Anglo Pacific Share Discussion Threads

[haydock] 13/5/2014 16:02

Unless of course the new BOD changes tack on the CDN coal & monetises some of that asset.
Lets face it many of them have excellent current CV's in CDN coal.
That in my opinion is where they will make the changes, hopefully bringing real new value to APF.

Certainly not in favour of share buy backs in this company.

I hope they maximise the CDN coal value as the neighbours have done, but I cannot see them as developers, so they will have to strike a deal ?

[piedro] 13/5/2014 15:42

"I would be grateful and interested to hear you views on yesterday's Q1 earnings figures."

Grim ... another year of suffering - with income from royalties and dividends of ±£12m

- IMHO, BWDIK.

[amitkoth] 13/5/2014 14:55

I can see good future prospects, but I'm with QuePasa on this one, Piedro.

I am entrusting APF to make investment decisions on my behalf. It follows that I consider them better at allocating capital than I am. Hence, instead of paying me back cash, I expect them to invest it in what they do best.

Having said all this, if they could raise further cheap debt on Kestrel at least (remember, they are debt-free) then it would be highly effective at low rates if actual cash royalties more than cover interest.

I did raise this with management a while ago, but all they have is the revolving $15m facility.

[haywards26] 13/5/2014 14:50

In my opinion the board are confident of a signficant increase in revenues and profits over the coming 12-24 months with the significant upturn in Kestrel production. Obviously commodity prices are out of their control, but it is possible to estimate such based on historical facts.

My previous point being it is neither impossible or illegal to pay a dividend that is in the short term in excess of the earnings. It is another question indeed as to how prudent or sensible such a payout excess is.

I reduced my APF holding last week, as there was a better near term opportunity presenting itself. But I still hold APF and would perhaps top up if the price was around this level or lower in 12 months time. This all depends on the newsflow and other opportunities of course.

[quepassa] 13/5/2014 14:31

Piedro,

Thank you for your interesting reply.

In my view, the Company have not in the recent past been able to predict future income with any great degree of reliability due, inter alia, to marked softness and fluctuations in commodity prices, natural disasters, issues at Kestrel, oversupply of global coal, rapid expansion of Far East coal mines, slowing of construction in China. I cannot therefore personally conclude that visibility on APF earnings will be any more reliable in the next few years until many of these market-driven and macro-economic factors are more stable and normalised.


I suppose that if APF did repurchase up to 11million shares ( and continue to pay the dividend) that would use up most/all of their remaining cash pile and perhaps make them draw upon their new banking facility.


That is unless they sold assets outright to do so but then again that goes back to my self-cannibalisation thesis.


Whilst you are right that this is an asset holding company, the strategy as I understand it, is to buy assets with a view to generating ongoing (long-term) royalties.

It seems to me that corporate pride may or may not come before a fall in this case.

Nobody would deny that the commodities and coal markets are massively tougher than a few years ago.

Against this back-drop, APF, like others, have lost a great deal of money on the book-value of their assets.

Additionally, their royalty income is greatly down.

But they seem wedded in my view to the concept of having at almost any cost to maintain or increase shareholder dividends in these straitened times. Why, I ask myself?

It just appears to me to be common sense in these tougher times to rein things in and to invest what income they have back into the business rather than diminishing the Company by splashing it all out- and more- on shareholder dividends.

Whilst shareholders are, as you correctly point out, indeed able to vote for/against the dividend, it is obvious what they would do.

I personally however question the wisdom or otherwise of the management proposing/recommending the dividend in the first place.

I would be grateful and interested to hear you views on yesterday's Q1 earnings figures.


ALL IMO. DYOR.

QP

[piedro] 13/5/2014 10:10

QP,

- This is an asset holding company
- They buy and sell assets as can be seen by todays RNS [re:BKY]

- At the next AGM they are asking ...

4 TO DECLARE A FINAL DIVIDEND OF 5.75P PER ORDINARY SHARE

19 THAT THE COMPANY BE AUTHORISED TO MAKE ONE OR MORE MARKET PURCHASES OF UP TO 11,088,742 ORDINARY SHARES IN THE CAPITAL OF THE COMPANY, SUBJECT TO CERTAIN RESTRICTIONS AND PROVISIONS, INCLUDING THE MAXIMUM AND MINIMUM PRICE AT WHICH SUCH SHARES MAY BE PURCHASED

- They can predict future income with a certain degree of certainty
- The business is long term
- And, shareholders may vote against the resolution

Which does not change your arguements but here the financial concept is different - IMHO

{EDITED}

[quepassa] 13/5/2014 09:03

That's generally considered debatable corporate practice.

Put another way, is it wise to cannibalise yourself today so others can eat meat now?

The Company are however between a rock and a hard place in my view. Because they know that if they reduce the dividend, the share price may or may not be negatively impacted.

What is evident though, is that the Company can hardly support the current dividend out of current earnings and their cash pile has shrunk - to an extent in my view that the dividend "commitment" is such that it impedes their stated desire to buy new royalties.

Therefore, with a shrunken cash pile and paying most/all of their earnings (or more)away in shareholder dividends, the circumstances give them little or no financial latitude to reinvest any earnings in new opportunities.

Additionally, as we saw yesterday, earnings for Q1 fell by an enormous amount compared to the previous year. This is a tricky position in my opinion.

In the long-run, wouldn't shareholders be far better off if the Company reduced/cut dividends pro-tem so it could buy some attractive new royalties at a time when they are perhaps available in the market-place at historically attractive/cheap prices.

In my view, the Company should cut/reduce the dividend, tighten its belt for a few years, reinvest earnings in its business and look to a future when royalty earnings may be more buoyant.

ALL IMO. DYOR.
QP

[haywards26] 12/5/2014 20:33

You can grow a dividend without underlying earnings support if you have the balance sheet to support it and also know that earnings over the medium term will more than compensate the current dividend payout eg when Aus coal is fully in APF royalty area and other royalties grow and come online...

[amitkoth] 12/5/2014 14:44

Err ... you can't grow a dividend if underlying earnings don't support it. Dividend cover is at risk. In fact it's underwater at present. Although as a plus, it looks like full-on royalties leading on from 2016, plus a number of other royalties coming on stream. I get the feeling we are coming close to a fund-raising to acquire a big, cash-producing royalty. Much less of the blue sky stuff like old management.

[haywards26] 12/5/2014 14:25

The did pin their mast to the dividend though, maintainging and growing were I think the words used....

[quepassa] 12/5/2014 10:46

If their stated business objective is to be a global mining royalty company, I do ask myself if their Q1 2014 figures could be much more uninspiring.

Royalty income for Q1 is a whopping 50% lower than the previous year. £2.3million v. £4.6m.

If you include the 2013 EVBC receipt of £1m, it would be mean Q1 2014 royalty income is down almost 60% on the previous year . - £2.3m v. £5.6m.


Much recent talk of acquiring juicy new royalty investments at a difficult time in the sector. But where are they? No mention. Still on the must-do list perhaps.

They have sold off investments realising a net £3.1m but which are they and did they make a gain on them against book value?

If you read the Outlook carefully, one can but ask oneself how much positive news it contains for the current year outlook.

ALL IMO. DYOR.
QP

[haydock] 12/5/2014 10:37

You will find it here:

Wiki thread:

Do not expect to find it in any analysts notes, they have all forgotten it exists, if they ever knew in the first place.

[bolador] 12/5/2014 10:21

Piedro,

Could you reveal more on Groundhog please especially as it relates to APF.
Thanks, your expertise will save hours and hours of probably fruitless digging for us hopeful investors !

[haydock] 06/5/2014 09:10

This is of such a magnitude of importance for this company that I have taken the liberty of reproducing this post, with appropriate thanks on here.
Those who do not understand why had better DYOR.


Piedro
6 May'14 - 08:34 - 946 of 946 0 0


ASX Release
06 May 2014
Atrium Coal
A$2.1 billion NPV for first stage production at Groundhog Anthracite Project


"Groundhog is a world class asset & we are merely scratching the surface of it's potential."

Nuff said !

[pinkalltheway] 04/5/2014 18:14

High point are a diversified royalty play for anglo's very interesting stock could be huge upside hence anglo's investment pre-ipo ..

[buywell2] 04/5/2014 10:59

nearly back to where you bought in christh

COAL taking a hit and GOLD not looking so hot either

[pinkalltheway] 04/5/2014 09:13

High point royalties $HPR lists in Aussie tomorrow very interesting play on the Australian natural res ($HPR has royalty holdings to many interesting plays in Australia which could be huge). Anglo Pacific have a decent holding in the co.. One to watch..!!!!

[masurenguy] 12/4/2014 11:51

Passing reference to the current 5.6% yield funded out of diversified royalty income in the FT today. However, QP's analysis above suggests that the falling cover could result in a dividend cut in due course.

[haydock] 11/4/2014 09:17

HZM on target ?


hxxp://www.smh.com.au/business/nickel-price-surge-more-than-flash-in-the-pan-20140410-36g0t.html

[fizzypop] 04/4/2014 11:56

Thanks QP. Not one of my wisest purchases.

[quepassa] 04/4/2014 10:21

Trawled through the latest annual report.

So complicated and so many restatements.

Isn't the Board top-heavy versus the number of employees? According to page 33, there were 9 Directors and 13 employees as at 31/12/13.

The Company lost a lot of money last year. The CEO's base 2014 salary is up however by 8% at £360k pa after only three months or so at the helm.

Couldn't find how much they paid for the Flowstream investment. Did anyone else spot it?

Seems that $5m was pumped into Hummingbird in mid-March as a post balance-sheet event.

Page 16 gives an interesting bar chart of dividend cover which can be summarised as follows:-

2009 1.6x
2010 2.2x
2011 2.1x
2012 0.9x
2013 0.8x

The report goes on to say :

"It is a policy of the Group to pay
a significant portion of its royalty
income as dividends. Just as
important to maintaining the
dividend is maintaining the quality
of the dividend. Dividend cover is
calculated as the number of times
adjusted earnings per share
exceeds the dividend per share."


It seems like the recent quality of the dividend is somewhat debatable, especially when viewed in the last two years against APF's own dividend cover measure.

One can perhaps ask oneself how sustainable/increasable/reduceable the current dividend may or may not be in the current market.

Interested to hear others' observations on the 2013 APF Annual Report.

ALL IMO. DYOR.
QP

[christh] 18/3/2014 14:42

Hong Kong Money Helps Herencia Resources Cue Up The Drill Rigs At Picachos
18 Mar 2014 by Alastair Ford

Plenty's changed since Minesite last checked in with Herencia Resources in 2012. Back then, the capable Mike Bohm was still in charge and Herencia was pursing life with a primary focus on just one project – the Pagantua silver-lead-zinc property in northern Chile. Back then though, the resources boom was still on, or at least the tail end of it and the market was still supportive of projects like Pagantua. Life's a little different now.

[quepassa] 12/3/2014 14:54

You have been saying that for at least two years but the only thing that has happened is that the price has fallen.

QP

[christh] 12/3/2014 12:22

price will recover...

[quepassa] 12/3/2014 09:59

Not looking good.

ALL IMO. DYOR.
QP