Member Info for pickedpeck

In the face of a market where there are quite a number of companies on single digit PE ratios and high yields, when will DGE stop sliding?

Given what appears to be very low growth it would make sense for the yield to have to rise, either by allocation of profits or by the price continuing to fall. Does DGE belong with BATS and IMB in the 7% yield range? If so the price could fall another 1/3rd or more before the yield holds it up.

Its tempting to look backwards at where the price was in a low interest rate period, but right now it's in a prolonged slow motion freefall and it's hard to see what the company can do to turn that slide around.

Sorry to be the naysayer, I'm talking myself out of some contrarian investing rather than undermining anyone else's choices.

Seems likely that the Iranians will disrupt shipping in the Hormuz Straits in retaliation for the US bombing, although China may pressure them not to. Brent price already twitching a bit as are some oil traders back ends.

Meanwhile a PE of sub 4 and yield of 13.5% already without inflated market prices seems anomalous.

Brent crude is up 20% since the start of June:

https://tradingeconomics.com/commodity/brent-crude-oil

I know WG is no longer a pure oil and gas play, but the economics of its customers and their attitudes to investment and projects are heavily influenced by the cycle of the oil and gas price. That in turn affects the perceived value of the sector as a whole. Materially for WG it puts upward pressure on the Sidara bid price, particularly as WG are busy winning and announcing EPC contracts faster than in the last couple of years.

If the price continues to move upwards as seems inevitable given the increasing level of conflict in Iran the sector valuation will steadily increase, unless of course Iran decides to blow it all up into a regional conflict. WG is not isolated from any of this.

Sadly interesting times.

The financials are obviously excellent, but the exploration portfolio is growing and initial results seem to suggest a very high level of prospectivity.

Should jump on these results.

What a lot of BS there is here. Some people really need to get a life. I'd put this in the 'nothing to see here' folder until the results are out.

Anyone is guessing before that, positive or negative. They won't be able to negotiate debt until their books are published, even drafts won't cut the mustard.

However, if the books show that they can trade their way out of the hole they have neatly drilled for themselves then debt is an option.

If the books show the opposite, that a major restructure of the debt and equity is needed then all bets are off.

Sidara meanwhile have been given the price by the board, almost certainly acting on behalf of major shareholders. Sidara are not the only organisation with influence on the bid price.

Still, all conjecture and random bolloaks until the end of June. See y'all then.

Look up 'gearing' and understand it as a measure.

It's not about the debt, it's about whether they can reset the debt. With interest rates falling, and maybe falling fast, the debt rapidly becomes more manageable.

I've tendered all my shares already, have zero lef got a small profit.

But given the company said they expect the remaining shares to get a potential payment of 10p a share why the fall off now?

Lightnotheat,

I agree. I got this wrong, I thought a price of 70p would be the final price, but I did also expect a bid in the nuts given the circumstances you rightly point out.

But in taking this step this morning the board are doing several things.

1. Telling Sidara they will likely accept their offer if it is at this price or above and on these terms.

2. Listing the sell price and terms of a deal they will take should someone else want to bid, giving some time before a bid becomes binding and has to go to a vote.

3. Telling major shareholders that the price is way below where they would want it to be, but the amount of debt that has to be refinanced. I don't agree that a debt for equity swap is the only way ahead.

The announcement is from Wood not Sidara, it's a bit of a punt to see what the reaction is from the key players and to flush out any possible lurkers.

It is definitely not all over yet, but the rules of the game are now a lot clearer.

The board have announced to the world before there is a binding offer on the table what the terms of the potential deal are.

Doing so whilst it's still a potential offer is telling any other potential bidders that if they come in with more than that then the board would accept.

Its like everyone knows it's been for sale, but no one outside the negotiations knew the price. Now they do, including how much debt they would have to cover.

We may yet see a rival bid if anyone else has been sniffing around, PE being the obviously most likely.

Sidara may also play hardball now and drop their offer if no one else bids. The offer being non binding allows them to do that too.

The actual price of the shares now represents a smaller part of the cost if the full deal, incrementing it a little to win might be tempting for a bidder.

There is no share price in 12 months time. The entire issued share capital goes. If you can't understand something as simple as that stop buying shares directly and use a financial advisor.

If sidara walk away without making an offer the share price will drop further. No question, so many holders are pinning hopes on there being a bid, it's hard to imagine most of them not dumping.

However I think it is far more likely that Sidara will make a bid that is too low to be acceptable by the board. They will find it hard to face taking a low bid having turned down excellent ones just a year ago, so almost any sensible bid Sidara can make will be initially rejected. Sidara can then either raise the bid or just go hostile, they haven't got form for the latter though.

Third scenario is that the initial Sidara bid is just accepted and that's that. In this case the board have been instructed by major holders to accept whatever is offered. How this one plays out who knows.

Just bought another 20,000. I believe WG will trade it's way back out of scenario 1, and scenario 2 will end in a reasonable bid. Even scenario 3 will give a decent return against this price. The major outstanding risk is there something financial we haven't seen yet, but that seems very unlikely given the Deloitte review.

The next day or three would be an ideal time to announce a bid, many may be more predisposed to take a lowball / lots higher than now bid given the current wider market catastrophe.

Yes there is a lot of market uncertainty because of Donny Trump's circus show, but the current price is more or less just 10% of the last bid for effectively the same company. Same people, same markets, same contracts, same long term revenue streams, same synergy.

I doubt Sidara will be put off, the world will quickly readjust. It's arguable that a post US world may be better for global trade, everyone else is busy learning hard lessons including China. It's been the elephant in the room for a long time that the US is never going to be able to pay its bills as they spiral out of control.

There is also the definite probability of some rebellion by disgruntled and bankrupted Americans.

Anyway... Wish I was in Buffets cash position.

Take Sidara and offers out of the picture, would WG now be an attractive buy at this price as a recovery play?

Assuming all the financial shenanigans are now out in the open, the last RNS was based on Deloitte's preliminary review which should mean there are no more gotcha moments, is the WG enterprise value really only £200m?

They are able to generate cash, have a large and capable global workforce, and have a reputation for delivery with some huge clients.

The suspension is a red herring, perfectly reasonable whilst they prepare accounts.

WG are now priced as if they are going out of business. A few weeks ago with most of the bad news already assumed the price was more than 2x this.

This is now both an opportunity for a quick win via Sidara bid, or a recovery play over 2 years to get 3-4x return.

As for lenders giving waivers, give me a break. They do the opposite and they get pennies back on their pounds. Don't think for a minute they are delighted to be here, or are not going to impose punitive rates to compensate for the risk. That's why no finance deal so far, isn't it obvious?

Icecool,

I am not implying anyone above 55p is stressed, I am outright saying you are. Your reply is clearly a stressed one.

I have never said WG is PFC, but if you can find a more similar company on the UK market, or in fact anywhere, lets hear it. Yes I know PFC's debt position, its hard to miss, but two years before their collapse they were where WG is now. Its lazy not to go and look at the history.

WG said last year, and the year before that they would be cash generative next year. That's three years on the run they have said that, and missed two so far. Why do you think it will be third time lucky? Apart from the board who missed the first two promises saying they will do better, what evidence have you got in hand that they are succeeding?

Johnnychainlocker - My point earlier is / was that WG. will be in exactly the same position if they can't secure debt refinancing. Having a big order book is good only so long as you can execute on it at a profit, just having a big number doesn't inherently make you valuable. I do believe WG will get refinanced and won't end up where PFC are, but until its nailed on that's the case it is only belief rather than fact.

Icecool,

You can resist name calling if you try you know. PFC and WG are the same scale business, I don't understand why you don't see that. They have been competitors, they have both been FTSE 100 businesses (at the same time) and operate for the same customer base, order backlog and revenue are similar. Debt is the major difference, PFC are completely hamstrung by theirs now and that's why their market cap is 2/3 of knob all.

I'm not at all emotional or sentiment driven, I'd say you are the one that comes across as stressed and need for your wishful thinking to come true. It seems to suggest you are a long way underwater here and need a deal to be on a big number to make a profit that justifies your own risk position. That's fair enough, we all want the best deal possible. My own average is 34p so right now I am down too, but not worried at my average price. If I was sitting on say 55 or higher average I would be feeling a bit stressed too.

Don't let what you wish for blind you to what you see in front of you. Looking back at fundamentals reported last year on the year before's business is not what is being sold now. Saying things are being dealt with is different than having evidence that they have been dealt with successfully. You're buying what the board is saying, not measuring what they have done.

I agree they are not the same as PFC, but they are in a large debt and negative cash flow situation which echoes where PFC were before their valuation collapse. The board have promised a return to cash generation the last two years and have failed to deliver, and are again now promising it for next year.

That massively undermines confidence in any future promises they make. It gets looked at like a 'This time next year Rodney..' level of promise, and when you combine it with an unqualified CFO, and having to restate three years of accounts, trust from institutional investors in the current leadership must be near nil.

This can and probably will be turned around, but it does absolutely need to be turned around and that's never as simple as it seems.

All it takes is a debt interest shift to swallow fine margins and they are in trouble.

This is not a zero risk company. Painting it like everything is fine and thinking Sidara will buy on what their valuation would be if they were healthy is a great big wish.

We will see anyway, I'm in this for well into six figures so I'm obviously expecting a return, just setting realistic expectations as jam tomorrow rarely arrives in my experience.

You pin too much faith in the valuation of the order book, you need to take that out of any calculations. Plenty of companies have gone to the wall or very near it with huge order books, it's about forecast EBITDA and execution risk on the orders, not the volume.

PFC's order book is currently larger than WG's as an example, the market does not believe they can execute profitably though so it has a negative valuation on their balance sheet.

When the board rejected the 230p offer previously they were hopelessly misinformed by their own financials. Saying nothing has changed is just not true, having to restate three years books and still not having secured debt refinancing is not nothing.

I absolutely agree 70p is an opportunistic offer, but we are in opportunistic territory, not in business as usual mode. The power right now sits with the bidder, why would they bid more than shareholders will take?

As for iis not having fear, you're right, they have a whole host of analyses, fundamentals is only one. Plainly their current analysis values the Co at no more than 40p or they would have all piled in.

I hope for all our sakes you're right, I just don't logically think you are, and I think I am being optimistic at 70p. At the absolute outside I could see maybe 100p, the real pessimist in me thinks we could get a proper bid in the nuts first to test holders resolve. With no rivals why would they lodge a high bid first?

Icecool, most of your analysis is OK, but the board are not the ones selling the company, the shareholders are. It's not a question of what it's worth based on fundamentals, that's an ideal world argument. It's what the shareholders have instructed the board they will take for their holding.

I agree many will be sitting on a significant loss, but they will also be looking at the current valuation by the market of their asset. Simply ignoring the fact the market thinks it's worth 30-40p without any detail of the offer is not a credible approach.

I believe we will get an initial offer of around 70p, it's likely that at that price enough shareholders will sell for Sidara to be successful with their bid.

Look at this way before you start throwing rocks or name calling (again). You have a choice, take 70p cash now, or sit at a valuation of mid 20s and 'hope' for a 200% recovery gain. Investors count time aswell as cash, opportunity cost, risk on investment, and risk of recovery will all be included in their analysis.

Holding out for a 500% recovery whilst being possible, you could even argue likely, doesn't change the risk factors.