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Spoke to brokers this morning. Both Barclays and Henderson are aware of the corporate action but had not yet received the formal paperwork/opened the post.
Someone mentioned the company drowning in debt, yes debt is quite high but not when you consider the EBITDA forecast for 2019 and 2020. Also much of the debt will be for the new equipment leases they entered into and not pure borrowings.
It is still not clear why we need to give 10% of the value of the business to DSS (DAN). I suspect it will have something to do with 3 issues. Protection of tax losses/Lower costs of listing/Keeping the operating company (ATC) separate from the listed company (although owned by it)
Brugel,
If you take the equity value from the research note less 10% to DSS less 25% for caution/further dilution you get £62k. Not bad!
If you look at the research note the profits in 2019 and 20 wipe out the losses and pay down much of the debt. It would be inconsistent to issue lots of new shares when future forecasts do not indicate a debt problem as it would indicate a lack of belief in he forecasts. Much of the debt will also be new equipment leases so there is no point in paying that debt down early. In addition they forecast a discounted value of the equity of the business as $86m or £66m. The company has 7043m shares in issue which is 0.93p per share. There will likely be some discount for uncertainty over the forecasts so expect something less from the float if/when it happens.
Careful, although the EBITDA is very high the interest and debt repayments are a considerable strain on cash flow. Much of the profit was made by adding to stock/inventory and hence much of the profit was not cash. They need to relist because I think they will struggle to raise funds any other way.
Good to have some verbal fisticuffs but please don't go too far. Takeachance1 you are overly optimistic and not understanding the RNS well enough as the shipment proceeds are not profit, all the production costs and overheads have to be deducted first. The good point is that its $14 per barrel more than last time. Gambier you don't need to be rude you have the ability to explain these things better and should do so and don't be so pessimistic try to balance your arguments with possible reasons that you might be being overly pessimistic.
For the long haul this one with all that debt and pension deficit.
Gambier, thank you for your views which I understand. I look at it slightly differently in that the value is currently 1 times EBITDA, they are strongly cash generative and now paying a decent dividend. The current management appear to be honest and capable (famous last words) and have a plan. The risk for me is what sort of state the refinery is in and will drilling new holes be worth it or not. For me the punt is a huge upside if they drill good wells but limited downside compared to other small oil explorers if they only find rock. I personally think the company is worth at least 3 times its current market cap even now.
Gambier at what price do you think these are worth buying?
They need to raise funds so I am expecting some kind of share issue, possibly rights issue to raise up to �5m. This is just my view and could be totally wrong
Good job that they are trying to take the company forward. The loan however is relatively short term so it looks to me that alternative funding options are being organised. I think we will see a share issue to more likely a rights issue to raise circa £5m to £10m in the next 2 months.
The dividend at £42m is only half what DEBs generate each year after over £100m of capex. They can afford to spend £150m or so per year without reducing dividend or increasing borrowings much if they can keep profits and cash flow at last years levels. In my view the shares are worth 80p and upwards on standalone performance and more if the strategy works. Place your bets. The uncertainty over the strategy, new management, Ashley involvement etc creates a problem. However time will resolve these questions, hopefully positively, and Brandes has already decided where to put their money.
Brandes issue research about UK destination/experience shopping. Much in line with Debs strategy hence their clients purchases. Do we believe Debs can execute their strategy?
This is just another step towards the negotiated solution. The reduction in activity and the impact on employees, contractors and communities will put pressure on the Government. ACA should have done this months ago to preserve cash and it is now just a bet on if the company goes bust or not before the Govt makes a deal. It is not in the interests of the Govt to let ACA fail but sometimes Govts do crazy things. It is in the interests of ACA to do a deal so a reasonable outcome should be achievable.
This appears to be great value. It is as if the market has already decided the new strategy will fail, the dividend will be halved and profits will drop through the floor. Place your bets please.
The Govt have made their demands public but the historical under declaring claim is the most ridiculous and the biggest risk. The Govt has a lot to lose in terms of future investment if it is seen to be an unreliable partner, however it is also probably true they gave away the concession originally too cheaply. I would agree to invest in smelting capacity, issue shares to Govt up to 15% over 5 years, agree to the higher royalty rate in exchange for cancellation of the historical claim, lifting of the export ban, special deal on any future concessions. Soon ACA will have to start laying off miners at which time the Govt will come under big pressure.
You should email ATC.ActionGroup@gmail.com to get full information and then make your own decision. I understand the lawyers are currently considering the merits of the case and will then provide a better idea of costs and strength of the shareholders claim. If I have understood it correctly it is about the conduct of the directors.
Once target depth is reached they might decide to go a bit further, they have to case, perforate, install pumps, measure flow rate over a period of time to get stability etc. They may have so much oil they cant handle it or no oil at all. Personally I can wait until they want to tell us with real facts. Too many oil companies rush information out only to find problems later. If something has gone differently to plan I want them to have had enough time to tell us the solution not just the problem.
Thanks for responding Gerry. Please would you check your facts to see which of us is correct. Net Debt has fallen steadily but we have to consider seasonality in Debs. I do believe the Net Debt will rise due to seasonality towards the end of 2017 but remain below the opening position for the year. The overall level of Net Debt is low compared to earnings and the balance sheet in general or it could easily be got rid of with a 40% rights issue or not paying dividends, cutting back on investment for just a couple of years. Debs is very lowly valued at £500m for something that is earning a decent return. There are risks around pensions, new strategy, internet but there will be a turning point and I would most welcome comments on when people think that will be?
When to buy this share? Very lowly valued in terms of historic profits, low debt and good dividend. Market appears to be assuming large reduction in profits and dividend. This implies the strategy outlined in the interim results is not going well?
The directors have done a decent job of running this company and I for one am pleased that they do not pander to those that want reports on everything. The market capitalisation has grown and the outlook appears good for the business. EBITDA at $8m means this is valued at 2.5 times EBITDA so plenty of upside and we are going to get a dividend return of about 4% too.