Member Info for SeaTank8300

These are large volumes for a relatively less traded share - I don't know what MMs keep on their own books but would be surprised if they do such amounts in a name such as Seplat. I'd be interested to see who has raised their positions. Lately it has been Africa funds and income funds that are close to the situation and understand the opportunity. It is good to see big volumes going through at elevated price levels, in the context of the last several years. The chart is a really good one too as Seplat has steadily achieved higher highs and higher lows for some time now - since the 2020 low basically.

Big volume going through today

Very pleased to see high volume/value traded today in Lagos: £1.9m in traded value at 190p share price equivalent. Another resounding thumbs up for the opportunity here.

Oi Oi Savaloy, the VIX has been on a downward trend since March, from a level of around 20 in the first half to a level of around 14 since June, so PLUS would be expected to see softer revenues in the second half on the basis of lower volatility, generally speaking. Apart from this, the UK mid cap market has been soft since June, and also Odey continues to reduce their holding (vs in the past they were always buyers) from 1.78m shares end June to 0.7m shares today. Combined, it is not a great surprise that the share price has been on the soft side, but this overlooks the fundamental qualities of the business and very low valuation. My belief is that as PLUS shows concrete progress in the US, where they hope to grow to $250m in revenues in 2-5 years time, investors will wake up to the consistency and diversity of the company's cash generation and gradually bid up the stock to a more appropriate valuation level. I see no cause for concern here. This level is an opportunity for further accumulation, IMO.

I beg to differ dohers. At no time over the past almost two years has the MPNU acquisition looked a more likely outcome than today. Tinubu's advisory council on the petroleum sector has explicitly advised completion of these divestment agreements. Eni's sale, without offering NNPC first right of refusal, sets a precedent that will be impossible for a court to ignore, in the likely event it even goes to court. Seplat has never had any really powerful insiders, yet is one of the largest indigenous players in oil and the largest in gas today, from nothing a little more than a decade ago. Still, the former founder Avuru seems to have the ear of the president on petroleum policy, so the company is not without lobbying muscle. I'm not naive about how Nigeria works, but the law and courts can be expected to function, eventually, if it must go to court. The rising local share price of Seplat suggests there are local investors who are also believers, so I'm not alone.

Anyway, with or without MPNU, SEPL is a big dividend payer and will enjoy a step-up in cash generation in 2024 when ANOH is operational. Catalysts are in place, time will deliver.

Https://www.thecable.ng/sources-nnpc-against-sale-of-agip-nigeria-to-oando-over-breach-of-agreement

"In a statement, the NNPC said it is not against the sale of Agip Nigeria to Oando, saying its subsidiary was only raising concerns over JOA terms.

“It has come to our notice that a letter written by NEPL to NAOC is being interpreted to suggest NNPC Ltd is opposed to the sale of Agip Nigeria to Oando. This is not true,” said Garba Deen Muhammad, chief corporate communications officer,

NNPC.

“The letter was sent by NEPL, an NNPC Ltd subsidiary. But pls note that it is not an objection to the transaction. NEPL is only drawing attention to certain important clauses in the JOA, which might have been overlooked in error. Adherence to those clauses will protect the transaction now and in the future.”"

Do I read that in principle NNPC is not against such divestments without being given first right of refusal? Interesting.

Dowgate Capital:

TPXimpact has released a Trading Update which indicates LFL revenues grew +11%

in Q1 and +26% in July and reiterated its FY guidance; the AGM is on 28th

September. The group has performed strongly this financial year, with LFL growth

of +11% in the Q1 to June, while the operating margin was in line with budget. New

business wins in Q1 exceeded £90m driven by the two major contracts with HM

Land Registry (up to £49m/4yrs) and Department for Education (up to

£27.5m/2yrs). As these contracts have come on stream LFL revenue growth has

accelerated from +5% in April/May to DCe +23% in June and 26% in July which puts

the group firmly on track to achieve its guidance for 15-20% LFL growth in FY24,

with an EBITDA margin of 5-6%. Net debt ended June at £17.9m and the group’s

new banking covenants came into effect on 1st July. We retain our Revenue and

EBITDA estimates which are set in the middle of the guidance range in both fiscal

2024 and 2025. We maintain our view that, as confidence builds in the delivery of

revenue & EBITDA and debt is paid down, very significant value will be recreated in

TPXimpact equity. We retain our Buy recommendation and target price of 90p.

Eni sells what sound like onshore assets to Oando:

https://www.reuters.com/markets/deals/eni-sell-nigerian-oil-gas-unit-naoc-oando-2023-09-04/

Another indication that the government is supportive of such divestments again. Just a matter of time for Seplat.

Agree Tom111, the NIFTY 50 local index in Nigeria is near all time highs in US dollar terms, and SEPLAT NL closed at 193p equivalent last Friday. The locals know the local risks and opportunities better than anyone. I believe the discount of the LSE line will have to close. Seplat is steadily closing in on this MPNU acquisition + about to commercialise ANOH, which is probably why the local line of the share is trading at such a fat premium.

My final word was cut off: "ramp... yield"

Management have been explicit about passing on cash generation to shareholders. The dividend is going north fast from next year.

Hi Seplatwinner

A few things for you to consider:

1. oil production is really the key to their profitability and cash generation today, currently running at circa 30k bopd.

2. gas sales are worthwhile since they are under long term contract at fixed price levels and involve processing so this is a "mid-stream" business and hence annuity type cash flow, but are much less profitable - they need to scale this business, but it could be valued by the market at a higher multiple than the oil side, ultimately, as this is a less volatile cash flow stream compared to oil.

3. I believe reserve life is 25-30yr plus, but I don't have the figures at hand

4. $250m annual FCF seems fair at a circa ballpark $75 oil price level, but I'm going from memory

5. When you calculate EV/FCF, yes you are correct in your figures, however note that Elcrest (Eland acquisition) owes Seplat around $400m in financing for OML40, which is now due to be settled around 2027 I believe - it was a complex transaction, but assuming OML40 becomes more productive, this loan should get paid back to Seplat; hypothetically, this $400m will pay down debt or end up in cash reserves or be returned to shareholders between now and 2027.

6. Re MPNU, from what I hear the original deal terms remain in place and a reduced ownership of production is unlikely as NNPC does not have the financing to buy additional working interest from MPNU; it is even possible that Seplat increases their stake in MPNU as NNPC needs cash and the President is a market-friendly reformist.

7. MPNU operated assets produce 300k bopd, mostly in oil, of which 95k bopd is MPNU working interest - this is what Seplat is acquiring (95k bopd); i.e. on completion Seplat oil production will rise from 30k to 125k, which is +300%.

8. MPNU reserve life is more than 15 years as far as I remember

9. We don't know the profitability of MPNU and bear in mind that these are Exxon assets so the cost base will be bloated, plus they are shallow water so more expensive to operate. That said, I think it would be safe to assume MPNU FCF is at least $300m. It could be very much north of that. It could be $500m. We just don't know that detail yet.

10. You need to factor in the debt raised to acquire MPNU - namely the price tag of $1,600m minus cash deposit paid ($130m) minus FCF in the meantime since date of acquisition (1 Jan 2021), i.e. reducing the cash payment by $900m, so additional debt of $300m on completion + $300m additional payment in 2026 given the high oil price as per terms of the deal.

11. Factor in that one year from now FCF of the combined will have paid off the $300m debt for acquisition + generated additional $300m on top. So you should consider a 1-year forward EV/FCF target multiple (it changes the outcome a lot!)

All the above points to SEPL being ridiculously undervalued for what is a large, diversified, and I'd argue operational low risk producer with track record in dividends and explicit intention to ramp y

Namely $60m-$70m in annual free cash flow to Seplat, enough FCF to double the dividend, which has been the stated plan for at least three years. Yes, FCF from ANOH will be funneled to shareholders via dividends. This is literally months away. I've been holding for four years waiting for this.

Well there you go, Berenberg has just raised their EPS estimate for 2024 by +18% and 2025 by +10%. Did I not tell you so!

Thought I would point out that the near-term pipeline of hotel projects will deliver £25m of EBITDA as per the results release, which is equates to a 20% increase in 2023 guided EBITDA. On top of that, we can expect occupancy to continue to recover and RevPAR to grow at least in line with inflation, probably beyond inflation if current trends remain.

Consensus forecasts for EBITDA in 2024 and 2025 are £140m and £157m, respectively. Too pessimistic! A 10% yearly growth in EBITDA to 2025 + £25m EBITDA from new projects = £170m in EBITDA, which is a CAGR of 14%. Easily achievable in my view. The street will have to raise their forecasts.

The equity is currently being valued at £460m today. Such a low valuation on the stock doesn't make sense.

In my view, £170m of EBITDA @ a pessimistic cap rate or yield of 7.0% suggests a gross value of assets of £2.43bn. That is in line with the valuation under EPRA methodology, as it happens. Seems very fair to me, for growth assets with inflation protection. So the EPRA NRV per share number is absolutely FAIR and LEGITIMATE.

The realistic value for this stock is £25.

This is an asymmetric risk-reward opportunity in my view. With a diversified and high quality asset base, downside is basically minimal. That leaves >100% upside opportunity.

$313k value traded, which is meaningful enough. A good sign that locals are pushing the name higher.

The current share price level is 187p equivalent at the official exchange rate, or 158p adjusted for the black market FX rate, which is a 28% premium to the LSE line. That is how locals are seeing the fair value of SEPL today.

Sorry, this message I posted was not intended for the SEPL board - it was for the PPHE board,apologies.

Their return to dividends and/or other capital return is great news

This is great news - 3% yield if paid in dividends

Was it not just a change in major holdings?

I can see that Lombard Odier increased holdings by 1m shares yesterday.

As an aside, my data feed is showing me that Global Prime Partners added around 2m shares in July and Otus Capital Management purchased an initial position of 3.8m shares during April.

I also see that there have been significant increases by UBS trading accounts and Hargreaves Lansdown.

Oh well, hopefully LSE engineers are fixing this issue.

As I said, I own both. This is how I see it. I still own JSE because I have lost 65% of my investment and it'll probably recover, maybe. SEPL in my view has just as much upside with less risk of downside surprise. Lesson learnt here. But I still hold.