Member Info for romaron

Hi Titus, I partly agree with you but it is August after all. In these 'dog days of summer' with lower trades the reaction was short lived. I'd even go as far to say that the PFG tribunal report was space filler and on a busy market may not have got a mention. You appear to have contacts and your posts have value. The only thing I can add is that an employee of the FCA remarked that they receive less complaints about PFG than other companies in the sector. Add in the fact that we are the biggest then that surely suggests an improvement. Weak and anecdotal maybe but I trust the source.

It's true investors are avoiding PFG but we aren't paying a dividend and there is always a lull after 'restructuring'. The board is impressive and they are individuals who value their reputation. Their skill sets and experience are impressive. I actually think the company is stronger going forward. It is a sector that likes to take short cuts and they inevitably return to bite youinthearse. PFG has learned a lesson here.

*O/T you mentioned Carillion. They cost me money too. I had a short on EAGA when they bought them in 2011. It was an ill advised purchase of a company that relied on Government grants (Warm Front).

Be lucky

The article probably explained the drop in the sp late on Tuesday. I was out yesterday but read the article. Andy Parkinson (53) claims that the “root cause” of the problems were IT, technology, programme and project management, analytics and data that were not under his directions. Surprisingly, with this level of impotence/knowledge he accepted the role of acting MD of the CCD (July 1 2017) after being head of Home Credit since 2013. Ignorance is bliss and a ‘not me, guv’ is always a line of defence. As he helpfully points out it wasn’t until 5 days later that the real issues escalate to the board. Obviously Home Credit was in a different universe to CCD and Mr. Parkinson had never heard of ‘caveat emptor’. There was no mention in the Times of the 16 June Trading Statement which reported problems with Home Credit. Now forgive me but isn’t this where the problems centred? You could argue that with this level of ignorance he was a poor choice for the role anyway.
The other stuff is window dressing and board room excesses are nothing new. You only had to look at Peter Crook as evidence of that. The culture of ‘fear and silence’ is weakened by AP's 4 years there in a senior position. I like the defence that he was not responsible to the board as prior to 1 July 2017 it wasn’t his responsibility. He was only head of Home Credit not the division. A kinda Pontius Pilates defence. As for the ‘death threats’ by text. If he had really worried about them the correct people to tell are surely the police? He claims his dismissal was a “botched attempt to appease investors”. What did he expect, a bonus for cratering the division?

If you wasn’t a giggle go and look at the LinkedIn experience of Jonathan Tarttelin. He also had the gall to take PFG to the tribunal. It was settled within 2 days in April. He led the ‘successful’ tech led transformation programme ‘Turn Home Credit Around’.
I’ve attended a tribunal. A pal was a witness and I had some free time. The trader won but lost if you know what I mean. Citibank hardly noticed the flea bite.
https://www.reuters.com/article/us-forex-citi-tribunal/ex-citi-trader-points-finger-at-bosses-for-culture-that-allowed-breaches-idUSKCN0RB1NS20150911
The only loser tends to be the claimant as the ‘offences’ can be used to restore order and an excuse for new ‘rules’. Some of AP’s claims are flimsy imo. The joke about a disabled regulator whilst in bad taste was probably more a clumsy attempt to be funny. If it was really malicious what did AP do about it at the time? We've all worked with individuals without a filter.

Hi HIS - it's all relative. My latency improved immeasurably when I could download a film rather than pop along to Blockbuster and get the VHS. Some people in remote places can only dream of the latency we had 20 years ago. I also realise that there is a reason many areas suffer and that is that they are not commercial. We will never make a fortune getting the internet to remote villages but sometimes there's early mover advantage but usually not. Others watch you make mistakes and there is always money hungry for the next big thing. We are in a much different space now that H4 is in orbit and the recent Israeli military interest seems to have discounted latency.
Tyche - don't get too excited. The new CEO was a free transfer (out of contract) and is the sales team new? Having said that H4 is attracting interest. I still think somebody will buy us for H4. Whether it's in a liquidation sale or an auction is not clear. We've built it; now will they come?

Be lucky

(cont) The Investment banks were the masters of these trades and almost all hedge funds are staffed by ex- investment bankers. I doubt Lansdowne would ever explain to PFG let alone us but if I were the directors of PFG I’d try and find out. It just seems odd. If you short the stock and buy bonds you’re kinda neutral is what I suppose I’m saying. The recording of these trades may mask a derivative that isn’t as harmful as an outright short. In the scheme of things they even out but as this trade started nearly 6 years ago I haven’t the will to start digging into past bonds (I’d probably get lost anyway) but it suggests to me that they have their own algo/derivative that they’re happy with. It doesn’t look like a vanilla short to me just on timescale. Has anybody reading this any suggestions?

Our bonds are investment grade and the negative outlook is hardly surprising after 2017. The upside of holding equity at this time is that although they suffer more in a downturn when things improve, to use the words of Tempus, there is massive potential.

*Around 2012 Wonga was considering floating for more than £1bn. They’ve just borrowed an emergency £10mio to stave off collapse. They are on the wrong end of complaints and are facing increased compensation payouts. I think we’ve always been more responsible and the CCD debacle was partly an attempt to avoid future problems. I think we’re better set up to comply with regulatory hurdles which aren’t cheap to install and follow.

The strange subject title is to focus on how things interconnect. Anybody who has older relatives or a condition with either organ will grasp where I’m coming from. Treatment of one can exacerbate the other and the hospitals fine tune the medication because what benefits one can have an adverse effect on the other. Bonds and equity have this symbiotic relationship too. I occasionally look at the shorts and for some time I have been flummoxed by the holding of Lansdowne Partners. They have been running this position since November 2012 2.59% to today 2.19%. The other shorters are of a more recent vintage. In 2012 the share price in November was around a tenner and we have seen it go as high as £36 until the more recent excitement but throughout the turbulence the recorded short was little changed. In fact the current short hasn’t changed since April 2016. Should it be in a dormant account? Maybe it’s an arbitrage deal of some kind? It is relatively important because if you remove it the shorts drop to 3.66 and for them this must be buttock clenching time.

I would also throw into the mix that these shorts aren’t always a simple punt. What if they’re playing the spread between the bonds and the equity? If you’d shorted the stock on Aug17/17 and bought bonds 7%Apr14,2020 (£18.89 v 109.03) on the 31 Aug 17 they were (£8.58 v 93.70). Covering the short stock was probably cheaper than the bond yield so we can ignore that so you’d have lost 14% on the bond and made 55% on the equity. Then you could have a trade where they’ve gong long on another lender and hedged against PFG. I’m not saying this is what’s behind Landsdowne’s position but the FX market was doing these kind of trades in the 80’s between FX forwards, Deposits/loans, Treasury Bills, futures etc. Recording trades can be clunky and accountants don’t like them for this reason. Tortured figures or wrongly filed figures don’t always tell the truth.

(cont)

Oh dear velo, I seem to have upset you. It doesn't appear difficult.
It was an article after interim figures. That is what newspapers business journalists do; report and add a little more colour from a different perspective to the company's. PFG is in the nearly early stages of a recovery and your obsession with figures seems to draw you to conclusions that nobody can know. Some people do not buy The Times and I was contributing to this bb for them. Did you read the actual article? Apparently not as you have a very low opinion of any journalists but don't like it when someone says they prefer news and opinion from a reputable source. The better journalists have excellent sources and require collaboration and verification. This was a comment on the interim figures and I suppose it's only fair to add the final conclusion of the article.

"Advice: BUY
Why: When fixed and growing again, has massive potential"

You can take a punt on whether the fix works and growth resumes. Or you can listen to velo. I know what I'm gonna do.

(continue)
The figures. With 148 mio shares the price reached £36.16 (Nov 2015) making the company worth £5.35 bio. 253 mio and £23.88 makes £6.041 bio. Impossible? So was Leicester winning the Premiership. There was no date by Tempus but I reckon I’d be long gone (or at least reduced) before it reached £23.88 but with PFG the market leader in this sector who’s to say what the future holds. One thing for sure; the poor will always be with us. It says so in the Bible but you may disagree velo.

What a strange post velo 00.33. You seemed to be reading things into it that were not stated. I merely quoted a source and the summary. Your dismissal of a reputable source was spoilt by you comparing them to yourself. Intelligent readers here of course realise that future guidance from any source is still guesswork but I still prefer verifiable sources with a reputation against anonymous bulletin board posters. When Martin Waller edited Tempus he won Financial Journalist of the Year and although he has left the bar is set relatively high (you just need internet access and a password to post on LSE). I’d go further and suggest that Neil Woodford and Mark Barnett are better at this investing lark than anybody posting here. Short term traders have a different view to long term traders and if you’re expecting volatility and fireworks on PFG going forward I’d set my sights on other stocks.
The article stated that the company now has top quality Directors and they need time to bed in and change systems and culture. It is a work in progress and the balance sheet has been repaired. Home Credit is returning to profit whilst Vanquis and Moneybarn are on the up. You ignored these and criticised the mentioning of an eventual return to “above £23.88” as being risible. I just accepted that it was an optimistic wet finger in the air but not beyond the realms of possibility. There was no time line on this but personally I’d have been as happy with £10, £14 etc.
I agree that the £23.88 refers to the first profit warning because the month of June 2017 started at £30.51 and closed at £23.66 source: londonstockexchange.com
I was surprised at you being unaware of the shares in issue back in June 2017. I was doubly surprised that you put a deadline of 14 months on the Tempus article. I didn’t read it as that. If he [Tempus] had wanted to be really contentious he could have used the figure of £36.16 from 17 Nov 2015 (they got there from a low of £6/7 in 2010/12 when I first started investing in them). I realise this is old history for you but you know what they say about it repeating itself. I spent a lifetime with figures and if you torture them long enough they will say almost anything but reluctantly I will defend Tempus.
The 2010 period was different as you had falling and very low interest rates which benefited PFG. There was less scrutiny and regulatory involvement then (remember Wonga?) so this time it will be harder. On the plus side for most of the rise I mentioned they didn’t have Moneybarn (2014) and Vanquis wasn’t the giant it is now. Any future growth in the sp will be the compounding effect (eighth wonder of the world: Einstein) and is dependent on us outstripping the competition. I think we have been first movers on new regulations and it has cost the company plenty. I’ve been reading some pretty alarming stuff about Amigo loans and rogue agents are an accident waiting to happen.
The figures. With 148 mio shares the

Tempus wrote after a preamble about PFG's problems in the recent past, many of its own making, finished with this:

"Now look. It has a new chairman in Patrick Snowball, a former Aviva executive with a history of turning businesses around, a new chief executive in Malcolm Le May and two new independent directors, including Angela Knight, former chief executive of the British banker's Association. It has overhauled doorstep lending, which, while loss-making, should receive full FCA authorisation inside five months and turn a profit next year. profits at Vanquis and Moneybarn are on the up. It is the other side of a £331 million rights issue and a £250 million bond issue, which means its balance sheet has been repaired.

Provident is being open about its failings and is fixing them. The shares up 53p to 670p yesterday, were above £23.88 only 14 months ago. They could get there again."

Intriguing find Robbie, they trialled it with H2 so no doubt if this is popular then the scope of H4 will only help demand. If the military like it then it proves robustness and effectiveness, just what they need in Africa. A lot of products are developed by or for the military and then adapted for the much larger commercial market. The Israeli military may not always be popular but they are always respected.

At the end of the webcast in QA Malcolm Le May was asked who PFG's competitors were in the CCD area. He said NSF, and Morses. He was being diplomatic about agents and customers lost to them by pointedly (imo) saying that he doesn't comment on competitors. There was some gloating at the time from these two companies as they picked up agents and customers from PFG but it resonates with what I think is happening in this area of the market. He added that the regulatory environment will put increased pressure on those involved and PFG are further ahead on the necessary checks and balances required. This is not cheap and earlier in the presentation it was pointed out that it was difficult for others to break into their (PFG's) market (a moat). PFG are certainly ahead of the curve and I wonder if there was any way of changing decades of collecting Home Credit techniques without the pain and costs associated with any leap in technology. We've done it earlier and learned important and expensive lessons. The term 'door step lender' is heading the same ways as 'wick trimmers' as today's methods finally kill them off. Where PFG leads others have to follow. I wouldn't be surprised to see some agents return. The new Board appointments also augur well and I'm much happier. Some posters here seemed to have missed the effect of IFRS 9 on the figures which I'll admit to being shaky on but get the gist of them. They are a one off and as this is the first the comparisons aren't like for like.

* Vanquis competitors were stated as New day, CapitalOne and Barclays.

I think that a combination of this " Based on the good progress made in the first half of the year, the Board reconfirms its intention to restore dividends with a nominal final dividend for 2018." and the appointment of Patrick Snowball, who is by any measurement a proven winner, have reassured the market. Home Credit is a dated business and little changed from the 50's when my parents used it. I particularly like the mandatory recordings for all sales transactions, It obviously makes it harder for the CEM's who like to sail close to the wind and if their performance fails because of this, I say good riddance. Let another company employ them and take on the risk. This business doesn't need loose cannons. The condolences towards Tina Cantello and family seem sincere and I for one appreciated the mention.
As an aside I indirectly heard that a long term junior employee for the FCA was asked about PFG and complaints. They replied that they get hardly any complaints about PFG. Hopefully most problems are now in the rear view mirror.
Listening to webcast now.

From a thread written by a guy who worked in the industry:
"Can’t turn plans around that fast. Many years ago I got called by a company executive who asked me what the prior day’s production had been. He got a bit upset when I explained that I didn’t know, but would have somebody give him the number in a few minutes.

Seeing that he wasn’t satisfied, I had to explain to him that we ran like a factory, and the daily issues were handled by the field supervisors, that I had people making sure things were done properly so that weekly production was as expected, another group of people working on the execution of projects which would give results in several months, a group working on medium term projects, and a group which was mostly geoscientists and petroleum engineers worrying about what we could do in a couple of years. And that our success required that we worry about all these groups, making sure they got raises, training, and pizza when they worked late. Which meant I really didn’t worry about daily production because if something had gone wrong they would have told me about it.

I’m explaining this because you don’t seem to understand much about how run things properly (if you happen to know much at all). The reason we can’t react that fast is because we have a lot of inertia, we work lean, we don’t usually keep extra tubulars and wellheads sitting in a warehouse, nor do we build road and locations several years ahead of time. Running an oil field is sort of complicated. Quite a few of those who get to run one can’t do it properly even when they have 20 years in the industry."

Rings true don't you think? Human beings are so imperfect and come to that; machines and oil fields can have their moments too!

I disagree squif. I have confidence in AB and our bonds never went as low as INEOS's (10 cents to the dollar) for example. We are not a private company but have some of the qualities. I think that AB has made Enquest his life and success means everything to him. I cannot see him working for another company. He is, as they say, all in. Jonathan Swinney is also very important and I'd like to think there's a third as that can prevent too much autocracy. The collapse of oil wasn't anybody's fault and I'd even suggest that stewardship over this period was the most difficult they have ever faced. It took grit and talent to get through it.

The Moody comment was the instant reaction I got. 'Are they on watch'. The fact we were and aren't any longer is a plus. We then got on to why FIAT argued that they deserved a better rating than the Italian Sovereign Debt which Moody cannot give (Sovereign is trumps) resulting in FIAT refusing to subscribe. This was in the 90's. I used to discount bills and most required ECGD cover but only in the funding side. They were just another loan to me so my knowledge of bonds is limited. I even bought Gilts but only on the instruction from the MD. Interest rates went up and they were moved from trading to an investment. You can move figures into different columns but it all catches up with you eventually (unless the cavalry arrives).

It feels like we're not heading anywhere but I believe the cash flow is growing and the good old compounding effect will make it impossible for Institutions to ignore us for much longer. Our core Institutions have stayed loyal and BP love us. Moody have hinted that with a small increase in production that another upgrade is on the cards. I think the old maxim could be the answer here. Sell in May and go away etc.... and look again in September.

Just went through the list of shorts and oil is doing pretty well (Premier only 1.18 percent) but noticed that the Service company Petrofac is still not out of the woods (9.34 percent) and we do have history with them. Then you go a bit further and Wood Group is quite high (6.85 percent). I don't follow them closely but Petrofac can't seem to throw off the bribery claims and maybe Wood will have trouble digesting Amec Foster Wheeler. It's never simple.

It now appears we have no shorters who hold above a half percent. There was however 5.77 percent stock on loan in June. Look at any stock under pressure or targeted and there are always hedge funds holding a half percent plus and in most cases it costs a lot more to short them than to short Enquest. It could even be that at this low valuation it ain't worth their time? Cairn Energy (for example) has 4 hedge funds with a total of 3.16 percent and the stock on loan in June was 5.42 percent. This could be a play on the Indian Court case with Cairn for example? A conclusion might be that we [Enquest] have plenty of shorts under the magic half percent. I don't think it is as simple as that. It's probably the bulk but there are other reasons and they aren't always stock specific. Say you wanted to short Brent and go long WTI? Another way of doing this could be to go long a US shale company and short one heavily into Brent. I realise there's exchange risk as well but money could have been made on this trade recently for companies that follow the poo closely. It is never simple but what I'm trying to say is that just because somebody has sold Enquest it doesn't always make it personal or stock specific. They take a view on supply and demand affecting different benchmarks of oil. It might even be a confection of Brent stocks, who knows what the Algo programmer put into his black box. They can trade whilst we sleep. I quite like it that we are no longer on the above a half percent list.

*I met with an ex Moody's friend this week and although it has no doubt changed since their time did say that the first thing that always cropped up in discussion was 'are they on watch'. We are not.

I got a call from an old pal yesterday, early afternoon (2pm)). I asked where he was calling from. He was on his way home. He runs a company that provides Institutional level information to clients like Goldmans, JPM on a variety of products: Global Bonds, IR Swaps, Futures/Options & Repo plus written, intraday, time sensitive, coverage of FX Markets. He moaned that he had had enough. Nothing was going on. I realise this isn't about oil and only mention this because a lot of traders are away and markets are very thin. Any momentum is likely to overshoot in these conditions.

These are Peter/Paul transactions but they are loaded more to the front end. They are rebuilding the balance sheet and reserves in a prudent way. There is nothing unusual in discounting (or hedging) future oil production and once again is prudent management. The bond market is showing cautious optimism and that does make a change.

Regarding Magnus the deal was made when oil was between $45 and $58 in the preceding 3 months and it would be a brave man to forecast the price for the next few years! It was probably being negotiated during the tidying up of the restructuring. Enquest took on the bigger risk. For BP it was win/win. Oil goes down they've got rid of a liability. Price goes up and their investment in newer fields grows faster. So far it is also a WIN for Enquest with higher oil prices. Enjoying the debate between Fernan and EPS. Torture any financial figure long enough and it'll say what you want. Optimism/pessimism and forecasting are the variable factors that we cannot control.

This is important HeavyMallard and glad you brought it up. It was only on 14 June that Moody's increased the credit rating from caa1 to B3 or in words from substantial risk to highly speculative. Accompanying it was the comment that a further upgrade would follow if production exceeds 60,000 boepd. MO said yesterday that we're already around 60,000 boepd and he's usually accurate. You cannot ignore debt and that is what has been driving the share stock price as it is a much bigger percentage of the enterprise value. It is worth looking back occasionally. The risk is in the sp and until the debt market feels we are copper bottomed and happy with FCF the sp will have a restraint upon it.

I came across this from negative research in April 2017 "(Best-case scenario, when oil at $80); – Enquest’s shares should roar higher, as the prospect of debt repayment is likely. That and higher profits would drive the shares to 70 pence." source Walbrookresearch.
It also wrote this which we like to ignore but is fact. "Here is the evidence why the Enquest PLC will serve the bankers because of the “debt-to-capital” composition is over 70%.
That means shareholders controls less than 30% of the business! (i.e. less say in the company)"

Things change as they say. Clearly we'd have gone under without the oil price rise but we knew that it's a cyclical market. We're getting stronger by the day.

Be Lucky

Hi Squif, I suspect that the oil price has been engineered lower to flatter Trump and get him in the right position to come back from his trip saying that once again he's saved America and the World. There are various interests that can be traded off with Israel, Russia, Saudi Arabia, Syria, Iraq and Iran regarding oil. He's even mentioned Germany's reliance on Russian energy. He is getting results and that is because he is using new techniques and playing to his populist support base in the US. It appears he likes being Emperor and will want a second term.

I see him surrounded by sycophants like Canute only the difference being that he really does think he can turn the tide. You just have to weather periods like this. Some window-dressing for sure but most of the players in oil want and need a high oil price. This level is fine for Enquest but like the Opec agreement there can be treaties and deals
which artificially affect the price. We know Trump wants it lower but he can only influence it for a short while. Nothing we can do about it so relax. Enquest is getting stronger by the day.