Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Hi MountTeide, thank you for your posts and insights on MPL. I had about £50k's worth and rapidly made for 'Exit stage left' when you kindly higlighted about the irresponsible way the company was run (this was a couple of years ago at just over 7p, losing abot 10%).
It's interesting to be an onlooker and continue to see the shenanigans: lack of reporting; lack of photographs; lack of delivery. The lateste Google Earth pictures are quite astonishing. Given the level of indebtedness to the bank(s), it's puzzling to see any value at all at this stage. Learning point is: just because a company has more cash then it's Market Capitalisation and many reputable institutional investors and banks have significant stakes; it still means little if some impropriety or incompetence lies at the heart of things. In fact I'm reminded of my other great find - United Cacao, but that's another story!
From an initial analysis, MPL could be construed as being an investment about to go into its growth phase: piling for the new jetty's completed; most of the new jetty is 'decked' out; most of the land reclamation is done etc. However, I was first concerned that no document ever has given a P&L projection - even if you were thinking of running a Corner Shop you'd do this. Secondly, if they've got £40m of debt then that incurs a significant burden, especially during the ramp up stages; thirdly no Directors have been purchasing shares whilst the share price has been deflated. And if all you're doing is this project then why would you not be making very, very regular and detailed updates continually as opposed to the odd scrap every few months? So, when you look at what has really been delivered for £130m, it's not a lot! However, what has really sowed the deathknell for me and made me get out as fast as I can was the well informed post on Interactive Investor - I'd recommend all potential investors or existing shareholders to read it (See http://www.iii.co.uk/investment/detail?code=cotn:LSE:MPL&display=discussion ). One scenario (besides just going bust and the banks taking over) that I can envisage is that the Nomad at some point resigns. If this happens you will be stuck, the company won't be able to do any more placings. I experienced something similar on United Cacao where everything sounded great until that company effectively committed 'harikari'. It certainly feels better being on the sidelines now as opposed to having a substantial position.
I've been out of SGI for a while but continue to watch the deliberations... I haven't looked too closely at the latest financial reports but let's say �18m net assets less Intangibles of �6.8m leaves say �11m. You've now probably got to take a write off of �6.5m from the intra-company debt. And you're in continual ongoing breach of your Banking Covenants owing the bank �16.5m. You've made cuts to the staff team, and sold off things but nothing's stabilised or clear yet. So, is �8.5m the correct 'value' / Market Cap or is it half that figure and a share price of 2.5p? I certainly don't know but 'sitting on the side lines' feels right to me as opposed to watching it decline from within...
Yes, cash may be tight but... Mirada is an absolutely mission critical supplier to its clientele. I personally can't see such major organisations '...cutting off their nose to spite their face' as it were. Yes, they are juggling a little, but if there was a real issue then the first thing you'd do managerially would be to cut staff, not increase them significantly as Mirada has been doing year-on-year (74 in 2014 to 131 in 2017). What I am a little surprised at is why such large organisations don't actually backward integrate a little and purchase Mirada outright, as a current market cap. of �1.8m is less than some of their contract values.
If you're running out of Cash, and the Bank is not too keen to step in, then the cash needs to come from somewhere - i.e. the shareholders or it goes bust and the loan holders take over. If you need another say £20m of equity funding to cover Working Capital then I agree that it is not 'optimal' to do it now at a Market Capitalisation of a paltry £16m, but beggars can't be chooses. My guess, 2 new shares for 1 existing, underwritten by Gatemore, with the fallback that they're the loan holders.
A key message from the announcement for me is the following... '...This is necessary because the Board has identified a near term material funding requirement, over and above the Company's existing resources, to address a working capital shortfall,caused by the Company's recently reduced levels of profitability...' i.s. They've effectively run out of cash, the bank wants their money back, and the refinancing in all likelihood is to therefore include an additional significant contribution from shareholders. I must confess that I don't really understand why the share price has risen no such an announcement?
I agree pretty much with 'Reallyrich' £2m is 'diddly squat' in the scheme of things. If you look at DX Groups borrowings from 2011 to 2013 their loans used to be of the order of £200-£300m. So 10% on such a short term liquidity financing is not unreasonable in my view. What does raise an eyebrow is the need for such financing in the first place?
Well clearly I don't actually know, but it's reasonably safe to say that: 1: Gatemore probably know much more about DX Group; the inherent value; the underlying operations; the board and the potential opportunities at this juncture than most. 2: They very recently increased their stake by 2.5 percentage points to just below 24% of the company. 3: The Market Capitalisation of DX Group is currently a somewhat paltry £17m (against a Net Asset Value of £100m) 4: You've got an established organisation achieving Revenues in excess of £250m annually, with an Employee Count of 3,000 (a reduction of about 20% over the past 4 years) So, with Gatemore increasingly looking after their interests, I can't really see the logic in off-loading at this early stage, in fact, arguably it is more of a time to 'top up' a little. But heh, I'm more often wrong than right!
At 42p, Net Assets are still 1.5x the Market Capitalisation of Interquest. Given the cyclical nature of the recruitment industry I would have anticipated Interquest recovering to the 60-80p range over the medium to long haul as the fundamentals and professionalism of the company look pretty solid. I can therefore quite understand the attraction for the Directors to buy all shareholders out at a mere 42p. It will be interesting to see whether there are other suitors over the coming weeks that push the share price to a more realistic and reasonable level, if not, the inherent value in the Company will go to the Directors, not the shareholders.
1. Noticed £0.5m Revenue for new FINkit project in 2016 full report but £0 revenue in the later Interim, perhaps the potential client didn't pursue? 2. I'm also a little uncomfortable in that no Directors or Institutions have purchased any shares for the past couple of years since the share price / valuation has been at these very, very low levels. If there was the confidence in the restructuring and the new platform then wouldn't there be more interest internally shall we say? 3. The Banks' due diligence on the longevity/viability of any absolutely critical platform provider such as Monitise may raise a question mark and hence may raise a significant hurdle in terms of achieving FINkit sales. Upshot is, I'll personally watch from the sidelines...
I'm afraid I can't really grasp how this proposed transaction will work in practice... Who would purchase or hold a share at the proposed trigger price of 40p in two years time knowing that their shares will be immediately diluted by additional new shares amounting to 20.1% at a price of 15.2p? Wouldn't the natural downward revision of the share price mean that all Share Holders (except the 'Chosen One') would Sell near that time because their stakes would otherwise be diluted? I may have missed the plot though. But the idea of giving a 2 year purchase agreement to a supplier, and as an incentive to the Supplier, I'll also give them 29.9% of the company away at half the price seems somewhat lame to say the least. I was under the impression that if someone wanted to purchase a company they would typically make an offer to existing share holders, or perhaps I'm just too much of a traditionalist! Either way, the value has gone entirely to 2 Sisters Food..., so well done Ranjit Boporan, respect is due. :-)