The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
I think you're all right. Market has been suffering as ten year yields continue to squeeze, meanwhile re Jadestone specifically the market is concerned about the remaining life of the Montara FPSO and, as you say, another shut in or worse. I'm just relieved the oil price is holding up, so far.
I hope everyone is content with the share price momentum. It was only a couple of weeks ago that certain commentators were talking about it going to £10.
Hi Damofarl, I really hope that there isn't going to be a giveaway to NNPC to get this deal over the line. I suppose it is better to be cautious and expect the worst, but I hope it doesn't come to be. A giveaway would set the wrong tone in the context of this new administration's reform drive. Also, I don't see a legal basis for it - it would send the wrong message to FDI. But if it comes to pass then so be it. Either way, it must be very close to closing, as all indications from the new government to date have pointed to a resolution. It would certainly send the right message to have this settled before the two year anniversary of the announcement of the transaction.
Regarding the special dividend, this is a difference in perception perhaps - so long as it is clear that the special is directly linked to delivery of volumes at sufficient oil prices, my view is that the market will understand that the special is just that and 100% dependent on those two specific variables. I've seen this before with very cash generative oil companies, namely varying the dividend level according to the oil price and volumes. I don't think it would be disruptive and would underscore SEPL's investment case as a yield play. But in any case, the quarterly base dividend is a great result as it is.
The borrowing facility will be perhaps 500bp or 600bps above SOFR I guess so not cheap but not that expensive in the context of perhaps $400m of free cash flow vs maybe $800m in transaction cost post adjustments for backdating of the transaction and before supplemental payment at higher oil price (2026?). If MPNU goes through they will have plenty of cash flow to raise capex, finance debt, pay down debt, and raise dividend, but we won't know the actual financials until after the deal completes so it's all speculation at this stage. It's all good if the deal completes, that's for sure.
This has been the case for some years, the convents, the currency depreciations etc.
The covenant breaches are related to overdue loan percentages in India and have resulted in ASAI having to shrink the India business because their funding sources are being limited, but India is now a small contribution to the group and there is no recourse to the parent anyway, so there is no financial contagion risk here. I suggest you review the cash flow statement to understand the cash generation of the business. This business is not in any serious financial stress. Its market cap is less than annual cash generation.
My gut tells me the MPNU sign-off is going to be this year - 100% speculation on my part. But also, unfortunately, that OB3 and ANOH will be next year - again, 100% speculation.
I am hoping for too much but perhaps there is a minor chance that the board could introduce a regular, i.e. quarterly, special dividend, because why leave it to the end of the year? Their cash flow is very regular through the year, so why not match with the base dividend?
Anyway, either way, all is well on planet Seplat...one of the best performing mid caps on the LSE in 2023.
I'm intrigued as to why the Q3 results update has been moved to Monday, because the board meeting to discuss these results was today in Lagos and it is usually the case that results are published to the market the following day. Presumably the company is waiting for something in particular.
It seems that this company's market cap is now less than last year cash flow/cash earnings. I don't think there is a cheaper stock globally.
Odey now Lancaster are v v close to this company - they wouldn't be rebuilding their position one week prior to a terrible Q3 trading update, in my view. They have insights into this business beyond anything we have access to - regular meetings with management where they can understand the granularity of the business and monitor body language, and experts with deep knowledge of the sector. This major holding update is a very strong signal.
As for the board, it is legally obliged to act in the interests of all shareholders and, given it is a sizeable company with big institutions on the shareholder register, any funny business such as unjustified lavish share issuance to management or board itself would result in the board being dismissed before it can even happen. Israeli company law is very strict too, holding directors to account for this sort of thing. As I said, were this a Russian company with a low level listing on the LSE I'd be worried as there is no legal recourse, but this is not the case here.
I don't agree with the concerns that treasury shares will be somehow and illegally gifted to management or even its own board. This is just a ridiculous suggestion. It's not a Russian or a Chinese company incorporated in Cyprus or Turks and Caicos (!). I believe they are not cancelling the treasury shares in the event they find a value enhancing acquisition, that's my assumption. Ultimately the treasury shares will be cancelled if they don't find a good use for them. The business is diversified now, globally, with UK driving perhaps a third of revenues. It's increasingly a global business, so the stability and longevity of its cash flows is only improving as the quarters pass. I'd be fine with more in dividends, but buybacks make the most sense in terms of returning cash to shareholders from a tax perspective.
Agree, cutting dividend sends a terrible message and will result in further selling, so should only be considered if absolutely necessary. I don't see how it could be justified. I'd rather see Karo mothballed, frankly. Anyway, I'm pretty confident this won't happen so let's be a little more positive. Reasonable results today given the circumstances.
I don't know their financial situation but highly doubt the Pouroulises would sell Tharisa at a fraction of its asset value, so being acquired is extremely unlikely, in my view. The market value being ascribed to Tharisa does however send a message to management regarding Karo - why invest in a new mine that will be valued by the market at a fraction of its capital cost, not to mention barely be profitable at lower PGM price levels? In my view Karo should be mothballed for the time being and cash flow diverted to paying down debt and raising the dividend.
I am surprised that the stock is down on today's production update. PGM production was short of course and guidance for next year has been reduced, but the miss was not huge, and certainly not very material in the context of PGM profitability at current PGM basket price levels, and also a portion of the PGM reduction has been tactically sought in order to support chrome volumes. Personally, I am delighted to heart that Karo is being pushed out, as this is not the right market to load up on debt to build a mine that is high on the cost curve. I woud dearly like management to address the cost competitiveness of Karo because I frankly question the wisdom of building it with such a murky medium term outlook for PGM pricing. But that aside, THS is managing a difficult market very well in my view, and maintains a strong balance sheet and capacity to meet dividend expectations.
Tamesis:
Key points:
• PGM production below – despite quarterly reef mined ticking up well in Q4 (up 27% q-o-q), overall PGMs produced came
8% below our total year forecast. We note that the main driver of this difference in this quarter was due to the lower grade
feed and PGM recoveries as a result of RoM being purchased from 3rd party suppliers (which is still planned for next year as
waste stripping continues in Fy24 albeit at a lower rate). Management are guiding to a lower PGM output in Fy24 as result.
Despite the tougher interim mining environment (& PGM market), Tharisa cleary are not looking to reduce processing
capacity. The company does operate on the lower quartile of the cost curve compared to its peers, and can be expected to
weather a softer market. In turn this also ensures the full production levels of chrome for Fy24 (guidance up ~8% to 1-7 –
1.8mt). This being said, any improvements in reef mined will only have upside for the company as they reduce the margin
loss on PGMs from cost of the purchased RoM (and grade recovery depending on the RoM materials available).
• Chrome concentrate production being delivered into a strong market– chrome production this quarter is largely in
line with our forecast at 413.4kt, with strong q-o-q increase of 9.1%. Speciality chrome production up q-o-q at 75kt (Q3
FY2023: 72.8kt). Full year production was in line and the company is guiding to a c.8% increase in FY24. Recovery rates
are hitting c.70%, reflecting Vulcan’s performance amongst other parts of the operation. Chrome spot price holding up well
at $291/t vs our modelled price of $280/t and we believe the company is well placed to continue taking advantage of the
expected strong pricing environment in Fy24 driven by supply demand fundamentals.
Personally, I'm content with these results, the guidance, and slowdown of the Karo project while PGM market uncertainties persist.
Do you know what a cost curve is? You're another one of these retail morons lurking on LSE with nothing useful to contribute. Go back to your day job.
Intent to manipulate is breaking the law. You display intent. Imbecile.
The only nefarious contribution here is yours: baseless, without any analytical merit, and likely criminal, constituting market abuse as per the FCA (market manipulation): https://www.fca.org.uk/markets/market-abuse/regulation
I may report your sorry ass.
That "20% drop on open" comment aged well for you. You are a waste of everyone's time.