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GG - this is significantly NPV positive. Project being de-risked with narrower range of outcomes. Great news for shareholders
LOG are going to make a huge return on this investment, ultimately through sale of their position at peak NAV. I doubt they will fund further, and I dont think they will need to. This is going to be an eminently financeable , low risk development situation. It lends itself perfectly to a reserve based lending package, with little if any equity needed. LOG are taking a huge equity piece, but there is still a lot left for PI's to enjoy.
there is no way imho that the BOD would have disclosed material price sensitive info to any one investor unless they had previously been taken offside (and hence not able to deal). Likewise PY would not have been able to sell his shares had he been in possession of such info. I think Swiss certainly met the company (and may have been courted by BOD and or PY), but they would have taken a view on entry point v value upside. Final Pigging critical for financing capacity.
Peak. I agree. They have gone into this with their eyes open. There will be an equity placing at some point, and Burg will want it to succeed to support the value of their original investment. They may well have already had some sort of discussion with IOG about this - who knows. They may take shares, or they may underwrite. And other instututional investors will want to see them following their money I would have thought.
GG, Jumpedship I see it as a completely understandable and value neutral transaction. Personal wealth risk management. He is clearly a well informed insider, and wouldn't have been able to sell had he been in position of material price sensitive info. Its also unhealthy to have such a large position (not knowing anything else about his financial position) in one company (that also pays your salary etc etc). He also moved from being a 'controlling' shareholder to a non controller post LOG investment .So it a well earned pay day for PY. I would be more concerned if MR sold down. And I can't see that happening soon - he's out to show any remaining doubters that he's a winner.
PY was the original architect of IOG prior to its listing - hence his large shareholding. Previously CFO, left the Board to run bizdev - he's a former banker I think, and we can thank him for the pipeline deal I would guess. Still a senior manager covered by disclosure rules. Looks to me like he decided to sell half his holding to derisk his personal position. I would have done the same. Bur likely to have taken some. Its good that he retains 7 odd million. If he sells again I'd be concerned .
Anyone wanting to take over IOG would need LOG support - their warrants and converts give effective control. Cant see them selling now, too much upside and they're past the post of maximum risk. Equally important is the management . LOG and other II's are not operators, and this is an operating company, so management team are key. My guess is MR et al would want to run this forward for a while yet and build a proper valuable business. Staying listed also gives liquidity to management and employees .
This is very positive operationally, reduces risk and clearly increases value. However, notwithstanding that the shares stand at a significant discount to NAV on most estimates of the nature of project and related equity funding (inc LOG warrant exercise), institutional buyers are going to be reluctant to chase this higher until the terms are clearer. But that day will come (and they will participate in the funding I'm sure) and then PI can enjoy a significant step up in value imho.
Citizen - MAR (market abuse rules) allow director option exercise (which is different to vesting which refers to the option becoming exercisable - i.e. no remaining performance conditions) but only in exceptional circumstances - when an option will expire during a closed period. Otherwise not permitted. Heres a link : http://www.shlegal.com/news-insights/getting-the-green-light
This a big vote of confidence by MR. He didnt have to exercise now ( and crystallise a tax liability) , and has only done so as hes confident the share price is on the way up. The windows for directors to exercise are small though, as they musn�t be in possession of inside information. So this indicates that PI should not expect any significant news in the short term. But MR would not have made this decision unless he was very positive about IOG plans and progress.
I have posted on this issue before. As Longside points out, the obligation rests with shareholders to notify the company, but there seems no sanction on shareholders for ignoring this �rule�, and no requirement for the company to bring this rule to shareholders attention . I may be wrong, but i dont recall having seen a single disclosure at IOG - seems odd.
GG - project/reserve based finance is generally good for shareholders (too much can be a bad thing if reservoir performance ultimately disappoints). SNS is generally low risk from a finance perspective - local demand, strong contractual terms/established infrastructure/simple technology. I can't comment on reservoir risk, but I doubt this is unusual for the basin. So substantial project debt should be available to develop these assets, although it may well be done in stages to help reduce debt burden. Its not dilutive, and will leverage equity returns once its agreed. You are right that management/LOG and all other shareholders are generally aligned, but Meanwhile - unfortunately - I fear any liquidity will be met with contractor sales of shares. Another possible scenario is that LOG triggers a sale of the company to a gas player and crystallises their gain. This would not be a bad outcome for all concerned depending on price.
what we've got here is a a very highly geared situation. The leverage being created by uncertain project funding structure and timing /LOG ultimate equity % /huge potential asset valuation upside. This is a very complex equation for an illiquid market to price accurately - and at the moment incomplete data to work with. There remains some limited downside, but my hunch is still that there is way more upside. This is a very unusual situation for a listed company, but for those patient enough, it should pay off in the end.
I think the substance of the situation is that LOG control the company via the terms of the loan agreements even though they own no shares - ( and I recall that LOG have a conversion option in all circumstances - i.e. IOG can't refinance unilaterally to avoid dilution - can anyone confirm?). This is all somewhat uncomfortable, and may be related to the departure of the only independent director last week. Nomad should be watching this closely. Notwithstanding this, and so long as MR is involved in the running of the company , I remain positive given his business values and track record. As others have noted, there is substantial asset value underpinning the company.
As a long term (pre IPO) holder, I'm increasingly confident about my investment. The Increases in asset base that have been confirmed over the past month reduce risk, increase debt capacity for (resource based lending), and support contractor alliances. All of this supports a net asset value orders magnitude above the current market cap and drives long term shareholder value. Short term price volatility is disappointing but just a fact of life where the price is driven by short term trading strategies..