Member Info for ragnarlothbrok

Interesting movements in the basket lately indicating the uncertainty around the PGM market supply/demand balance... Pt up $40/oz in a few days and approaching $800... Pd seems to have stabilised around $2,200/oz for three weeks... and rhodium added $1,900/oz in 2 days...ZARUSD has been slowly disintegrating under a wave of poor sentiment towards the SA economy, not helped by the recent reduction in the base rate. Chrome prices jumped $20/t this week on low volumes after being at extremely depressed levels. Even iridium and ruthenium prices have added 5%+ recently, after being flat for as long as I can remember...

Hopefully SLP restarting production as we speak...

Some news over the last week... another securitisation today. Not many companies in the sector can issue investment grade debt right now.

And another acquisition, not quite distressed as I was expecting. $25m of annualised EBITDA acquired, less around $5m of interest costs should see a 5% upward lift in the annualised dividend.

Natural gas price still looking very weak and so is the SP.

https://www.investegate.co.uk/diversified-gas---38-oil--dgoc-/rns/completion-of-securitised-financing/202004140700094955J/

As expected, pretty ordinary update today given the impact of a 6 day reduction in activity and everything else thats happening in SA. But this seems to be one of the only miners that has not experienced any kind of recovery since the initial falls in March. Nor did the SP move up in line with the increasing PGM basket price. The SP therefore feels pretty overshot to me. I've written off chrome for now but with the other major producers making substantial cuts and the China economy coming back to life there could be an opportunity there to take advantage of some higher prices later in the year.

In 2014 Fairfx completed its IPO at a price of 45p with an enterprise value of £30m, a gross profit of £2.8m and loss making.

Now Equals has gross profit nearly 10x that, with revenue growing at 30%, EBITDA approaching £10m, on a SP of 27p and an enterprise value of £35m after £15m in net cash. EV/EBITDA is less than 5x.

Fair enough a lot has changed since the middle of the bull market but this smells like an opportunity to me. I have been in this for years and sitting on some sizeable losses after exiting around 30p. But I'm very positive on this stock and have been accumulating recently. I think this has a pretty good chancing of 50p this year, and 75p by end of 2021 (if they don't get taken out)

Share price doesn't seem to have noticed...free dividend

https://www.dividenddata.co.uk/ex-dividend-date-search.py?searchTerm=capd

Another reassuring update, one of the few companies that has maintained its dividend. From the wreckage of the US shale industry DGOC may be able to sniff out a few distressed assets from Rusty's list.

Not sure where you get a 15% growth rate, the wells are all generally in a state of decline. DGOC can barely manage to keep production flat through its smarter well management program.

New short broker note yesterday from Cenkos with the above title. Research Tree have kindly granted everyone free access for 2 months so you can get the note for free, but here a summary below. A lot to be optimistic about!

Diversified Gas & Oil is emerging as a new model for the E&P market, balancing low fixed costs with efficient operations to generate consistent cash flows. Since the Company’s foundation, DGO’s strategy has remained unchanged, delivering stable production, whilst maintaining capital discipline to deliver cash flows and shareholder returns. Efficient operations combined with low fixed costs means DGO can deliver strong margins at low prices - vital in the current environment. The DGO model does not follow that of its capital intensive North American “peers” and nor does it follow that of its international London listed “peers”, putting DGO in a league of its own. With many of the Permian oil producers and Appalachian gas producers cutting back on capex in the current price environment, we see a recovery in the gas prices, with the current oversupply of gas turning into an undersupply as production and stores fall away. We believe the M&A market will provide a great opportunity for DGO over the next 12-24 months, with inevitably some E&P’s not being able to survive the current low price environment. We update our model incorporating the extension of the Company’s asset retirement agreement with the state of Ohio, the latest forward price curves and the GBP/USD exchange rate, increasing our price target to 148p/share (from 121p/share) and our BUY recommendation

You can sign up now for free to Research Tree for 2 months, where you can get all Liberum's broker notes on SLP. They released a short note this week and are still very bullish despite the outlook. Its worth a read

My apologies this was from the December Edison report, but there was an update in Feb with 14c. So the correct number should be 14c with 4x 3.5c quarterly payments.

https://www.edisongroup.com/publication/strong-hedging-programme-supporting-cash-flows/26192/

Although official payment date was today sometimes it takes weeks for this to hit my account.

I think this is my only holding which is higher than a month ago. Be interesting to see some stats on new students, expectations prior to schools closing were already for strong revenue growth. Here's a little Q&A from Barry from a couple of weeks ago...

****************************/media/5e62287f0a204d0017843dc5/?context=/?mediaAssetId=

Going ballistic again and dragging the SP with it. Have autos got enough for their scheduled April restarts? How bad will the SA lockdown impact rhodium supply?

Hey lignumvitae, hopefully the board are doing all they can to preserve that cash balance while maintaining its database of loyal customers.

The company was doing £2m a month sales at its recent peak and has done enough to validate the business model in my eyes. Seems decent value for an Mcap of £11m. There a lot more women out there without jobs than a few weeks ago so maybe the recovery will take a while, but I think it will come this year, some time.

Hi O2B@C,

I'm not sure if you've checked the financial statements but the board didn't receive any bonuses in 2019 or 2018. They didn't even own any options.

Senior management receive around $300k a year in cash bonuses. I think you'll struggle to find many companies out there with bonuses at such a low % total staff costs, market cap and profit. I'm sure they will treat these the same way as the other cost reductions strategies they have promised to deliver in the recent announcement.

The SLP team have done an outstanding job over the last few years investing in the business and increasing production to its peak just as metal prices went parabolic. They have been financially conservative to prepare for exactly a day like this. Now because there is a cash pile there's no need for hasty knee jerk reactions, like firing staff or cancelling entitlements or dividends.

The board obviously can't control day to day metal prices. They should be judged by the value they have created over a longer period than a few weeks. I would support them getting whatever they are entitled to.

Looks like the market is deciding that a 20% dividend yield is way too high. 16c at a SP of 80p gives a 2020 yield of around 17%. The weakness in the pound has further enhanced this. After the withholding tax its a little less but still struggling to see indications that the dividend is unsustainable and the vast downside that the SP is implying

TBTT I agree with your suspicion. There are some crazy spreads out there, even on liquid assets like gold, indicating the market is not currently a reliable price discovery mechanism.

While the auto makers have shut down its possible they are trying to secure and perhaps stockpile some rhodium supply given its 50% cheaper than a few weeks ago. But on the other hand, 5-10% of annual rhodium supply has come off after the 3 week South Africa shutdown, that's on top of the Amplats refinery issue. I think 2020 rhodium supply is up to 20% lower than it was a few weeks ago.

Given these huge disruptions to both sides is a >50% reduction in rhodium prices a reasonable outcome?

Indeed.

Revenue is locked in for this year and a big chunk of next year as well. The NGas futures are in normal backwardation so 2022 could be hedged similiar to 2021 prices.

What are the risks... is there a chance that the hedging counterparties go bust and the whole natgas market implodes? Is physical production at risk? The assets are all fairly isolated and shouldn't be impacted by any social distancing or isolation.

I thought it was a very positive RNS yesterday. Revenue growth was stronger than I had expected and they seem pretty upbeat about their resilience. They have written off the 18% revenue from the travel cash business but the cash raised last year should help cushion the blow. They had £16m in the bank at December which will have grown given the revenue growth.

I recently sold the last of my shares in complete capitulation but this business is well poised and I expect to buy back in at some point. With strong revenue growth, a Mcap of £34m, EBITDA of £10m and genuine surplus cash of £10 the valuation would be a screaming buy if the entire financial system didn't seem to be on the verge of collapsing. The poorly communicated investments in systems, marketing etc which they made in 2019 which destroyed the SP were allegedly one offs so 2020 should give a better view of the underlying performance of the business

Luckily SOS have cash in the bank which is more than many companies at the moment. They only have small number of staff so I expect marketing made a very large portion of their costs. Being relatively variable they can switch into cash conversation mode pretty easily. They have as good a chance of survival as any company in this space. Boohoo/ASOS /Next down 40%-70% of their 2020 highs as well.

You are always going to have bitter posters who take pleasure in others' losses but things will eventually get rebuilt out of the ashes, as they have in the past when crisis has struck.