Member Info for Temple_of_Doom

On reflection, I'm thinking the Arqiva buy came up and it was just too good an offer to refuse. The Arqiva deal bust DGI9 in terms of cash flow going forwards - true - but the intrinsic value here is too good to miss IMO and now with Verne Global sold off I'm with Old Bloke in his valuations.

“ there must be some value in the masts positioning etc ‘ Well yes … these are all listed in Arqiva Global annual reports. Let them rust …. to get access to the reserves.

Broadcasting will give Arqiva ripe revenues for the next 10 years and more. Old Bloke wasn’t aware of the assets locked up in reserves …. when I chatted to him a couple of weeks ago … and the market still doesn’t understand as far as I can gather than the £163 million VLN bought a 50% economic interest in Arqiva shareholder loans, that themselves are for want of a better phrase secured on the assets tied to subsidiary reserves.

There is £3.6 billion of historical operating profits locked up in Arqiva reserves but none of this appears on balance sheets because Arqiva is a private company.

As I stated below DB … so correct. Bear in mind Arqiva pulled it’s IPO in 2017, and sold off £2 bn of assets in 2019 or so to Cellnet to pay off shareholder loans etc.

Arqiva makes its money from broadcasting on decline but is growing its IoT business.

I’m very rusty on broadcasting, but I use broadcast to save IP bandwidth at home, while broadcast frequencies are relatively low hence large rooftop ariels from memory so I’m not sure if these frequencies will be able to switch over to streaming on hand held devices … someone more up to speed can fill in whether feasible … but either way I think broadcasting will stay up to 2040 at leadt.

Arqiva Limited June 2023 results:

"Dividends and transfers to reserves

The Directors’ of the Company have not recommended a dividend in the year (2022: nil).

The profit for the year of £342.0m (2022: profit of £246.8m) was transferred to reserves."

Retained earnings tied to equity in Arqiva Limited:

Retained earnings £3,180.8 Million.

for which an IOU as a shareholder loan note is issued to equity holders that DGI9 has around 50% of.

There are no distributions of cash from Arqiva to DGI9. At best, one can think that DGI9 thought it could change the historical flow of revenues within Arqiva but even if so, while DGI9 doesn’t pay off at least the VLN interest cash flows to DGI9 are zero.

Realising value in Arqiva means an IPO or restructure of the business organisation as far as I can see … andvto grab at the value means working out how the reserves are held in Arqiva limited, that are tied to equity.

The challenge lies with unlocking value in Arqiva.

So NAV 84p a share 70% haircut for selling costs as per Verne Global minus RCF gives me 50p a share …. Works for me.

Agreed alibaba … two ways of looking at this … Labour pushing floating wind farms will increase the need for BESS where the revenues Gore street grabs from outside UK is an indicator of potential returns when UK gets its balancing mechanisms sorted out.

The problem with the sector, however, is possible oversupply at some point if too many enter the renewable market or at least fears of over supply.

We will see.

Quite a few funds are selling according to FT .... if it takes 2 years to realize gains, that's cash tied up for some funds that they may want to work elsewhere ... there are enough UK stocks down 50% the past two years.

For me, the deal breaker to hold revolves around what the VLN bought - a 50% stake in the shaholder loans is massive. Shareholder loans come before equity in the case of bankruptcy but after bank loans. Arqiva Limited has £3 bn in reserves as operasting profits squirreled away each year.

The VLN has to be paid off in a few years so current assets even on firesale will pay off the RCF and VLN ... where I would expect an IPO of Arqiva to be worth around £0.80 - £1 a share for DGI9 holders with an IPO buying out DGI9 equity stake for £350 million and the 50% interest in shareholder loans.

Enjoy.

“ (most likely, rusted shopping trolleys)” … funny.

Cash will presumably make up for the discount currently being traded from NAV ... I sold into 65+ this morning buying back mid 63s ... nice morning's work.

Bailed last lot at 183 looking for a retrace …. Starting a new Copper mine from scratch can take years … so CAML needs to move quickly in my view … just about broken even over the year so not great but clawed back a 20% drop.

I've seen this comment floating around now:

"When D9 acquired its 51.76% economic interest in Arqiva, it acquired 51.76% of these shareholder loan notes."

So the £169 Million VLN was used to buy out CPP's shareholder loan notes interest in Arqiva. That's about 10p in the £ according to my sums.

I wonder how long it will take for the market to wake up here?

Not necessarily, dividends are starting to feed through as per RNS today. Expect a small retrace monday given last nights Asia performance but NAV of 234 is getting back to normal. Nasty sell of the six month year end of 2023 but average 201p now so not complaining too much.

Agreed … I’ve been quietly adding here.

"Let's focus on finding solutions rather than assigning blame."

ChatGPT .... obvious innit?

Shorts tend to lift the price early in the morning then sell heavy into the afternoon .. sold those bought low 28s this morning at 29.3 at open .... looking for 27p today to get the average down.

Arqiva does indeed generate £180 m plus per year operating profit ... but one has to look deeply into the accounts of the subsiduary companies and bear in mind that Arqiva is a private business. It's method of accounting is to lock in operating profits each year into reserves and book a shareholder credit or loan as a result - so there is no direct cash flow towards DGI9 that helps its bottom line.

The above said, Arqiva Limited as opposed to Arqiva Global Limited as the parent company has some £3.18 Billion squirreled away in reserves as equity so the assets of Arqiva itself are huge.

Don't forget that Arqiva Global has looked to IPO with a market cap of £6.5 bn in 2017. It sold of a chunk of transmission capabilities to Cellnet in 2019 to pay off some of the shareholder loans, but is still looking to IPO and must itself be valued as a £2 bn business so a sizeable return for DGI9 if/when this happens.

The market doesn't like the debt tied with the holding company of Arqiva but much of this debt is a shareholder loan of operating profits so not real debt in the sense of the word to a third part like a bank.

There is no question to my mind that DGI9 should never have bought Arqiva - but it did ... and if it can unlock the value in Arqiva DGI9 shareholders will be amply rewarded in my view.

" an ex Northern Rock"

This:

"the impact of inflated cost of deposits in the fourth quarter due to the deposit campaign in response to the previously announced deposit outflows and press speculation."

Namely being obliged to borrow from money markets at higher rates than lending is indeed what broke Northern Rock during the credit crunch helped by Peston's panic scare, as I recollect.

Metro has squeezed out a headline profit for last year somehow, presumably to quell fears of losses published in the wider markets leading to more customers shifting accounts away - that would a smart move, if the increased deposit account costs turn out to be a one off.

But either way I sold my lot and bought back the same number of shares for less, so my all time average here is now 34p and 39p for 2023/24 .. so I'll bail again between 34p - 39p but I don't have a lot put in here.

There is no hurry, the share is not going anywhere in the short term IMO.