Bisichi Share Discussion Threads

[tim000] 14/7/2022 21:42

You’re not wrong! A £10 share price translates to a fully diluted mkt cap of about £110 mn. That’s reasonable if BISI is churning out annual cashflow of about £20mn for the next 5+ years (that too is quite possible), most of which will be paid out in dividends.

[e43] 14/7/2022 21:27

At current coal prices and with low valuations,most coal companies are transforming their balance sheets at incredible speed,add too that a modest re-rating then a 100-200% increase from current share price's looks not that demanding.

[e43] 14/7/2022 19:07

Yes ,getting the right balance in a portfolio is always challenging,I'm still edging up my holding in TGA,plus added a few thousand more here too.It will be v interesting to see the dividend policy here going forward along with the cash position at interims.TGA is slightly ahead on both scores at present,but BISI should be able to catch up fast.

[tim000] 14/7/2022 19:00

Hard to quantify, but BISI’s BEE connections coupled with its small size are very valuable assets. In a long distant AR, the company reported that its relationships with its BEE partners and the South African government were key to its success. Its small size means that it could increase its exports by 50% without having any noticeable impact on Transnet capacity of its much larger peers, including TGA. BISI’s good relationships might explain why it’s increased export volumes this year and last year when total RBCT export volumes have declined. And TGA reported it had reduced production this year owing to logistical constraints. No such reports yet from BISI.

[tim000] 14/7/2022 18:48

Thanks e43. I’m ambivalent about opening a position in TGA, I’m sure it still has plenty to offer including a large dividend, but the share price has already risen substantially and I feel now there are better investments in the sector. But I am tempted to sell some shares and increase my exposure to coal even further, in which case diversifying into another miner (ie TGA) would make sense.
There is an ASX listed miner called Terracom which has operations in South Africa and in Queensland. ASX listed companies publish detailed quarterly results, usually at the end of the month following each quarter. I hope we can pick up some useful info about prices etc from their report later this month. I’ll report here once the results are announced.

[e43] 14/7/2022 17:56

Well done Tim,any response fr the company is better than nothing.
Hopefully now the pennie's dropping with the Heller's ,that if they engage with their minority shareholders in a constructive way ,they will reap far far more for themselves and LAS with capital appreciation than they ever will with salaries and extra bonuses.
As you say very exciting times,and as an aside ,some interesting posts on the TGA thread today regarding this year's possible dividend their and it's massive.

[tim000] 14/7/2022 17:17

Following the AGM, I submitted a list of questions to the company by email.
In my view, it would probably be inappropriate for the company to disclose information
to me on a personal basis, that is not available to the broader market. The company has now replied to me, with a holding reply and saying they will address at least some of my questions in their future engagement with shareholders. I look forward to seeing how their shareholder engagement develops going forward, it's a very exciting time to be part of the company by having a shareholding. (I wouldn't feel that way by having a shareholding in a far larger company.) Contrary to what the climate change mob say, BISI is producing an essential and cheap source of fuel to the world, and hence improving the lives of many, including in South Africa.

[tim000] 14/7/2022 10:17

Transnet maintenance shutdown July 12-22

hxxps://www.freightnews.co.za/article/transnet-freight-rail-announces-maintenance-shutdown

[tim000] 14/7/2022 07:07

Another good video

[bisiboy] 13/7/2022 21:55

They also used to compare share price to ftse index over 10 years they stopped doing that after the share price crash perhaps they might restart that now !

[tim000] 13/7/2022 13:00

In the 2004 AR, the company reported that its export quota had increased from 272k to 317k tonnes. Why have such operational details completely disappeared from the AR??

[tim000] 13/7/2022 12:51

Later on in the report they did actually mention two stocks they had investments in, one a magnesium explorer and one a diamond miner.

[tim000] 13/7/2022 12:48

1999 AR: "Our wholly-owned share-dealing subsidiary, Mineral Products Limited has continued to manage an equity portfolio with a weighting in mineral and natural resource stocks....This portfolio complements our position in the mining and natural resources sector and provides us with an easily accessible cash reserve..."

[tim000] 13/7/2022 10:58

All thermal miners are. I hope the growing gap between Newcastle and RBCT benchmarks is a statistical mirage, and that BISI's thermal sales are at prices closer to the former than the latter.

[montyhedge] 13/7/2022 10:54

Glencore are making a fortune from Newcastle coal trading at this level.

[tim000] 13/7/2022 10:38

No, I planned to but forgot! But there are indications that at least some of the fund is invested in energy stocks. I don't have the AR text to hand, but going back in time the AR did mention that, without being too precise, the fund was invested in this way.
The only rationale for ever having an energy bias is because the company mines coal, and expects its shareholders to want a high exposure to coal. It follows that coal should be the primary investment, although I agree it could also include property too.

The newest Director has a background in fund management (I guess that's why he was appointed) and he was bullish on energy stocks. I told him that I agreed with his analysis. The company has never divulged which stocks they invest in, but the Interims will give us a strong clue, from the size of the profits made.

[e43] 13/7/2022 09:57

Tim,did you ask anyone at AGM about the composition of the equity fund,I hope it's in coal rather than UK property shares but how do we know?

[tim000] 13/7/2022 08:40

BISI's AR21 features two measures of performance, EBITDA and adjusted EBITDA (the main difference being that the former includes capital gains on equities). EBITDA was £5849k and adjusted EBITDA was £5028k. The 6 June Profit Warning stated that results at the interims would be "very substantially ahead" of those for AR21. A reasonable interpretation of that would be at least double, so £11.7mn and £10.1mn resp. That would be my minimum guess. It is very likely that profits in H2 will exceed those in H1. So adjusted EBITDA of £20 mn would be my minimum guess for 2022. (My own best guesses are at least double these figures for H1 and 2022.)

BISI's investment fund was £4.3 mn at end-December 2021, of which just over 50% was invested in foreign listed stocks (and nearly 50% in the UK). Assuming the fund is weighted towards coal, for example the coal staple WHC.ASX increased from AUS$2.61 on 31/12/21 to AUS$4.92 on 30/6/22 (inc an 8c divi). That's an increase of almost 90%. NHC.ASX increased by nearly 70%. At home, TGA increased by 200%. So £1.7 mn capital gains on the investment portfolio looks feasible.

[tim000] 12/7/2022 08:26

Latest RBCT API-4 sterling prices (£/t), outturns and futures prices:
2022 Q1 177
2022 Q2 230
2022 Q3 294
2022 Q4 274
2023 Q1 251
2023 Q2 222
2023 Q3 202
2023 Q4 188

The futures mkt is pricing RBCT coal to be at similar levels in 2023 H2 as the outturn in 2022 H1. No sign therefore of the profits windfall this year coming to a sudden end. Note also the jump in the current quarter: the interims will understate prospects for the rest of the year.

[tim000] 11/7/2022 14:28

For coal miners in general, that may be right. But BISI is lagging companies like TGA, and I hope it will catch up. Although proportionately it exports less coal, it does have property interests and its investment fund, and a politically valuable BEE partner. So my view is that BISI is still very much in its early stages of rerating and has a long way to go before investors might perceive fair value - especially if coal prices stay high. I can't see why BISI shouldn't reach £10 in a couple of years, with a following wind (£10 total return including dividends).

[e43] 11/7/2022 13:33

As Datt and you say Tim,still feels along way to go , we're probably through the early-ish stage now entering mid- sensible stage where new investors can see clearly the returns being generated.
Late stage comes when general investors wake up to the fact coal companies are giving the best returns as coal prices stay higher for longer.

[e43] 11/7/2022 10:19

Yes I think that's the interesting point Tim,Even a modest re-rate of the sector drives prices much higher.
Take TGA for example,selling on a forward PE of 2, but if you then factor in the fact that half the current mkt cap is covered by their growing cash mountain,you then get to the absurd situation where future earnings/assets after mid 2023 are being priced in at zero!

[tim000] 11/7/2022 07:43

Also, we shouldn’t forget BISI’s investment fund activities. Some smart investment decisions could result in substantial profits relative to BISI’s current mkt cap.

[tim000] 11/7/2022 07:40

Emanuel Datt argues that miners’ P/E ratios should reset at some point, based on fundamentals. We know that there is tremendous latent investor appetite for the next hot commodity: cobalt, graphite, lithium etc etc have all had their day in the sun. I’m pretty sure thermal coal will be this year’s in-fashion commodity; at some point news will spread across social media and everyone will be buying coal stocks. The re-rate is likely to overshoot in the short term. But given the cashflow being generated by miners, a highish p/e implies a tremendous increase in prices. Datt said current margins were akin to those of software companies. I remain non-plussed that O&G investors remain on the sidelines.

[tim000] 10/7/2022 21:29

No, nothing on that. But Eskom do buy a lot of their coal on fixed contracts, as you infer. There has been media commentary on this helping to explain relatively low inflation in South Africa currently.
Reading old Annual Reports, they included much more detail on operations than in recent years. I hope they will be a little more forthcoming now that they have a great story to tell.