Cabot Energy Share Discussion Threads

[esrimeur] 20/2/2004 13:12

I suspect the price was determined prior to the annoncement for both loan conversion & placing. And not by ref to a future mkt price - as in today's. That is the usual procedure.

Very cheap now. £1.25 mln cap - about the value of the listing!!

[nikesh2] 20/2/2004 12:18

im out now
too chicken

[jeff_v] 20/2/2004 10:31

Could do with a timetable on equity issue and loan note conversion - get rid of the last bits of uncertainty on what total shares in issue is going to look like. Hard to tell if the if the loan is contingent on issue, implies immediate draw down.

[alexicacon] 20/2/2004 09:21

Be patient my friend. No one is selling. The news was good. Treat any dips as an opportunity to pick a few more up.

[nikesh2] 20/2/2004 08:57

waitin for rise to 30p now
comeon

[jeff_v] 19/2/2004 17:46

They said back in October that the share issue would be fully underwritten and implied the rights was because they loved their shareholders. Love us so much they take us from behind. Still, upside versus downside etc it looks a good punt, better if you can get in lower.

[jeff_v] 19/2/2004 17:42

Good summary mdchand. Then apart from cutting costs to make something of its margins any signs of growth and this time next year my son we'll all be millionaires.

[nikesh2] 19/2/2004 15:06

im with u man
i bought today and will probably buy more later on today or 2mrow morning
fair value should be 30p

[mdchand] 19/2/2004 14:52

All - showed this to a hedge fund friend of mine - this were his intial thoughts....

CAB LN is a huge punt but with £19m of tangible assets you would have thought it is potentially worth at least x0.5 book aka £9.5m. Conservatively double today's market cap to take account of the £1.5m equity issue gives you £3m (i know this is not perfect accounting but good enough for rough working). Pricing it at x0.5 book therefore gives you x3 upside: not bad. Pricing it at book gives you x6 upside: even better.

The problem - as shown by the £2.8m only of net assets (as per the interims) and miniscule shareholder funds - is funding the liabilities. The £10m of facilities will help out here big time.

Now, let's look at it from a profit/EPS perspective. With FY sales and costs both around £60m, it should not be too difficult to cut £2m from costs meaning (adjusting for likely interest costs) a profit of around £1m or 6p EPS post the new equity issue. Put x6 on a recovery x10 and this gives you 60p...not that dis-similar with the x0.5 of book value asset based method.


Issues outstanding:

They have to get the equity issue away
There was nothing about the cost of the facility (although secured on fixed assets it should be pretty low) What about their industrial competitiveness / whether the Asians are going to compete them out?

I am sure GMAC would not have got involved if it was a useless case (even though they are secured on property, the hassles associated with making your return this way is probably not worth it).

I think that upside:downside is compelling here therefore BUY. The next catalyst is getting the equity issue away.


Anyone care to comment?

[nikesh2] 19/2/2004 14:39

i got 14k should i stay in

[nikesh2] 19/2/2004 14:32

is this goin to rise soon

[esrimeur] 19/2/2004 13:52

Yeah, a bit like PIT up the road from CAB. But a 2/3rds reduction in lines, cutting out duplication, should be a great help to trading --------he said, optimistically.

[simeon7] 19/2/2004 13:47

Esrimeur - You are probably right.

Management will have their own agenda on this one.....remember most of the value in Carbo is through their property! The business as it is is worth diddly squat! (as you can see by their woeful trading record)

[esrimeur] 19/2/2004 13:44

Simeon - would agree if cash were all equity, but GMAC will have tight covenants in situ re management from hereonin, be assured.

[simeon7] 19/2/2004 13:42

I think you need to look back at the recent history (last fews years).

The management effectively bought the company out of adminstration (quite complex, but look at the RNS's from last year/year before). It was a master stroke, yet they now are in need of refinancing?

Just sounds like a management cash cow to me... I would personally steer clear, until more guidance is given.

[jeff_v] 19/2/2004 13:39

Kiwi - you should learn to read young man. 1.8M euro (1.2M) and 3.185M of loan note (75% of it or of holders to convert at 21.25 per share)

[esrimeur] 19/2/2004 13:37

Well I think it was probably at insistence of GMAC - no mention of price, be interesting to see who is involved - probably same lot who were to underwrite the r/i.

[kiwihope] 19/2/2004 13:36

So on 31 October 2003 they said a rights issue at 14p to raise 2M euros - that's about #1.7M. That means about 12M new shares to add to the existing 8M. Plus the convertibles (how many?).

This may look interesting but it will still have a huge debt (most of the re-financing is debt).

I also find it unusual they announce the intention of a rights issue - even the price - and 4 months later still haven't had it. What if the price drops below 14p before the rights issue? Will they drop the issue price. Seems odd ...

[jeff_v] 19/2/2004 13:33

Not very nice to go back on their woord and cut the poor plebs out of a chance to buy at 14p! MMs might do us a favour, I suppose?

Still probably saves a few quid and a couple of months.

[jeff_v] 19/2/2004 13:30

Yes, saw the warning - can't really call it a profits warning though since I doubt the Board can remember that far back. Shares in issue though, I'd say more than quadruple personally, but what would that be? 32M shares for a company with a turnover of 60M which (allegedly) thinks it might be in profit one day. This was 2.40 a few years ago. Still made a loss then.

[tiggypuds] 19/2/2004 13:27

Jeff,
To be honest I was going to buy at 20p, then went for a brew to think about it. Came back and decided not too because :
1) Profits warning for H2 hidden in an outwardly positive RNS. Not good.
2) Shares in circulation will at least treble, what will that do to the price?

[esrimeur] 19/2/2004 13:25

Yep, JV, I know, but today's RNS distinctly says an equity placing - not even with an open offer.

[jeff_v] 19/2/2004 13:24

Well Tiggy I'm with you if it knocks the price lower - what are you hoping to get in at.