Gore Street Energy Storage Share Discussion Threads

[loglorry1] 23/5/2024 13:25

"With 400mwh in California coming on stream by year end"

Is that fully funded from the net cash and with no more project level debt which will of course need to be serviced?

[waterloo01] 23/5/2024 13:15

With 400mwh in California coming on stream by year end, it alone almost doubles last years full capacity. It's also in one of the better markets, so even with the debt servicing, it alone could double the revenue and get much closer to a divi cover of 1.

[stemis] 23/5/2024 12:26

I agree SpectoAcc. Last year, pre investment manager charges, GSF made an ebitda of £24.2m. I don't know what depreciation of the assets comes to, but let's say £5m, so a PBT of £19.2m. From that Gore Street Capital, the investment manager, took £7.4m. That would be nearly 40% of income.

Thing is, the purpose of Gore Street Capital, is simply to manage GSF. It's accounts are freely available from the companies house website. So why doesn't GSF just employee the relevant people? Perhaps because Gore Street Capital made a pre tax profit of £3.0m last year and it's highest paid director (who I presume is CEO and founder, Dr A O'Cinneide), received £1.0m. I don't how much of Gore Street Capital Dr O'Cinneide owns because shareholding of the company is, in the majority, through LLC's and what I presume is a non UK company but I'm guessing a fair chunk. So his effective remuneration is probably somewhere between £1-4m. Sitting behind an investment manager, none of this is disclosed in the Report & Accounts.

Does anyone know if Dr O'Cinneide owns shares in GSF? He doesn't seem to be a notifiable shareholder

[cocopah] 23/5/2024 12:16

The biggest threat is saturation in the US markets … and don’t forget we are borrowing to get Big Rock up-and running too! I don’t like the opacity on fund level costs, nor the amount. These are questions the CEO needs to address in order to convince investors. We shall see in 12 months either way.

[waterloo01] 23/5/2024 11:02

Now just under 10%. Very possible they will stop there, having sold down to previous holdings levels pre merger?

[spectoacc] 23/5/2024 08:31

Never a fan of fees, all ITs relate them to assets when they should relate to income. REITs particularly bad - eg LXI's c.£14m pa when managing over a billion quid of property, what's to complain about? Well, the fact income may have been c.£50m, so £14m of that is what's being taken each year. Not a fee of 1.4%, but of 28%.

Re GSF - there's a 45% increase in energised capacity through just this year, got to be some operational gearing related to that, and wouldn't take much of an increase in per MW income to chip away at coverage. Won't achieve it in current year either, but it'll be a lot better than last year.

As always, how much is in the price.

[stemis] 23/5/2024 08:02

@Stemis Fair point, their "operational" definition does exclude fund level costs - but it also excludes fund level revenue, so there is more going on here. There are repayments from operational entities to holdco and also holdco level interest receivables

I'm, afraid not. Fund level revenue is mainly loan interest from subsidiaries. It's excluded from ebitda (earnings before interest, depreciation and amortisation). Anyway the 2023 Annual Report is perfectly clear, Group ebitda is £11m less than porfolio ebitda. Interesting how they only disclose portfolio ebitda in the 2024 Trading Update though...

GSF have the information to disclose the earnings, or even the underlying PBT, of it's portfolio. That it chooses not to and instead tries to focus everyone on ebitda is because it knows it would reveal that the dividend is not remotely covered by the earnings of the Group and it would take a 3, 4 or even more times increase in profits to cover it. In the meantime the investment manager is stripping £7+m a year from the business...

[alan pt] 22/5/2024 20:42

@Stemis Fair point, their "operational" definition does exclude fund level costs - but it also excludes fund level revenue, so there is more going on here. There are repayments from operational entities to holdco and also holdco level interest receivables

Personally I see no reason to doubt the 56% cover at fund level at this stage, but you do prompt me to dig a bit more to verify. Though it would be helpful to have the full 2024 accounts, which we won't have for a couple of months

@fordtin My quick look here does answer at least some of your question, discount rate (and this NAV) does change according to completion stage - though this may be masked by the overall increase in discount rate - hopefully soon to be reversed with interest rates falling

Look for "table 12" in last years finals:

[fordtin] 22/5/2024 10:21

Going back to my previous question;

Why doesn't GSF's NAV reflect the transformation of construction projects to operational assets?

GRID added ~0.71% to their NAV upon energising two 50MW projects;

" During the quarter, the most significant changes to NAV per share included:
o +0.92p from West Didsbury and York being revalued as operational projects"

[stemis] 22/5/2024 09:24

Sure. If you look at the Full Year Trading Update released yesterday you'll see that the EBITDA for FY24 is £28,400,000 and FY23 is £27,800,000. Underneath in the FY24 Operational Highlights it says "The portfolio generated an estimated £41.4 million of revenue during the fiscal year (31 March 2023: £39.3 million) and an estimated £28.4 million in operational EBITDA (31 March 2023: £27.8m)". Operational ebitda, not group ebitda.

Go to the Final Results 2023 (released 17 July 2023) and the Key Metrics. You will see

Operational EBITDA £27.8m (the same as the comparative in the latest trading update)
Total Fund EBITDA £16.8m

The difference is holding companies (because there is the top holding company and intermediate holding companies) expenses of £11m.

[alan pt] 22/5/2024 09:08

I specifically extracted the relevant income and costs figures from the NAV statement and I have read plenty of company accounts.

But it's always easy to miss things in the detail - would you like to quote us the specific sections and figures in the annual report which lead you to your conclusions?

[stemis] 22/5/2024 08:17

CC2014

I'm confused by your numbers Stemis.

You state the portfolio generated £28.3m but the RNS says revenue of £41.4m (perhaps a couple of million might be interest on the bank balance but let's put that aside)

£41.4m is revenue. £28.4 is ebitda. Dividends are paid out of profit, not revenue.

You then take the investment advisor fee off the EBITDA, but that's taking it off twice imho as EBITDA is after all costs except interest (which is close to zero), tax (which is close to zero as it's an IT), deprecation and amortisation.

The ebitda is portfolio ebitda and absolutely does not include central costs. I suggest you read last year's annual report.

AlanPT

As CC2014 says, don't double count costs. The latest NAV declaration makes it clear:


I'm confused at to what you think that proves. It's the quarterly movement on the net asset value of the holding company. If you think that somehow proves the profitability of the Group then I'd respectively suggest you don't understand the accounting in a fund such as this. What is does show is that quarterly holding companies' expenses in the quarter were £2.3m or annualised £9.2m.

Clearly the smoke and mirrors is working...

[spectoacc] 22/5/2024 05:56

GSF feels like one of those where we'll look back in a year or two and say "How did it ever get to that price/why didn't I buy more".

Have said that before, and plenty of value traps too - eg the others (GRID; HEIT); the likes of DGI9, SONG (even with the bid).

But at this discount, with an 11% divi even if really 6%-heading-to-c.9% on earnings, issuing shares at NAV, previous director buys - what's not to like.

[alan pt] 21/5/2024 19:58

As CC2014 says, don't double count costs. The latest NAV declaration makes it clear:


Cash Generation 7.5
Fund + Subsidiary Holding Companies Operating Expense (2.3)
Dividend (9.6)

7.5-2.3=5.2/9.6=54% (for the qtr)

56% cover overall sounds about right because the final divi is slightly lower

[scruff1] 21/5/2024 19:49

William 528
Thats been in my thoughts for some months now. Possibly less so now but I have thought it was a distinct possibility.

[cc2014] 21/5/2024 19:33

#1529

I'm confused by your numbers Stemis.

You state the portfolio generated £28.3m but the RNS says revenue of £41.4m (perhaps a couple of million might be interest on the bank balance but let's put that aside)

You then take the investment advisor fee off the EBITDA, but that's taking it off twice imho as EBITDA is after all costs except interest (which is close to zero), tax (which is close to zero as it's an IT), deprecation and amortisation.

[cc2014] 21/5/2024 16:31

And nav is currently 110p so that gives a dividend of 7.7p so the current payout of 7.5p is about right

[dodger777] 21/5/2024 16:30

Please be 70% of nav 🙏🏻😬

[fordtin] 21/5/2024 16:26

re "the company have comitted to 70% of nav, not 7p"

I think you probably meant 7%;

"the Company reaffirms its dividend target of 7% of NAV for the reported period."

[melody9999] 21/5/2024 16:15

believe the divi is set at 70% of NAV ...with NAV at 100p thats 7p which is why the yield is so strong at the current share price

the company have comitted to 70% of nav, not 7p

[bountyhunter] 21/5/2024 15:39

Increasing dividend cover: The Company's dividend cover continued to trend upward, with the estimated operational dividend cover being 0.78x and an estimated fund-level dividend cover of 0.56x, achieved from the average operational capacity during the period of 311.5MW. As the prioritised portfolio is built out, the Company expects a material increase in dividend cover.

[spectoacc] 21/5/2024 15:35

Smoke, mirrors, and 11% ;)

But IMO the more relevant point is the energised assets that will be earning in this financial year. Still won't get them to full coverage IMO, but it's getting close.

[stemis] 21/5/2024 15:31

The dividend is so poorly covered it's almost a misrepresentation to call it a dividend...

I presume the 11.6% dividend yield highlighted in the update is based on an 7.5p dividend and a share price of 64.5p. A dividend of 7.5p costs £37.9m. They claim it's 0.56 covered at fund level. They don't, as usual, show their workings. What we do know is that the porfolio generated £28.4m. Last year holding company costs were £9.9m (including £7.4m paid to Investment Advisor, Gore Street Capital Limited). That would get it down to £18.5m, off which comes depreciation (which for an asset based business can hardly be immaterial) and tax. On any normal measure of dividend cover, 0.56 is a borderline misrepresentation.

Smoke and mirrors...

[williamcooper104] 21/5/2024 13:40

And if they do cut the divi after promising to not then likely it's wind up time

[waterloo01] 21/5/2024 13:30

Good to see the company come out fighting and also being more transparent as to divi cover (and thanks goes to a poster on here for pushing them). They are differentiated by their geo spread, which was a good strategic move

I stuck with/added to GSF in the low 60's, but my experience with trusts, and esp wind downs, which seem ever present in some sectors, is one of caution.

VSL - has been terrible since the wind down voted on. Sold half, but still see some decent value, so not out. I looked at GABI, but don't like the profile, so have opted for RECI and Volta. I hope I've chosen well. (I have much larger positions with the likes of AV. as I see both capital growth and a very decent growing divi around 7%)