Goldplat Share Discussion Threads

[dangersimpson2] 26/9/2017 16:28

Interesting discussions on valuation. My thoughts:

- It seems clear that the market doesn't really have any idea how to value GDP. Hence a tendency to reflect a historic 5-7 PE range whether the future is looking great or challenging. This is good because it presents opportunities for those who can do so better than the market. Of course we have to be different from the consensus and right in our assessments not just different!

- Given the past slip ups the market is very much in the 'prove it before I price it' mode. It can be frustrating in the short term but again presents opportunities when one can surmise that things are going well but are not yet reflected in historical financial numbers e.g. Kili turn around.

- NAV is not a good way to value the business given the high proportion of intangibles. These mostly represent historical exploration costs so can be written down. In extremis the NTAV may provide some downside protection but overall it isn't a good way of valuing a trading business.

- Given the business environment in Africa this is obviously a high risk investment partially mitigated by diversification across multiple locations. This means that some people will be wary about investing at any price. I think that is why some people are (in my opinion) overly focused on things like the RR dispute. It represents for them an indication that this is beyond their personal risk tolerance. It may seem an over-reaction to me based on simply defining the economics of a single transaction but for them it represents indication of a risk that they are not willing to bear. Everyone has different risk tolerances based on age, other income portfolio diversification etc.

- I'm personally not a fan of clever transactions to unlock value like mining spin-offs because mining has a higher rating - I think deliver the results and the shareprice will take care of itself over time - at the current size of the group anything else is an unnecessary management distraction or adds an unnecessary layer of costs.

[russman] 26/9/2017 15:45

Lets go back to cashflow.Auramet advance was 1m.Now it is 6m.Why do gdp need a loan from "scorpion".

[russman] 26/9/2017 15:37

Not sure why there is a discussion about historic p/e ratios.GDP have calc eps wrong for years.

[kimboy2] 26/9/2017 14:47

No Dan, it is because the CEO was incompetent and bought a duff.

[1rodson] 26/9/2017 14:36

OR WAS IT BECAUSE THE NEC WAS DRUNK AND THE FD COULD NOT COUNT?

BOTH GONE NOW JUST AS DAN SAID THEY HAD TO GO.

YOU NEVER GET IT RIGHT KIMBOY ONLY DAN CALLED IT RIGHT HERE ALL ALONG.

[kimboy2] 26/9/2017 12:33

Randgold is doing very well with profits increasing by 20% pa and cash costs of gold around $450/oz and a good pipeline of developments and exploration.

Punters clearly have confidence in the future expectations, which they self evidently don't have in GDP.

Another thing that it occurs to me may put it on a low rating is that it is seen as a rather dull utility company dealing with a possibly declining sector, rather than a glamarous gold miner.

Gerard did suggest the possibility (IIRC) of floating off the mining side, presumably along with whatever is purchased. It may well be that the mining side would be rated far higher than the recovery side.

It is my view that Kili, once stage 3 is completed, will be worth more than the present market cap of GDP.

[sea7] 26/9/2017 12:11

If I was looking for a sector example, randgold resources is a prime example.

it has a p/e of 38 at current prices, they have a large cash pile and investors expect growth, seeing as they are will to pay 38 times earnings for the stock. It was higher, however, the stock has come off somewhat lately.

You get your dividend players and growth players in the same stock. There is a lot of confidence in Bristows outfit and that is reflected in the prices being paid.

For goldplat to trade at higher multiples, the confidence level needs to increase, which will only be achieved by Gerard demonstrating that the operations can deliver consistent returns going forward and the plan to acquire a primary mining asset, will be a success and not the unmitigated disaster that kili, anumso and nyieme became, although kili has turned the corner, finally after a decade.

There is the school of thought that the stock only traded at the 5-7 range throughout its history, because kili has been there since the early days acting as a drag, continually. This drag has finally come to an end and once Gerard can demonstrate some actual AISC and Cash costs at the mine, along with removing the concern over grades, then we could, dare I say it, see a re-rate of the stock to the upside, with a new p/e range, as yet to be identified.

[kimboy2] 26/9/2017 11:49

If we look at SSE it is on a p/e of about 12. For the last 12 years it has been kicking around 1300p. During this time it has produced an eps of around 120p and pays a dividend of around 90p and is forecast into the future to do the same.

This is a p/e which reflects a stable situation and confidence into the future.

If a companies p/e is greater than this then I would view it as punters expecting growth. If it is less than this then they are expecting a decrease, or an uncertainty which offsets any expectation of growth.

That I would suggest is the rational situation, not that shares are rational of course.

So why is GDP on a p/e of only 7 and quite a bit less on forward numbers? Well the reasons aren't difficult to find - history of slip ups, Africa risk, microcap, inertia etc etc.

Punters, in so far as it is on their radars, do not have great confidence in the forecasts. I suppose that is part of the logic of producing forecasts which the company can guarantee to beat to build confidence.

Anyway I suppose that the first installment of confirmation, or otherwise, will come at the end of October with the Q1/18 numbers, though irritatingly they don't give the operating profit numbers these days.

[sea7] 26/9/2017 08:01

tks for your comments KB,

My view of the p/e range for goldplat is that the market generally feels, through the historic performance, that a share price which reflects the fact, that it will take 5 to 7 years at current levels of profitability for the company to have generated profits which equal the current mcap, is about as much as it is willing to pay. As soon as we go above the 5-7 range, the stock becomes pricey in the eyes of the market from a stock trading perspective and the share price drops back.

If we assume that they can maybe squeeze another 8k ozs out of the business per year in its current form, taking it to the 50k that Gerard spoke of, then it would imply that once the "easy win" of the reflection of the turnaround at Kili has been accounted for, then we would probably be seeing and additional £1m on the figures. Could be more, could be less.

This would give us around £3.3m of profit, excl minorities based on results to date. For the stock to be in its ususal 5-7 pe range, the above profit would put us on a share price of 13.8p.

This is scenario planning, with regards to what I think this stock is worth, which is always on the conservative side. I am always looking for the weakest case when assessing the value of the stock from the point of view of p/e ranges and share prices. This is simply because earnings are notoriously difficult to predict, can be lumpy and change for any number of reasons.

The stock may indeed creep up over the months, it may not, however, since the day that this stock listed, excluding the loss making years and taking into consideration the way it traded when all the issues had not surfaced yet, it has always, on average, stayed in a p/e range of 5-7 based on the last set of numbers that came out, for a significant portion of time. It only increased as we headed towards the next set or started to drop off as earnings started to drop.

Gerard may have a new acquisition by next june for all we know and earnings may be a bit higher, they also may be lower as the cost of an acquisition may be eating away at the profitability and he may have used a debt/equity package with warrants as sweetners on a deal, which will impact the calculations.

As there are plenty of unknowns to play out yet, I always err on the side of caution in illiquid, aim listed stocks which are emerging from a few years of issues.

We had the easy run up in the share price from 1.75p to 8p and then the retreat to 6p today. The push to 13p won't be as easy, as the easy wins are gone and we now have a much harder job of moving up.

We may have a pretty good idea what the profitability may be, what the company is planning on doing and what we think it is worth, however, the market is valuing goldplat on its trading performance and giving it a p/e of 5-7 and the subsequent share price which reflects that and not a price which reflects asset valuation plus trading performance.

If the market was valuing goldplat correctly, which included assets, we would see
13p for the assets plus 6p for the current trading performance for a p/e of 5-7, this would see us at around 19p per share. If we allow for the market to value the stock at expected 50k ozs produced and £3.3m excl minorities profit, then we would be at a value of nearer 27p, which is assets plus expected trading performance and ensures a p/e of 5-7 is maintained.

The market hasn't valued goldplat like that ever. I had monitored share price performance in this stock against the net asset value ever since april 2007, at its best it would have traded close to or above net asset value on odd occasions. More often than not it used to trade at about a 10% discount to NAV. I stopped monitoring it when the company went into loss making territory and stayed there. As we have moved out of that now and the company is moving in the right direction again, for the first time in over five years, I have started looking at this again.

The NAV is 13.8p. For Goldplat to trade at a 10% discount to NAV we would need to see a price of 12.5p. Allowing for the expected p/e of 5-7, a 10p share price seems about right for next year on a not much changing, base case scenario and the fact that this company is still regaining the trust of the market, after Demetri walked out in September 2012.

[kimboy2] 26/9/2017 06:55

The last results wrote off £955k from an exploration venture which was yet another Manolis misjudgement.

[kimboy2] 26/9/2017 06:51

I don't suppose that VSA has done no research. It is just that they are not producing a profit figure that is a probabilistic mean, but something that the company has a 99% chance of beating.

As for my numbers I tend to put them up for people to question or knock down, rather than because I believe them certain to occur.

The calculation for this year isn't rocket science. If you take the post tax attributable form last year of £1.348m. Add the turnaround at kili from a loss of £1.1m to a profit of £0.7m and add £0.5m for the Ghana elution column and additional equipment.

[1rodson] 26/9/2017 06:40

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.

[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.