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Hopefully, there will be a turn. I expect it to coincide with various other pressures on other energy sources .............
China coming back online will put pressure on oil and coal prices. Europe having to stock up gas for next Winter will put upward pressure on gas prices in Europe (and potentially coal in SA).
Various headwinds, though: world slowdown that is greater than the boost from China coming back online and releases from the US Strategic Reserves into the crude market (temporarily suppressing oil prices) are two that I can think of.
A sidenote. It is interesting to see how various stocks are watched by people on the same forum. I have been watching Helium1 for a couple of years now. Got into 88e from there and then from there to PANR. :)
I think that investors are jumpy. Longer-term, generally, it is expected that there is going to be an energy crunch. However, in the near term, if the world goes into a bad recession, energy prices will crash (oil, coal, gas) because world economies will slow down and there will be less use of energy. Also, at this moment, mild weather is putting downward pressure on coal via low gas prices. Now, because of the nature of the market currently, this could change at the first sign of a cold snap (for example), but it is one of a number of things that is affecting the coal price right at this moment.
We are in interesting times. It's not only TGA that seems to be schizophrenic. The wider market is all over the place. One week, everything is positive because there seems to be an upturn in certain sectors,; the very next week, those same sectors are down because of some other report! It's all over the place! And current investors have no idea how to deal with such a volatile market - they've had 15 years of QE and steadily growing markets, it's not in their investing muscle memory to deal with buy-sell-buy-sell in quick succession! So they are super jumpy! That's my take on it, anyway.
Interesting times ahead!
EdwardSeaton : Everything you say is correct.
However, I do think that TGA is being evaluated on it's "cash cow" potential, not on any underlying value that is being built up inside the company (i.e aquisitions, infrastructure investment, etc.). I understand that these are really good things in a company and, long-term, would definitely be a big plus to add to the stock price. I'm just not sure that investors are looking too far into the future and therefore are potentially not considering the value-add that you may be. I think that, until there is some baseline, longer-term vision for this company, it's sp will remain strongly dependent on potential immediate dividends. And as investors with a time-value to our money, we have to still try to take advantage of perception as much as fact. Just because you buy-sell-buy a company, does not mean that you are not committed to it's longer-term vision :)
Do you agree?
Diamondman : no, I agree with EdwardSeaton in that I don't think it will affect the next dividend, with cash only being paid sometime later .......
EdwardSeaton : The figures come directly from Thungela. They stated that they expect neutral cash flow (i.e no free cash extra) for December 2022, thus the Free Cash at end November 2022 is the the actual Free Cash that will be available for distribution for the next dividend. There are two things that may affect dividend payments in H1 2023:
1. TGA make stupendous amounts of money in H1 2023, much more than H2 2022. There is then the possibility of a "special"/quarterly dividend. or the next dividend in May 2023 will be increased by a certain amount. BUT, this is highly , highly unlikely and earnings would have to be WAY more than H2 2022.
2. TGA make very little money H1 2023 (prospects suddenly drop away for the near future and coal goes to $90/ton, for example). This could cause them to retain more money for the next half of the year to tide them over and keep cash available. This is exactly the scenario you alluded to ............. "ceased to be cash generative ..........".
Both of these scenarios are a dramatic change from H2 2022. I think both are very unlikely, with the significant move down more likely than the significant move up in the near term. FYI, when I mean significantly up, I personally can't see anything less than $400/ton from right this moment (March 2023) having any material impact on the dividend decision to be taken in a month's time.
Just note : You seem to think that TGA will always be very free cash generative. Well, apparently not in December 2022 (zero), by their own admission and at coal prices higher than current. There are two components to free (extra) cash generation - price and sales. And TGA is particularly vulnerable to sales losses - their sales chain is a single chain - TGA to Transnet to RB Port. A break at any point in the chain affects sales, period. And we have seen this a few times last year in action! It doesn't matter how good/efficient/productive TGA and it's mines are in generating product; if Transnet doesn't come to the party (for example), the coal price could be $1000/ton and TGA may still only be marginally cash generative in absolute terms!! This is the weakness of their system at the moment.
Hi, all.
Just went over the pre-close statement made by Thungela again. Essentially:
1. R19.8 billion free cash as at end November 2022.
2. R5 billion in cash outlay expected (R4 bill taxes + R1 bill insurance)
Leaving R14.8 billion free cash at end of 2022. Now, they still need to retain that R6.6 billion buffer (as they discussed in the first half of last year), so that leaves R8.2 billion free cash from H2 2022 for dividends. Assuming that they still pay out a full 90% and then 90% of that to shareholders (10% to community stakeholders). This is "only" coming to a divi of £1.75/share for H2 2022 to be paid in May 2023 ...........
Anyone got any other numbers?
When I say, can't explain technical analysis .........
I understand the statistical nature of it. It is taking into account the myriad different types of investors out there and amalgamating it into understandable and repetitive trends and taking advantage of the fact that as a population, humans can be modelled :) It's just that it is hard to reconcile the apparent scientific fundamentals of profit/loss/dividends/cash accumulation, etc. with a seemingly disconnected empirical model.
All,
I ignored the H&S pattern as well. I am still fully invested, although my "market cap" is obviously much lower now!!
Fact : Share price dropped and seems to be completing the H&S formation.
No matter what you think fundamentally should happen, the technicals (charting) appeared to indicate otherwise and the market seems to have followed through. We are now in a position that you could have sold out at about 10-11 and bought back in at 8.5-9 - that is and increase of 30% in your Thungela holdings. Going further back, you could even argue that you could have sold out at 16 and bought back now - that is an increase of 90% in your Thungela holdings ........ but I would say that this is a little ambitious :)
I was listening to an analyst/fund manager recently. He is bearish about the US market. He absolutely agrees that the fundamentals of the US stock market is screaming "overvalued". He doesn't understand why the market isn't crashing further. He doesn't understand why the market is positive when interest rates are up and there is a very, very good chance of a bad recession around the corner. YET ............. his technical indicators showed a short-term bull run and he has bought back into the market into growth stocks (i.e. stocks that are expected to REALLY crash in a recession). As he puts it, he has figuratively put a peg on his nose and invested in stocks that he thinks "stink" and are going to crash sometime, but he is taking advantage of the situation to accumulate more wealth. The point is that fundamentals are not always the way to make money ..............
I can't explain technical analysis, but it seems to often work. I know there are people on both sides - hardline technical vs hardline fundamental. I think an effective and nimble investor has to use both. I have not been nimble and I think I have missed out on a significant wealth boost. We can argue till the cows come home about where Thungela SHOULD be, but let's not hide the fact that it is currently 60% down from it's highs in September, representing a huge missed opportunity to sell high and buy low (which does look to have been predicted by the technicals ............)
One more thing. There seem to be investors on here who believe in buy value and hold. Well, a number of analysts are saying that those days are over for the near future. We are moving into a long period of high volatility and the halcyon decade of QE and low interest rates, where one could buy into almost any stock and watch it gain steadily at 5-10% per year are over - it's now the time of the experienced, knowledgeable, nimble investor who can stock pick and is prepared to buy-and-sell. As one guy said, we are moving into a market where one could buy a stock and 10 years from now, be at exactly the same price, not due to any particular crashes in the market but because the market is just bouncing around within a band. Thungela may or may not be one of these type of stocks
It seems that some in the coal community see it the same way. Here is an extract from one of the sources out there, The Coal Hub (https://thecoalhub.com/world-coal-market-brief-overview-65.html):
"Gas contracts on the TTF hub firmed marginally to 655 USD/1,000 m3 (+15 USD/1,000 m3 w-o-w), supported by more active gas intake from EU storage facilities. Overall, in the medium term, coal indices remain under pressure, resulting from a combination of such negative factors as above-normal temperatures, high coal inventories at ARA terminals as well as gas prices sitting at their lows over the last 1.5 years.
South African High-CV 6,000 quotations climbed above 145 USD/t on higher demand from India on the spot market.
South African Richards Bay Coal Terminal (RBCT) announced plans to boost transshipment in 2023 up to 60 mio t (+19% to 2022). This is an ambitious target, since South African exports fell to 50.4 mio t in 2022. At the same time, the RBCT’s design capacity is 91 mio t/year. India remains the key export destination for RBCT supplies, with a volume of 15.5 mio t (-8.6 mio t or -36% to 2022). Shipments to ****stan dropped to 3.0 mio t (-8.4 mio t or -74% y-o-y).
Deliveries to Europe jumped six-fold, to 14.3 mio t against 2.3 mio t in 2021, while exports to Morocco soared roughly two-fold, from 0.5 mio t to 1.2 mio t."
So, Europe is definitely currently one of the main RB coal price drivers - 14.3mill. (Europe) vs 15.5mill. (India) does show that Europe is a major player for TGA at the moment .........
EdwardSeaton : I agree with you in the longer term and with China fully online, but in the short term, it is the European market that is the current driver. I do not dispute (in fact, I expect!) the market to revert as soon as the pressures applied by Europe on energy prices is mitigated or removed. Last year, it was quite obvious that as Europe madly scrabbled for gas, the Dutch gas TTF prices skyrocketed. In one of the coal circulars it was reported that SA companies were being approached to provide coal at premium prices because Europe was prepared to pay these prices, since even at these elevated prices, coal energy was cheaper than gas energy. This had transitionary effects on the coal price at Richards Bay, which directly inflated TGA income, thus TGA sp (from it's perceived base, if you will ........ I'm not arguing that the current price is realistic).
So, until I see a break in the correlation between European gas prices and RB coal prices and/or get a plausible alternative correlation, then my current explanation for a large part of the effect on TGA sp is the European energy market.
pedro61: Can you explain what you mean by reasons for last year's rises still being intact?
One of the main reasons was that Europe were suddenly very scared of running out of energy over 2022/2023 Winter, were buying gas wherever possible and the gas prices in Europe shot up. Coal became a cheaper alternative, either as a backup or to reduce gas consumption and thus the coal price remained high throughout the middle of last year. However, the Winter in Europe has been unseasonably mild and gas draws lower than expected, so coal prices have come tumbling down. So, this definitely has not remained intact.
Also. supply chains were shaken up last year and must have placed some upward pressure on coal prices - some of these problems are likely to have been ironed out going into this year. I would argue that this as an upward pressure on coal prices has also not stayed intact.
Finally, and related to the other two, Russia has already cut most of its gas supplies to Europe, so I don't see there being much more that will happen on that front, again removing an upward pressure on coal prices.
I'm not saying things won't change again later in the year, but this is not a given. And any upward pressure may be much less than last year.
Hence, my query ............
Malik : I agree overall, but in the short term, for the next dividends, the timing of retention of funds will potentially have a big impact. If not the next one, definitely the following one. As at end of last year, TGA probably had accumulated about £525million for dividend distribution excluding the retained R6.6 billion rand as contingency and for future expenses associated with remediation at end of life of assets ........), equating to a divi of about £3.20 for July-Dec 2022. TGA won't be accumulating at the same rate as H2 2022 because the average coal price is significantly lower from the get-go in Jan 2023 - average price in H2 2022 was about $264/ton and Jan 2023 has been about $160/ton (equating to a divi of about £1.20 for H1 2023 if assumed for whole H1 2023). If the R4billion investment is retained from H2 2022 distributable cash, divi is reduced to £2.33; if retained from H1 2023 cash, then divi paid in October goes down to £0.36 .............
Now, this is a simplified calc, only taking the worst sales for last year and taking a simple reduction of dividends due to the acquisition, so do more detailed calcs if you can or want .........
Optimus: If in the UK, one needs to consider the £/$ or you have to look at R/$ and R/£ together. Stronger $ vs £ means more £ earnings per ton sales (doesn't really matter what the rand is doing vs the dollar since the exchange couples may not be moving in the same direction at any given time).
In SA, of course, the R/$ alone is important. Taking your statement of stronger $/R bodes well for TGA, definitely true for TGA in SA, but a simultaneous stronger £/$ would reduce the expected £ divi at the same time for UK shareholders .....
Great optimism! I seriously think that this share will hit the £15-£20 range again, but only later in the year (although if I'm proven wrong, I'm not going to be unhappy!)
I think in the near term, though, it can go lower. But if it gets anywhere near £5, it would be a joke - the coming dividend could be as high as £2.60 after SA tax (I've even seen analysts predict £2.70s), so for investors to expect a 50% half-yearly yield is taking the ****!
All of this true. But I guess, with the coal price dropping, it directly impacts where the price sits. So, yes, decent dividends on the horizon, but the value at which the share price sits is affected by the predicted income and dividends.
At $150/ton, 10% yield per half year and moderate sales (6 million tons per half year), pricing will be in the £10 region.
It seems that the share price is responding either to the predicted earnings for the NEXT half year based on current coal price, or there is some news item in the background that is impacting the share. Last year, it happened a few times that their was some incident that only came to light a bit later that explained the sp price move. Could be the same at the moment.
If I understand the head and shoulders correctly, as long as any retracement doesn't go above the "head", it's still a valid formation. So, doesn't even need to close below 1062 now, but also later ........
However, I have also seen opinions that the head-and-shoulders formation is less reliable nowadays, due to more freely-available market info ........... and one needs to find a number aligning indicators rather than just a single one. Head-and-shoulders can be poor quality and be rejected on its own pretty quickly after forming ..........