22m was available for
repurchase. In addition, pursuant to changes to the IMA announced on 3 January 2020,
the manager agreed for RSE to be required to repurchase shares or pay dividends equal
to 20% of net gains on dispositions. No further carried interest will be payable until the
$85m of realised and unrealised losses to date at 31/12/23 are made whole with future
gains.
Portfolio performance for the last quarter of 2023 remained essentially flat with positive
performance from the conventional energy portfolio offset by lagging results from the
decarbonisation investments. Growth stage (pre-profitability) energy transition and
decarbonisation investments continue to lag broader markets, and still face adversity as
the viability of their business plans remain in question due to a dampening of investor
appetite in the face of higher interest rates. RSE points out that a lower risk appetite
presents a substantial risk for these businesses as they are at a stage in their growth that
relies disproportionately on funding from private equity, corporate balance sheets and
institutional investors, and that RSE’s decarbonisation investments are not immune from
these headwinds. On the energy commodity front, WTI crude prices were down 6.5% in
2023 and 20.8% in 4Q, with Brent Crude down 6.2% in 2023 and 19.2% in 4Q. Henry
Hub natural gas spot prices were down 29.1% in 2023 and 3.7% in 4Q. Consolidation in
the US oil and gas sector has reached levels not seen in a long time with over $250bn in
acquisitions announced in 2023. The Permian basin featured prominently in this deal
activity and reflects the acquirers' strong balance sheets due to the sector's commitment
to cash-flow-generation.
Against this backdrop, RSE's conventional energy portfolio gained 7.6% in value over
4Q, driven largely by Crescent Point Energy's (previously Hammerhead Energy) 21.1 %
improvement in share price, countering slight weakness in Permian
Edgar - 'no reason given for the move' - I wonder if ARA might have some insight into the decision.
I don't pretend to know the decision making structure of the TZ government, but give n the apparent lack of any movement whatsoever on Ruvuma since the summer (happy for this to be proved wrong by Santos..), is this guy part of the reason? Seems plausible.
That was a s**t quarter for ‘shareholder value enhancement’, something Santos alleges is one of his aims. I can’t wait to see the spin he puts on the next quarterly ops report to account for the last three months of radio silence - build up expectations and deliver fokol.
Maybe he pulls a rabbit out of the hat and buries the bad news on NYE, don’t think that’s his style but then again, was prepared to give him plenty of slack on other issues.
No doubt ARA have him on a petty tight leash in terms of what can be released to shareholders, and the leash seems tighter than ever. My biggest concern is the size of the resource , as highlighted by the 3D survey, has caused the government to reboot the whole negotiation process. And for those who claim that can’t possibly happen, nah, TIA..
JPM view on Hammerhead deal + what follows:
Taking the combined cash and Crescent Point equity proceeds of
$11.26 and $4.00 per share respectively implies a combined price of $15.26 per share that
is a 4.3% uplift to yesterday’s US NASDAQ closing price for Hammerhead. Most of the
24% uplift captured vs the 30/9/23 that is mentioned in the RSE statement reflects the
increase in the Hammerhead NASDAQ share price that was up 22.6% from the 30/9/23
close to 6/11/23 close. We estimate that exchanging for the cash and Crescent Point shares
results in a 1.5% uplift to our live RSE NAVe from $16.31/1,327p per share to
$16.55/1,347p per share. But while the uplift to the live NAV is relatively small, this is
a strong result for RSE, in our view.
Hammerhead listed via a SPAC combination transaction that completed earlier this year and Bloomberg Finance L.P. says Riverstone Holdings LLC owned 81.6% of the overall Hammerhead shares. In this context we think
capturing an uplift to yesterday’s close and monetising the Hammerhead holding far
quicker than we expected is an excellent result for RSE overall.
RSE shares have re-rated this morning to 700pps (@10:00) at the time of writing, up 9.2% from yesterday’s close.
We think this largely reflects the potential for an expected return of cash to shareholders
as mentioned at the end of RSE’s statement. At the current share price we estimate RSE
trades at a headline discount to NAV of 48.0%, but deducting for the listed holdings and
net cash (now 72% of NAV combined, pro-forma for the Hammerhead disposal) this still
implies a 170% discount on the remaining unlisted assets.
This calculation becomes a bit less meaningful with such a high proportion of NAV in cash and listed securities but suggests RSE still represents good value at the current share price. If cash is returned at
a price close to NAV then shareholders could effectively realise some of the discount to
NAV and this may occur as soon as early 2024 if the Hammerhead disposal completes in
December 2023. We are Overweight
Peak capitulation moment? Feels like it, healthy in a bizarre sort of way, don't suspect Santos can justify not updating shareholders on progress by the end of this month or early next, suspect there will be a news release very soon, warts and all. Frustration levels must be through the roof..
Nesty, unfortunately for ATM shareholders, there has been a lot of style over substance from AV in the 5 years i have been invested. Fluffy tweets without facts and evidence of how those long awaited goals are going to be reached, and when, don't count for much in this market.
I'd personally be much happier if the next big announcement was an agreed sale of ATM at a realistic price. I don't have much confidence in them arranging the finance necessary to get to levels of production needed to justify a share price north of 25p in the next few years, their track record in this area is poor.
I'd love to be wrong, and I doubt AV's ego will allow for such a takeover, but as a pretty dispirited shareholder since late 2018, i would happily take 20p for my shares right now, leaving plenty of upside for a bigger operator who can finance the expansion internally at lower costs.
Nice breakout to post-covid high, targetting £3.25-3.50..
Given their comments on the RNS confirming the sale, strong likelihood that it will involve a significant return of cash to shareholders, esp given that committed funding to existing investments is only c. $6m..?
As of 30 September 2023, REL's published cash balance was US$127 million. Following the expected completion of the Hammerhead transaction in late December 2023, approximately 43% of REL's net asset value is expected to consist of cash. REL is currently exploring the most efficient means of returning its excess capital to shareholders (while also taking into account the anticipated on-going requirements of its other portfolio companies) and will make a further announcement in due course.
STOCKHOLM, Nov 6 (Reuters) - Swedish payments group Klarna said on Monday it has posted an operating profit of 130 million Swedish crowns ($11.97 million)in the third quarter after years of losses. ($1 = 10.8645 Swedish crowns)
Agreed, another hurdle cleared, opens the way to 1.40+ in the short term, and plenty of +ve news to follow..
Oct 11 (Reuters) - Exxon Mobil's mega $60 billion deal for shale rival Pioneer Natural Resources could be a catalyst that will drive further consolidation in the U.S. oil and gas industry, analysts said, as they zeroed in on a handful of likely targets.
Dealmaking in the U.S. oil and gas patch has picked up pace as producers sought to replenish their inventory after years of under-investment.
The Permian Basin, the top U.S. oilfield known for its low cost of extraction, is seeing a consolidation with more than $26 billion worth of deals this year before the Exxon announcement, as per Rystad Energy data. That is more than double the entire value of deals signed in 2022 for the region.
"(The Exxon transaction) is a positive read-through to the sector overall, particularly the Permian Basin players," said Gabriele Sorbara, managing director of equity research at Siebert Williams Shank & Co.
Rivals will "step up to try to compete with Exxon", Sorbara said.
Future buyers are likely to be among Exxon's closest big rivals in the Permian Basin such as Chevron and ConocoPhillips, analysts said.
"Chevron seems the most likely to respond with a transaction of its own," said Andrew Dittmar, a director at consultancy Enverus.
The most-prized targets for Chevron could be Coterra Energy or Devon Energy, he added. Chevron had $9.29 billion in cash and equivalents at the end of June.
Others mentioned included Matador Resources, Permian Resources and Diamondback Energy