focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
I like the Advfn chat on Reach plc but too many emotive comments with too little analysis for my liking most of the time. For me this stock is about delivering on 3 things:
1) Clearing the pension deficit so that it doesn't hoover up £60m a year in cash until 2027. This is the main drag on the share price as I see it. Helpfully, Reach put the calculation of the deficit in the annual report. For the discount rate which determines the scheme liabilities, they use a corporate bond yield of suitable maturity (this has to be at least 20, probably more like 30 years). They also note that a 0.5% rise in the discount rate will reduce the deficit by £200m, all else equal. Since the end of 2020, the yield on a 30 year gilt has increased by roughly 0.60%. All else equal, this eliminates the pension deficit. If you add in the likely monthly payments still going into the schemes, this is looking very promising development and may mean that the company can revise their agreed contribution schedule with the scheme trustees.
2) Sustaining momentum in the digital space. This is also key to the long term attractiveness of the business. Q1 2021 growth was 25% for digital, the 78% growth number for April 2021 is good but important to give it context, this was compared to the worst month in the worst year for many years in April 2020. Now that digital advertising revenues are ahead of print advertising revenues, it is critical to maintain this good momentum into the coming years. If this does not happen, this is a shrinking business. Shrinking businesses cannot command P/E ratios above 5 in most cases, even with the debt-free balance sheet that Reach has.
3) Minimising the decline of the printing business and continuing to run it in a very efficent manner. We all know print is not a growth area anymore, however it is still a cash cow for the business and is a worthy asset if it can be managed well alognside a fast growing digital business. The fairly drastic operational changes taken last year, including the shutting of two printing plants, seem prudent to me. With the UK economy looking to grow by over 7% this year, this business will benefit from the gradual re-opening and huge pent up consumer demand driving corporate demand for advertising through digital and print platforms.
Would welcome some feedback on this to get the informed discussion going.
Without a doubt busters, Siltronic and GlobalWafers are basically much bigger versions of IQE, albeit more focused on volume manufacturing of wafers rather than innovating new wafer materials. IQE has only just moved into the "foundry" space these two occupy. Interesting that GlobalWafers paid 16-17x 2019 earnings for Siltronic.
As far as I am aware IQE does not supply Apple with materials directly, rather they supply large chip fabricators with the substrates which are used to manufacture chips according to specifications mandated by consumer product manufacturers such as Apple. It would be interesting to find out if ARM is a customer of IQE as they are making the new Apple-designed chips. Apple is not about to get into the chip manufacturing business, that is not their game.
For a company that is still quite small (only £500m market cap), I would actually be very concerned if it started paying a dividend. The company needs all the cash it can get at the moment, in order to make the significant investment needed to capitalise on these great opportunities that IQE has ahead of it. Paying out profits as dividends and then going cap in hand to the banks would not be a sound corporate financing decision in my opinion.
When did they double the size of the processing facility? I thought they had expanded it by 25% by increasing one of the two lines from 30t/hr to 45t/hr (Oct 2017 RNS).
Whilst these results are slightly below expectations, they are far from a disaster. The company can still quite easily sell as much CPO over the first two quarters of 2018 as 2017, albeit at a lower price, which is out of the company's control. The operation is better safeguarded with the capital improvements of last year, so I see some value in the current price.
�1.50 in five years? I admire your optimism but it would need an enterprise value of �450m to be worth that much, it's current EV is �45-50m. Added to the fact that the company will almost certainly have to raise more capital through equity issues to carry out its expansion plans, 10x growth in 5 years is looking rather unrealistic. However, I can see 3-4x growth in that time frame IF the company attain the RCSPO stamp and deliver the Guitry and Ghana projects on time. Any weakness in sterling benefits us shareholders until the company asks for more money, which a weak sterling will make more difficult. However, I do think the management of this firm is pretty robust and in time the market will respond, one must remember that whilst the markets like a profit, what really drives the share price is growth so Ghana and Guitry are really critical for us shareholders.
Dekel are quite late on the interims this year, the cause of which is likely to be one of two things. Either performance has been poor due to another production interruption which they have kept quiet about, or they are delaying so that they can announce something positive re Norpalm. I am hoping it is the latter so that the share price can really kick on, this year has been a time of good operational progress not reflected in the market value of the firm, frustrating times. Also remember that results will be flattered further by a strong euro/weak sterling.
The share goes ex-div on 10th August and the dividend is paid on 1st September.
Frankly, with all the shares given out in lieu of payment to consultants and suppliers in recent years, I'd be pretty irritated if the company did not undertake some earnings-enhancing share buybacks if and when the opportunity cropped up. Irritated is a slight understatement.
The company is allowing shareholders to take the dividend as a scrip issue (more shares) rather than to have it paid to them in cash. The election forms refer to the forms that need to be filled out by shareholders who want their dividend paid as a scrip.
It looks like the offer price of NOK 1.65 per share has been accepted, and will no doubt shortly be approved at the AGM/EGM. What I'm struggling to find is the total cost of the acquisition, as the only page that I can find which states Norpalm's number of shares outstanding is Bloomberg, which states that there are 30.415 million shares outstanding. This would equate to an offer of NOK 50.18475 million, or £4.65 million. Anybody have anymore analysis on the potential value of this acquisition? Is this a good price?