Alkemy Capital Investments Share Discussion Threads

[m4rtinu] 23/3/2015 09:24

Just noticed that the div (0.3p) will be paid one month later this year.

[loldemort] 20/3/2015 08:19

Presumably that's why we are increasing the trading business? I hope we turn out to know what we are doing there, and don't start hearing about huge trading losses in the next couple of years.

Sorry, by "trading" I actually mean the power response stuff of course, which strikes me as being a kind of trading.

[investopia] 19/3/2015 12:14

On last balance sheet:

Gas assets at £26.054 million

Property plant and equipment at £33.833 million

Cash flow statement:

Gas asset depletion of £0.756 million

Gas asset impairment of £3.832 million

So, gas asset depletion not as much of a worry as gas asset impairment - although both seem to mean reduced gas assets.

[lageraemia] 19/3/2015 11:00

The 'rapid depletion rates' don't really matter because the gas in the mines isn't counted in the asset base - the plant and generators are.

There are a lot of old mines in the portfolio, and the modular equipment can be moved to each new project.

[pj 1] 19/3/2015 09:35

investopia 19 Mar'15 - 08:43 - 7076 of 7076 0 0
My starting point is that the share price is right (I always assume that first with any firm, these days).

Interesting thought process there invest. Its certainly got me thinking about how I judge current value (not just ALK but across the board)

[investopia] 19/3/2015 08:43

It's not a straightforward value case here, that's for sure, APAD.

My starting point is that the share price is right (I always assume that first with any firm, these days).

Prior to ALK's move up to 50p or so, buying the lows usually delivered a successful investment outcome. However, if I recall correctly the value case was clearer then thanks to lower debt.

We need a discount to net asset value to allow for the rapid depletion rates, I reckon. So, share price upside depends on growth or speculation, arguably.

It feels trickier now than before...

[apad] 18/3/2015 18:31

ps

"There are currently No Vacancies within Alkane."

[apad] 18/3/2015 18:29

Health warning - I bought and sold at about break even before the take-off. Bought back in on the first slump but missed the bottom so am showing a 30% loss.

The reason I sold was the rate at wich the gas output from the coal mines drops off.

The reason I bought was I had come to see it as aa well run company that could make a decent living from green subsidies and quickly available generating capacity for the National Grid and the PER is low.

I now reckon that there will be a gas glut and all those gas fired power stations the government has been subsidising without telling anyone will make it hard for ALK to compete.

So, what will probably happen is that I will stagger back to break even and sell before the next rapid price rise.

Well you did ask :-)
apad

[investopia] 18/3/2015 18:18

Doh!

Thanks, Rivaldo - reminder to self: look at the cash flow statement!

While you're there, so to speak, do you consider EV/EBITDA useful for ALK?

I wonder if the depreciation of the finite gas assets, which always strikes me as alarmingly fast, means it may be worth keeping the cost of depreciation firmly in the valuation. Maybe EV/EBIT serves as a better indicator.

Struggling to view ALK as being as cheap as the broker note suggests. It's different from those other firms the note compares with isn't it? Maybe for that reason the valuation will always be lower.

I do have a small recent investment here, but struggling to justify a top up. It would be good to hear what others think.

Regards,

I.

[rivaldo] 18/3/2015 16:00

Er, that's completely incorrect :o))

EV of £48m divided by EBITDA - after deducting SG&A expenses - of £9.6m gives an EV/EBITDA of just 5. As pointed out by VSA above.

Happy to educate further if necessary!

[investopia] 18/3/2015 10:38

Looks like they are using earnings before interest, tax, depreciation, amortisation AND administrative expenses, to me.

Is that how EBITDA should be calculated?

The normal admin expenses of the business are considerable. It puts a different complexion on the valuation if you add them back in to the EV/EBITDA calculation.

What do others think?

[rivaldo] 18/3/2015 10:06

VSA now have an updated target price of 43p, with 3.22p EPS this year and 3.26p EPS next year, plus 0.35p and 0.4p dividends respectively:



Conclusion:

"Current Share Price Offers Cheap Entry Point

On our updated forecasts, ALK is now trading on 5.0x 2015 EV/EBITDA, compared to its utility peers on 9.3x. Although these peers are typically much larger and offer significantly higher dividend yields, a discount of almost 50% presents a clear buying opportunity, in our opinion."

[dan de lion] 13/3/2015 17:33

“Every once in a while, the market does something so stupid it takes your breath away.” – Jim Cramer

[rivaldo] 13/3/2015 14:08

VSA Capital reiterate their Buy and 49p target:



More from them here...

Http ://www.directorstalk.com/alkane-energy-2015-expect-15-jump-output/

"Alkane Energy For 2015, we would expect a 15% jump in output

UK gas-to-power producer Alkane Energy (ALK LN)# has released its annual results for the period ended 31 December 2014 (FY 2014).

•Revenue: £16.0m, -22.3% YoY (2013: £20.6m); VSA forecast was £18.0m
•Adjusted PBT: £3.3m, -2.9% YoY (2013: £3.4m); VSA forecast was £3.4m
•Proposed dividend of 0.3p per share (2013: 0.2p)
•Electricity output (CMM and Power Response) was 195GWh, +1.5% YoY (2013: 192GWh); VSA forecast was 200GWh.
•Average electricity sales price was £53/MWh, flat YoY (2013: £53/MWh); VSA forecast was £53/MWh.
•Total installed generating capacity now at 145MW (2013: 82.5MW).
•82% of 2015 output contracted at an average price of £52/MWh; 36% of 2016 output contracted at an average price of £51/MWh

VSA Comment

In its trading update on 21 January, ALK guided to an adjusted PBT of between £3.25m – £3.50m, c20% below our original forecast of £4.2m, so this result should not come as a shock to the market (ALK has fallen 34% YTD and 13% since its January update). As previously outlined, profits were impacted by a combination of delayed new capacity at Wheldale and Shirebrook and fewer than anticipated STOR calls from the National Grid.

For 2015, we would expect a 15% jump in output to 230GWh as Maltby and other acquired assets make a full-year impact for the first time, forecasting an adjusted PBT for 2015 of £5.4m. Based on its adjusted H2 PBT run-rate of £2.8m and with record levels of production on both base-load and peak winter running currently reported (and with pricing pretty much locked-in for the year), this seems quite achievable. Q1 trading update due early May.

With the average 2015 electricity price currently c£43/MWh and 2016 pricing currently c£45/MWh, we have assumed in our modelling that ALK sells the remainder of its forecasted at current prices. This produces an average for c£51/MWh for 2015 and c£47/MWh for 2016.

This year, we also expect ALK to bid for capacity under the second Demand Side Balancing Reserve auction, which opened last week, and also capacity in the next capacity mechanism auction in late 2015, adding to the 55MW of existing (one-year contracts) and 46MW of new build capacity (ten-year contracts) it won in the December 2014 round. We would expect more STOR calls this year and increased triad pricing as Ofgem expects the de-rated capacity margin to fall to around 3% this winter under its base-case scenario, but could fall to around 2% under higher than expected demand and/or plant closures.

With net debt at £18m (exc. convertible loan, which we assume will be converted by the April conversion date) (gearing 41%) we believe organic growth and an emphasis on existing sites will be the focus for 2016. ALK is planning to commission new CMM sites at Mossfield, Markham Main as well as its stranded gas project at Nooks Farm this year."

[lageraemia] 13/3/2015 10:43

If you're going to talk about a massive expansion in debt, is it not also worth discussing the corresponding increase in the asset base?

[gucci] 13/3/2015 10:26

The Company announces that is was notified on 12 March 2015 that Neil O'Brien, Chief Executive Officer, purchased 50,000 Ordinary Shares of 0.5p each in the Company ("Ordinary Shares") at a price of 20.5 pence per Ordinary Share on 12 March 2015.

Following this transaction Neil O'Brien's interest in the Company increased to 1,121,840 Ordinary Shares, representing 0.76% of the total voting rights of the Company.

[m4rtinu] 13/3/2015 08:50

I often think Alkane would be a better company if it just stuck to its main area of expertise.

[investopia] 12/3/2015 17:42

I wonder if the current state of the share price reflects the amount of speculation built in for shale, which now seems stuffed, at least for the time being.

Meanwhile, Alkane has built its core business by taking on great swathes of debt.It's interesting to calculate valuation multiples now based on enterprise value and EBITDA, which makes the firm look well-priced, if not a little expensive (if we discount shale potential), rather than on the cheap side as it always used to look back in the day.

[roddyb] 12/3/2015 15:35

I am taking a bath on this one!!

We generate electricity from free gas, we sell 80% at set prices that will not fluctuate, we are increasing capacity year on year but the share price remains in a pant-pulling direction.

I am getting reamed. Malcom Graham-Wood pls tell me what I did that was so wrong to buy into this one a year ago...

[puffintickler] 11/3/2015 13:11

I would not count that as a problem though as this dilution will be bought for cash at only slightly less than the current share price

[dan de lion] 11/3/2015 09:18

If converted to shares that would require just over 13 million shares to be issued, that would take shares in issue up to approx 160 million reducing the EPS from 2.6p to 2.3p.

On a P/E ratio of 15 the share price would be 34.5p!

[m4rtinu] 11/3/2015 08:49

If Henderson convert to shares will this mean issue of new shares and dilution?

[giant steps] 11/3/2015 07:52

Unfortunately share price is pressured by 17.5p CLN, nears (April 2015)

[mortimer7] 11/3/2015 07:46

Decent trading in the results once the exceptional items are stripped out, and I'm looking forward to 2015. Short term, need to sort out balance sheet in relation to current asset/liabilities & specifically cash.

[dan de lion] 09/3/2015 11:18

The bond strike price is 17.5p so is in the money, as Henderson seems to be very supportive I would think they would either convert into shares or roll it over, all in the share price anyway.