Goldplat Share Discussion Threads

[1rodson] 26/9/2017 06:26

Manolis was the driving force of GDP. Sadly he was lumbered with total incompetents.The fullness of time has easily supporter this contentention.

Dan Miller spotted these abnormalities as soon as Monolis left and said so. It's a poor reflection upon the quality of posters here that none supported Miller but, typical of sheeple, went down heavy on the side of the incompetents.

The rest is plain to see.

Green. To me he is like a failed poker player who has been invited to have a shot in the only "last chance" game in town ......question is now can he play the hand he was dealt? I think not as he is jumping around too much for stability's sake.

Again time will tell.

[michaelfenton] 26/9/2017 04:53

VSA increase in profit figure has obviously been done with absolutely no research. They are obviously not doing their job? If you believe in GDP and think it has turned the corner which appears to be the case then the long wait will be worth it. I will leave the calculations to kimboy who is much better at it than me.

[kimboy2] 25/9/2017 23:50

My point is that a p/e of 5-7 implies a 15 - 20% return on your money in company profits, either through a dividend or held as cash. It would seem reasonable to assume that investors are not anticipating much growth from such a company.

If I take your example of £2.3m profits next June and an share price of 10p. If it was guaranteed to be £2.3m (and no increase beyond) then the share price would rise to 9 or 9.5p quickly with only a time discount below that level.

If investors think that there is zero chance of profits increasing at all then they would keep the shares in the p/e 5-7 range and not anitipate any profit increase by moving the share price higher.

I would suggest that a 15-20% return, which a p/e of 5-7 implies, would suggest that investors expect profits as to more likely to be reduced.

My view is that is wrong. VSA are forecasting a 50% increase in attributable profit, and I think it could reasonably be argued to treble.

Once this increase in profit has happened then the price will be that much higher to maintain the p/e of 5-7, whether it is 50% or 200%.

I suspect as results come out during the year to confirm the increase in profitability then the price will creep up, rather than just jump at the year end.

It is my view that the market is being irrational wrt GDP at present, but I am quite happy to wait for the numbers to resolve the situation.

It could be argued that GDP's record, and gold mine's records in general, would fully support such caution.

We shall see.

[sea7] 25/9/2017 23:17

The point is that this company has, historically always returned to a p/e range of 5 to 7.

Even when Goldplats share price was 16.5p, the p/e based on the 2012 figures was 6.22, the profit for that year was £4,467m, excl minorities.

When we look at 2011, the share price in feb and november was 11p, the p/e based on this share price was 6.79. Profits were £2.728m, excl minorities.

going back as far as 2010, we had in feb a share price of 10.5p, with less shares in issue, circa 111m, the profit, excl minorities was £1.534m, this gave us a p/e of 7.65.

What this tells us, is that despite profitability fluctuating over the years and numbers of shares in issue changing, with a variety of different share prices, before the company started registering negative p/e's, we regularly saw the p/e in a range throughout the years of 5-7. If the stock went either side of this range, it would soon enough trade back within it.

Whilst we know that there is no specific reason why the 5-7 range is where goldplat trades, it just seems to.

If this continues, then assuming no further increases in the number of shares in issue and an additional £1m profits, expected going forward, at least, then we should be thinking of around £2.3m profits, excl minorities for end next june. If the p/e range holds true, then a p/e of 7.28 would equate to a 10p share price.

If no acquisitions are made, no progress on the TSF, no progress on the rand dispute, then we should, based on current performance and expectations, be on a share price of 10p, by next June.

Whilst that does not seem like much, it still indicates a 65% increase in the stock, in about 9 to 12 months.

[kimboy2] 25/9/2017 18:04

Tell us when you find out so that we can stop looking.

[russman] 25/9/2017 14:47

Was gdp's cashflow positive or negative last year.

[kimboy2] 25/9/2017 13:54

The p/e will depend how much future growth is put into the present price. I would say something around the 5-7 p/e is presuming no future growth. The faster the anticipated growth the higher the p/e.

The present share price is making no allowance for the potential growth. The share price will of course recognise this growth at some stage, assuming it happens, it just isn't anticipating it for whatever reason.

These reasons are no doubt to do with past history, the backdrop in the gold market, Africa risk etc etc.

IMV the limit to organic growth at GDP is perhaps something like £6-7m attributable, which I suppose at a p/e of 7 would put us on an share price of about 30p.

That is not allowing for an expansion in Kenya beyond stage 3 or the Ghana clean up developing into something substantial, or indeed an acquisition on the right terms.

The point to me is that GDP is a poorly rated company valued at £10m and throwing off a fair amount of cash at present.

There is always risk of course, but I think if those who are obsessed with RR are looking in the wrong place.

[dangersimpson2] 25/9/2017 13:24

Mathematically a P/E is just the result of simplified DCF under steady state conditions. It is a good simplification tool but there is no 'right' P/E for any given company at a given time - particularly when cashflows are lumpy and subject to rapid change.

That said you can get very high returns by identifying a company at the start of a step change in growth rate when it is on a low P/E since over time you get the benefits of both the earnings growth and the increase in P/E that the market gives a fast growing company. Almost all very high return companies (e.g. 100 baggers) are due to this effect. It is very hard to grow earnings 100x but if you buy a company on a P/E of 5 and it manages to increase it's earnings by 10x in 10-20 years the market may give it a P/E of 50 and you have a 100 bagger.

Not that I expect GDP to deliver those sort of returns but equally there is no reason to think we will be wed to a P/E of 7 if they can continue to grow production & therefore earnings over the next few years.

[shareholder7] 25/9/2017 13:12

Thanks Danger and I feel this board is now discussing the issues rather than pumping the stock, you make some very good pointsI was a very keen investor in GDP and have just been knocked backwards as I got in at the 16p and followed it all the way down to 2p which caused some sleepless nights as I had a few too many shares The company changed direction when Lamming was CEO and the mission statement was Profit not Gold so mining was put on back burnerThen at this time Fidelity bought 10% I assume on the back of that message and I bought more as wellSo there are still a number of shareholders still holding that want the company to stick to the knitting and not not go Gold mining So we went from digging for gold and recovery to,Focus on the core business and recovery only to,Back to digging for gold and recovery So many shareholders are here with different agendas I just get the feeling the shareholders are not told the whole story and to me we need a Non Exec on the board that represents the shareholders, a completely neutral person. It still is a bit of a boys clubHope this all pans out for everyone and I will consider a return after the RR issue is resolved, hopefully in favour of GDP GDP are taking on the largest gold refinery in the World and I am not convinced (DD feels the same and he is a project management guy) that their contract management is up to scratchI do feel most have underestimated RR

[kimboy2] 25/9/2017 12:38

I don't really go along with a p/e of 7.5 being an innate rating for GDP. Surely it will depend on what future forecasts are at any particular time and the potential growth.

ATM the forecast for next year from VSA is £1.815m compared to £1.348m last year. That would put us on a forward p/e of 5.5.

As we 'know' given the turnaround at Kili and the prospective elution column in Ghana the likely outturn would be something more like £3.5m. That would put us on a forward p/e of about 2.8

[kimboy2] 25/9/2017 12:00

It is in effect an advanced payment at a discount.

[sea7] 25/9/2017 10:29

It is largely irrelevant russman. The material is en-route to the refinery, the cash is advanced to goldplat from auramet, they then pay the suppliers of the feedstock and obtain more from them, as per any agreements. As the material is processed and then sold, the proceeds are returned to goldplat, who keep it.

There is a fee for the service, which last time amounted to 1% of the transaction size. It greatly depends on the point in the process that goldplat accesses the auramet facility. Obviously it is somewhere between 5 months and 1 month and that timing will dictate how much interest is added to the bill.

The cash advance is secured over the material en route to the refinery, so it is about as secure as they are going to get.

I think it is in payables and not classed as a loan, although it is to all intents and purposes, a short term loan at 3 month libor plus 5% on an annualised basis.

[russman] 25/9/2017 10:21

So is net cash -3.5m (2.5-6) if the Auramet advance is classed as a loan.
Cash seems to be going the same way as the last problem with RR.

[michaelfenton] 25/9/2017 09:50

Thanks sea7 I get your points and will keep adding at less than 6.5p. I have been in GDP for years and feel that Gerard is really turning things about. I am not trying to ramp GDP just expressing what i think is an opportunity.

[sea7] 25/9/2017 09:38

from an asset point of view, you are absolutely correct MF. The net asset value per share is about 13p, which represents a 50% discount to NAV at current prices.

these assets generated £5.196m of revenue last year and a profit of about £1.3m from continued operations, excluding minorities.

With a p/e of 7.5 at these stock prices it puts goldplat at the upper end of its historical trading range.

There is the profitability from kili yet to show up, which will enhance this somewhat, however, the actual profitability is yet to be stabilised, as evidenced by Gerards answer to a question surrounding the costs at Kili.

That bit of uncertainty, the delays over the TSF development, the rand dispute and the historical trading range of the stock, with regards to its p/e is all keeping a lid on the share price in my view, which keeps 7p as resistance at this time.

I do see 5.5p as support, so without any news for a while, I would not be surprised to see the stock drift towards 5.5p bid/5.75p offer as the support range, 6.75p bid and 7p offer as the resistance levels.

Sudden moves on the TSF, pushing the button on stage 3 kili, announcements of an acquisition and closure over the rand refinery dispute will no doubt have an effect on where the stock trades.

[michaelfenton] 25/9/2017 09:13

I have added a further 20.000 this morning and will continue to do so at around 6p - 6.5p as company is grossly undervalued.

[michaelfenton] 25/9/2017 08:45

I think the tailings situation is very interesting. Sitting on a very valuable asset which si often forgotten as it has taken an age to materialise?

[wigwammer] 25/9/2017 08:41

Dangersimpson - good post.I would add underpinning the valuation is the 82k oz gold asset they have in the stock dam, which likely equates to a discounted value somewhere above today's market cap.

[sea7] 25/9/2017 08:01

yep, a lot of different questions in the Q and A document.

With no additional capex planned beyond Ghana elution and stage 3 kili, they will be stockpiling cash, in advance of a planned acquisition. This is the direction of travel now, in my view.

[michaelfenton] 25/9/2017 07:47

Glad to see this board making sense and having differeing viewpoints? It is useful to me.

[kimboy2] 25/9/2017 07:37

A lot of questions in the Q&A that were not in the CC

[kimboy2] 25/9/2017 06:41

On the issue of the 22,000ozs 'base case' I got the impression that they have secured a large batch for this year already;

Numerous projects are underway in partnership with existing clients and a large strategic batch of material was procured during FY 2017. Metallurgical test work is being conducted on this material to improve recovery rates and profitability.

[dangersimpson2] 24/9/2017 23:54

shareholder7,

It's always interesting to hear the other side of the argument, that's the true value of discussion boards. The points you make are clearly ones that prevent you from buying the company at the moment and that's fair enough. However in the interests of balance allow me to give my argument as to why the investment case may not be as bleak as you believe.

I am a value investor so I rarely try to second guess how the market is going to react to news in the short term. I have no ability to do this correctly over time. Instead I try to roughly value a business and buy at a large discount to that valuation. Value investing works because everyone wants to own great businesses, with great products, great management with a history of unbroken success in growing markets. The problem with those companies is that because everyone wants to own them they make terrible investments since they are (on average) overpriced. I focus on companies where bad news has created an underpricing. They key is to identify companies where due to events of the past the future cashflows, risked appropriately, exceed the current market value of the company.

Therefore while your bear points are for you reasons not to buy in the short term, they are for me reasons why the share is probably undervalued in my opinion. Let me go through them briefly:

1. Mining vs recovery: Sentiment related - not impacting future cashflows.

2. Kenya Politics: risk factor

3. RR dispute: £600k cash impact - positive if they win.

4. Ghana vs SA: small risk factor

5. SA material: this is a genuine concern, needs to be reflected in future SA cashflows

6. Write down of past explo: No future cash impact.

7. Shareholder register: sentiment related - not impacting future cashflows.

8. Africa Risk: this doesn't actually impact EPS, what is does is increase the discount factor one should apply to those future cashflows.

It is my opinion that even applying a high discount factor to reflect the relevant risks the discounted future cashflows of the business exceed the current market cap. Take next year for example. With an operating PBT of £2.9m including a £1.1m loss for Kili then just a turnaround to a £0.7m operating PBT for Kili next year and a similar recovery performance we would be looking at a PBT of £4.7m for the group.

Even after taxation, minority interests & a weaker SA performance due to declining material availability that figure compares very favorably to the c£10m market cap. Sustained profitability & cashflow at that level for the next few years gives a DCF significantly higher than the market cap even with a high discount factor to reflect the risks to the business. Particularly since there may be other opportunities to enhance those cashflows with relatively minor capex in the future.

Of course those cashflows mean nothing if the management are terrible capital allocators (as Demitri Manolis seemed to be in the end.) Gerard Kisbey-Green though appears to be a relatively good capital allocator so far in my opinion.

The gap to potential value is so large in my opinion that GDP remains undervalued at the current price despite the negative points you raise. And given that discount, the illiquidity and my inability to judge short term market reactions I'm not going to sell a share I consider materially undervalued on a cashflow basis due to negative sentiment. I fully understand how investors with different mindsets may feel differently though.

Here's hoping that GDP deliver operationally & the political risk is resolved to the extent that you are happy to buy in again.

Danger

[kimboy2] 24/9/2017 18:56

Manolis was incompetent. Gerard has done a great job.

I presume we can both agree on that.

[1rodson] 24/9/2017 18:39

Come on Kimboy if as you say it can make 20 million now it could have made it when Demi bought it if there had been proper management