Hydrodec Share Discussion Threads

[capricious] 13/10/2018 10:45

Some of the board will take up the offer. Any amount received will help go towards Mr Blacks’ loan repayment deal. I imagine they have built their strategy using the II offer as a basis. The open offer being more for LTHs & the matter of dilution, plus a source of variable extra funds.

It would’ve been nice if some revenue projections were released but at some point, the updates should reflect the lower costs and better cash flow.

[encarter] 12/10/2018 19:16

It's a lot of cash to raise and imho it is unlikely that they will raise it all with the share price where it is, so where will that leave the company?

[1gw] 12/10/2018 17:45

I presume most won't. But there might be some larger shareholders who couldn't buy their allocation in the market without moving the price above the open offer price - so they might go for the offer. The price moved up to 0.75p to buy yesterday afternoon with what seemed to be a relatively small amount of buying interest.

The problem for the company is that if the market price stays below the offer price, they may not raise much money from the open offer. I suppose any existing holder who wasn't invited to participate in the placing and who believes the open offer funds would make a significant difference to the company's prospects might be tempted to buy enough shares in the market ahead of the offer to get the share price above the open offer price as the deadline approaches.

[1squintyflinty] 12/10/2018 17:31

Why would anybody take up the additional shares when they can buy cheaper in the open market

[1gw] 11/10/2018 14:08

I've bought some more. Trying to convince myself that getting them under the placing price ought to provide a margin of security. It doesn't get the money to the company in the same way as participating in the open offer would, but they need some buyers in the market anyway to get the price above the open offer price or they won't be raising much money that way.

[rndm355] 11/10/2018 12:19

Hydrodec article - "Am I nuts for buying back in?"

[capricious] 10/10/2018 14:01

The same 75p so currently investors can get in cheaper than offer.

[vitamal] 10/10/2018 12:44

Halved since Friday! What price shareholders offer?

[capricious] 09/10/2018 10:19

I think the final split was meant to eventually reach 48ish-50ish, if not simply 49-50. I may have misremembered the numbers.

Regarding the feedstock isssue. Historically, there are long lasting factors that meant obtaining supplies is not straightforward but with the improving market, it’s now obvious Hydrodec’s cash position has been a major block. G&S has a reasonably large footprint, seemed strange that they couldn’t fulfill the original contractual estimates. During the crude crash yes but now, not so likely.

For new investors it looks much better, pretty dire for existing ones, at least in terms of the next few years. I imagine if all goes as planned, and they make a profit, someone will buy it up... before the previous holders get back anywhere near the lost value.

It does also bring me back to the more unusual way that Mr Black’s holding were recently used as a debt vehicle. Normally a man of his position would be able to raise debt in any manner but this way, the cash is given based on his holdings at the time. Mr Black has been a life saver, and kept the company from going under, more than once but the disappointment mixed with the good news, does niggle my cynical bone.

The dividend is something of a sop but I suspect it’s still based on real forward (optimistic) projections.


I’d like much more flesh on the details around Slicker collaboration, including the IP research. These things sound good but can absorb a lot of money, without putting anything back in the pocket.

I’d also like actual projections on the likely increased feedstock. If they’ve identified sources, or future sources, there must be some numbers sitting on a spreadsheet.

[tradertrev] 09/10/2018 07:49

Thanks 1gw - yes now found the ownership split in the placing statement - G&S has 41.65% economic interest in HoNA. Presumably this means that Hydrodec only "owns" 58.35% of the "operational EBITDA" numbers that are quoted in the financial update section?

[1gw] 08/10/2018 22:28

Well I've had another look through this morning's announcement and I'm still really struggling to reconcile the 10th September statement "We are excited about what lies ahead for the Company and its shareholders" with a deeply discounted placing which is what we got.

tradertrev - the non-controlling interest is the G&S interest in HoNA (Hydrodec of North America) I think. From reading the annual report, it seems Hydrodec sold G&S an interest in Canton (G&S supply feedstock). G&S contributed to the capital cost of the rebuild after the fire and as a result their stake in HoNA went up.

I presume they must have looked at sale of the whole business to G&S as an alternative to the placing, but either G&S weren't interested or Hydrodec concluded that shareholders would be better served in the longer term by the placing - at least I hope shareholder value considerations came ahead of continued employment for the board.

I wonder if anyone will try to resist the proposals, or indeed make an opportunistic offer for the company? It seems unlikely somehow.

[tradertrev] 08/10/2018 11:42

Taking a look at this in case the placing is yielding a buy opportunity. Looking at the interim results and the balance sheet, does anyone understand the "non-controlling interest" line? Out of net assets of $15.16million, it looks like just over half is "attributable to owners of parent company" and just under half to "non-controlling interests". What is really strange is that over the last year net assets have fallen from $19.9million with nearly all that falling on the owners of the parent company. The non-controlling interest line has barely moved.
Does anyone understand what that means?

[yump] 08/10/2018 11:34

I know there's been a problem with feedstock, but they have never mentioned it as being affected by working capital.

If you know you need more working capital to solve the feedstock problem, then that to me should be a simple calculation ages ago, relating utilisation rate to cost of working capital. Pretty trivial stuff on a production line.

[capricious] 08/10/2018 11:19

So they’ve secured at least the medium term future, at a heavy cost to existing shareholders.

The eventual reduction in interest to loans will must mean they can cover central costs, with a little headroom. The main strategy is the US, with a secondary focus on advancing their IP, without being dangerously over ambitious.

[1savvyinvestor] 08/10/2018 11:06

Feedstock has been talked about all year as a problem. That was known

[capricious] 08/10/2018 10:41

Edit: ok got the decimal place wrong.

[yump] 08/10/2018 10:18

Why haven't they mentioned an issue with working capital and the feedstock situation before ? Seems to me that would, of all the various problems, be one that existing investors would appreciate if it led to the need for fund-raising.

If they've only just realised or accepted its a problem it doesn't say much for their basic management abilities. If they've said it just to help justify the fund-raising then there's no hope imo.

[capricious] 08/10/2018 10:11

The long term strategy sounds good and raising funds was almost a given but was really hoping it would be at a time when the share price had recovered somewhat.

The consolidation of shares isn’t great, in my experience you ultimately lose more than you gain.

[1savvyinvestor] 08/10/2018 09:24

One big problem for me though is that this is not a start up and has been going for many years without breaking through. The management has changed and there is a glimmer of hope but I think it is a long slog.

[vitamal] 08/10/2018 09:14

Thanks so short term pain for long term gain as they say

[1savvyinvestor] 08/10/2018 09:12

well; Current business at the Canton site seems to be going well. I think EBITDA of over $450K per month recently from memory. If they can move towards 100 % utilisation this figure should improve towards $750K - and then we have a profitable business.

[vitamal] 08/10/2018 09:03

The implication seems to be that feed stock has been restricted in the past due to lack of working capitalDidn't really appreciate that previously If the feedstock problem is resolved then what level of operation is necessary to break even/move into profit.

[c2b] 08/10/2018 08:37

Sound like a good strategy to me. If they stop paying Andrew Black 10% on his loans sure they can pay a small dividend. Very far from a sure thing, and very much a recovery stock, but seems a better bet than shares with ridiculous valuations based on nothing but hype.

[corrientes] 08/10/2018 08:02

but it is 'exciting' for directors as their remuneration can continue for a good while longer, without having to be concerned about unimportant matters such as business viability.

[1savvyinvestor] 08/10/2018 07:10

I absolutely hate it when raises are below current price. It is never a good idea. Decimates current share holders and seldom fully successful. I doubt they will raise £10 million