Bisichi Share Discussion Threads

[tim000] 30/7/2022 11:14

I agree Andy on coal prices. Building new energy infrastructure in Europe, largely wind and solar, not nuclear, will take many years. In the meantime, Europe has to replace Russian oil, gas and coal. But existing supplies from energy exporters such as Australia are already committed to the Far East market; there is very little slack in the system. I think a lot of effort is going to be put into improving Transnet's capacity to get coal to RBCT, so that South African coal miners can bump up exports to European coal-fired power stations. This is a 5-year or so plan; my advice is to forget about short-term volatility in coal prices (spot and futures), and just stick to the investment strategy of being very long coal miners. South African coal miners seem to have the best growth prospects, imho especially well-connected BEE JV minnows such as BISI.

[andydaf] 30/7/2022 09:50

Thanks for that Tim.I am looking for a dividend of at least 30% of the free cashflow.I have a sneaky suspicion that coal is going to stay high enough for long enough for the dividends from Bisi to pay off LAS outstanding loans.They may well between the two companies also be able to afford to do the Ealing developement themselves.I live up north where houses are cheaper but i shudder to think what 55flats and some retail units are worth in london.As always GLA

[tim000] 30/7/2022 09:05

Yes, LAS has property assets net of borrowing and cash with a book value of £40 mn. If you net the current mkt value of their BISI shares off the mkt value of the company, you’re left with a residual of about £4.5 mn. So you’re getting an 89% discount to the book value of their property, with all the upside to the BISI share price. There is also the West Ealing development, which is ready either to be sold or built out in-house. They have a couple of loans to refinance this year, it would help them if BISI paid a large interim dividend. I’m not sure what else BISI can do with its cash. They are almost bound to address strategic issues in their interim results. If they say they will have a dividend payout ratio of say 50% (which is not unheard of in coal mining), the BISI and LAS share prices would surely spike up violently.

[andydaf] 30/7/2022 06:07

Good week here but in reality the market cap has only gone up by the cash generated in the month.Good sized dividend from bisichi has dropped into my account and a couple of my oil and gas plays and i am too looking at LAS.I am expecting a much improved interim dividend from Bisichi and as las own 42% i expect they are too.Tim is correct that 1000 bisi shares in las will cost 3950 but allowing that the bisi shares are worth 2700 it does not seem to me that the rest of las is valued correctly.Property companies are not my thing but i think i may well have a punt.I expect coal to continue its good run for quite a while yet and looking at some predictions Bisi could well be in the money for a lot longer than most people imagine.This cash generation surely must transform LAS as well.As always GLA

[tim000] 29/7/2022 22:10

I'm thinking about BISI's investment portfolio, valued at £4316k at end 2021. Overseas investments were 53% of the total. The company almost certainly will have added funds since then. I'm confident that the fund invests primarily in commodity stocks, I'm guessing that the new NED John Wong was recruited because of his fund management background, and John said at the AGM that, like Buffett, he is long on energy stocks.

Looking at four coal mining staple stocks, TGA, WHC.ASX, NHC.ASX and YAL.ASX, including dividends and converting at relevant exchange rates, the average of the four stocks has risen 167% between end-Dec 2021 and end-June 2022, partly because TGA has done so well (+228%). Of course BISI won't only have invested in coal, but I doubt they have ignored coal, given they are coal miners! So it's possible that the profit figures soon to be announced will include a substantial capital gain on the £4++ mn funds under management. I haven't made any allowance for this in my own figures, which just looks at cashflow.

[e43] 29/7/2022 18:08

Yes a great week all round.and surely more to come.

[tim000] 29/7/2022 15:37

Yes, callum, 14-year high today! Certainly LAS offers more liquidity, I too am thinking of buying more LAS. But at current prices, you have to pay about £3950 buying LAS shares to buy the rights to 1000 BISI shares. BISI is still cheaper as an out-and-out coal play - especially taking into account BISI's investment portfolio.

[callumross] 29/7/2022 15:15

Broken through to new highs but think maybe buying LAS may be the smart way to play this one now.

[tim000] 28/7/2022 17:24

hxxps://thecoalhub.com/coal-prices-set-to-increase.html

[tim000] 27/7/2022 19:37

I managed to buy 1000 TGA on opening, will buy some more on Friday.

[e43] 27/7/2022 19:17

It certainly feels like it Tim,with most of the shares here in firm hands now,the price can move v quickly .Good to see TGA making a new high too.

[tim000] 27/7/2022 18:19

MCM share price today, another miner’s share price spikes up even without news and even though they mine coking coal. A sign of what is surely to come here…

[tim000] 27/7/2022 18:17

Glencore negotiate some large fixed-price, annual contracts to supply thermal coal to key Japanese customers such as Tohoku Electric Power and Nippon Steel. These negotiations have been more challenging than usual this year, but an agreement has been reached with Nippon Steel to supply coal at US$375/t this year. These Glencore agreements are very influential throughout the international market, and will act as a benchmark for many fixed-price deals. Excellent news for all coal miners.

[e43] 26/7/2022 22:57

TGA is a very easy share to trade in and out of,generally a good tight spread and no stamp duty.(probably split my Friday div between BISI & TGA)

[tim000] 26/7/2022 22:28

I have a fairly large dividend from BISI due Friday. It should go into coal, but there are many candidates. Perhaps TGA is best, then consider moving into BISI after the TGA results are published? However, the differential between Newcastle and RBCT futures prices is enormous. I think this reflects RBCT being viewed as a coking coal index, but BISI exports steam/thermal coal. It should be receiving a premium to RBCT.

[e43] 26/7/2022 21:45

Yes, August looking very promising for BISI ,huge results due from TGA mid month,then Bisi's probably a week or two later,we could see some chunky daily gains when the penny drops that thermal coal is v hot,and likely to stay that way for the foreseeable future.

[tim000] 26/7/2022 21:16

Enormous increases in futures prices for both RBCT and Newcastle coal. I guess because Russia continues to limit gas supplies to Europe, and August 10 draws nearer...RBCT API-4 benchmark now averaging US$300/t in 2022 and US$270/t in 2023. If these prices are sustained, BISI should be churning out net cashflow (post-tax etc) of £4 mn per month on average for 2022 H2. Newcastle coal prices average US$365/t in 2022 and US$328/t in 2023. ASX coal miners (WHC, NHC, YAL, TER, etc) should do well overnight.

[tim000] 26/7/2022 19:31

I read the BEN thread. BEN is valued at over 4x BISI but is probably loss making and in need of further capital. It defies belief that none of the investors there have gravitated here to a business trading on a p/e of under one. I’m not complaining though, I continue to add to my holding and may hit 2% soon.

[e43] 26/7/2022 17:06

It's quite a thought and just emphasises how cheap this share is Tim,that the £6m you mentioned being the potential increase in revenue (most of which would be pre-tax profit) on the export price increase between H1 and H2 alone would for most companies with a mkt cap of 26m be seen as an excellent annual profit and make the shares look v cheap.And to think the 6p div coming on Friday is going to cost the company less than 700K,so huge scope for v substantial increase in next two dividend's.

[tim000] 26/7/2022 10:14

In my view, the importance of the close partnership with BISI's minority BEE partner, Vunani, cannot be over-estimated. The government wants to promote BEE partnerships with good community standing (I think e43 found some commentary on the Quattro scheme being expanded in future), and BISI has always prided itself on being one of the first BEE partnership coal miners. It has rewarded Vunani with a 50% profit share of its recently acquired 8.1M tonnes of reserves, reflecting the role Vunani played in acquiring them. Vunani was also instrumental in BISI becoming a member of the Quattro programme, enabling it to export. Going forward, BISI brings mining expertise and access to cheap capital to the partnership, while Vunani has political and mining connections. I've mentioned the majors want to sell off some of their coal mines, and I guess become more balanced energy producers with green energy operations too. That provides opportunities for the BISI-Vunani JV to grow rapidly, at a time when thermal coal is in strong demand. Eskom has just opened a giant coal-fired electricity power station (Kusile), near to BISI's coalfield. It has a lifespan of around 50 years. Thermal coal demand is growing in China & India, and Europe now as well. BISI is incredibly well placed to benefit from all these events.

[tim000] 26/7/2022 09:14

The shutdown was two weeks in July, just finished. I don't know anything about August. Remember BISI rail 320k tonnes pa to RBCT, much less than 1% of Transnet's total annual tonnage. And BISI has an influential BEE partner. BISI hasn't had any problems using its full Quattro quota last year and apparently this year, I don't see Transnet as a problem for BISI - only the majors.

[tim000] 26/7/2022 08:48

BISI has announced a very substantial increase in profits for H1 compared with the whole of 2021, based on outturn RBCT benchmark prices averaging ca US$260/t in 2022 H1, compared with US$125/t in 2021. Futures markets are currently pricing in US$315/t in H2, ie over US$50/t more than in H1. And of course, BISI's discount to benchmark in H2 should be the lowest on record, given a tight global market. That suggests achieved export prices exceeding those in H1 by ca £35-40/t. For 160k exports, that's extra gross revenues of ca £6 mn, compared with H1. Plus presumably higher domestic prices too.

[tim000] 23/7/2022 12:47

One reason why it helps to have Sisonke as a stand-alone business is that it helps in the calculation of government royalties, which are a percentage of mining revenues - not I think applied to processing plants, which would be double counting.