Mercantile Ports & Logis... Share Discussion Threads

[mount teide] 11/5/2017 15:56

As suggested previously - i doubt the market will see any update verbal or photographic before the Prelims in mid June - it would just be too embarrassing, as it would just continue to re-inforce that the progress targets in the 31 October 2016 Shareholders Circular were a complete work of fiction, and that there has been a material change to the port design. A change that shareholders should have been made aware of in that document or before, since the decision to go for a lower cost, two side access, short jetty in lieu of a much longer solid quay wall and hardstanding out to the quay wall line, was clearly taken at least 9 months before that document was published, when the jetty piling began.

The current management thinking is presumably to buy more time in order to get a little more progress on the ground - before they raise their heads above the parapet next month to get slaughtered once again.


Accounting SPL/MPL Style - where money apparently grows on trees! Not even management's most vocal critics would suggest it was anything other than an appalling mistake for which the FD (oh i forgot they don't have a FD), has been sacked, rather than an attempt to give the impression the company is 'not in anyway strapped for cash' when shortly afterwards management elected to go to the market to raise a further £37m


Prelims - 16 June 2016:
'As at 31 December 2015, the Group had cash resources of £38.5 million and headroom in its banking facilities of approximately £32 million.
The Group EXPECTS that by end June 2016 it will have cash resources of approximately £18 million and headroom in its banking facilities of approximately £15 million.'

Interims - 22 September 2016:
'As of June 30, 2016 SPL had of £24.8 million cash on hand and £24.8 million headroom in its existing credit facility (using the INR/GBP exchange rate as at 30 June).'

So in the 14 days between 16 June and 30 June 2016 - so good were MPL's accounting/cash control they managed to lose and find a cool £16.6m !

I understand their is no truth in the scurrilous rumour currently sweeping the City and Mumbai Financial District that MPL's management taught the Labour's party's much acclaimed Chartered Accountant Dianne Abbott all she knows!

AIMHO/DYOR

[phowdo] 11/5/2017 15:49

Talking of useless auditors...

[tyranosaurus] 11/5/2017 13:24

The biggest problem is that auditors are paid by the companies they audit.
Rock the boat and you lose the job.

[guernseymoney] 10/5/2017 11:52

As a previous auditor with a Big Four Co., I can concur that the industry is pretty useless.

Constrained by internal bureaucracy, increased competition and a barrage of confusing/pathetic accounting and CSR-friendly standards, auditors are more likely to be found sat back in their offices until the early hours ensuring that the annual accounts include relevant accounting disclosures on important things like the number of energy efficient lightbulbs used in the organisation being audited, than actually uncovering any fraud/nefarious activities, which is a total afterthought.

[waterloo01] 10/5/2017 10:43

Interesting stuff. Still no RNS re change of port, nor on progress or anything for that matter.

Google earth has an update from 31st March. Compared to the previous update it once again looks like not much has happening on site, apart from some landfill. 84 piles completed, so a LONG way to go yet!

[tyranosaurus] 09/5/2017 13:33

Auditors are usually people who have a degree, be it geography or something else of no use to accounting.
They are experts at filling in audit programs to the standard required by the Institute Of Chartered Accountants.
They do not understand the business being audited and have no idea of how it`s run, and are not actually thinking about possible fraud.
i.e. of no use to private investors, who need to be private investigators themselves.

[mount teide] 08/5/2017 02:59

Some wise words from Harry Markopolos on the value of Company Audits - "The Big Four accounting firms are so bad at catching fraud that they couldn’t even catch a cold, with incentives in the industry totally screwed up." That’s the view of the whistleblower who uncovered the $65 billion Madoff Ponzi scheme and he thinks fraud is endemic in the insurance industry as well.

"10 years after the financial crisis and Madoff Ponzi scheme investors still cannot rely in any meaningful way on company audits"

"The fact that Madoff feeder funds were getting clean audit opinions from the Big Four accountants for decades, when Bernie was stealing every dime from day one, shows how easy it was for Madoff to fool the accountants", Markopolos said, adding that "in the long history of accounting it’s impossible to name even one multibillion dollar fraud that the Big Four uncovered."

“Now, if I asked you, to name all the big, multibillion-dollar accounting frauds that the Big Four aided and abetted, we could be here all afternoon,” he said.

“The incentives are totally screwed up in the accounting industry. There is no way the company should be paying the audit fees. It should be the shareholders. It should be a fee. Every time you buy a share, a certain number of basis points should be allocated to audit fees. Because the audit fees are currently way too low. Management brags about how low they've gotten the audit fees."

“So audit has become a commodity. The people doing the audit, 80% to 90% of the contact hours are by someone in their 20s. Well, who is going to catch fraudsters when you're in your 20s? The only way you're going to catch fraudsters is to have thinning hair, gray hair, or no hair. You have to have been around the block and then burned several times before you're able to catch fraudsters.”

[mount teide] 08/5/2017 02:12

orinocor - I am against shorting as a matter of principle.

Book? - too busy enjoying early retirement!

Regarding our investment in SPL/MPL

I posted at the outset, that the professional experience of the SPL management left a lot to be desired but, we were prepared to overlook this potential red flag on the basis that;

The port design and build out were being carried out by reputable marine engineering organisations, that were known to us - Royal Haskoning and ITD Cementation

There was a fixed price contract for the land reclamation, quay construction, approach channel and harbour dredging - the overwhelming majority of the costs involved.

The port was strategically located to benefit from the inevitable migration of general cargo/ro-ro/break bulk ship cargo handling operations from the old Indira Harbour to the Uran Peninsula over the decades ahead; in much the say way the JNPT terminals has seen with container shipping.

We felt that provided:

The inexperienced management did nothing more than ensure the port design specification and scope of work for the access channel and berth pocket dredging (for dredged depth) was adhered to.

The port construction timetable kept on or close to schedule and budget(which should have included a 15% contingency allowance for general cost overruns).

The experienced NEDS did their job and provided quality oversight.

An experienced port operator was contracted to run the terminal


Then the port development would have decent prospects of becoming a commercial success - and offer a potentially attractive risk/reward investment at a share-price in the 50p-60p region, for what is the construction of a physical asset with a 30 year renewable operating concession.


Unfortunately, in our opinion, the passage of time has shown the executive management has failed totally to carry out its responsibilities to manage this port development project in a satisfactory and professional manner.

Cash burn - we cannot in any way reconcile the progress made to date with the cash burn - makes no sense.

Construction timetable - every construction progress target set by management has subsequently proved to be a work of total fiction.

Materially important claims were made by management in RNS that were subsequently shown to be untrue - in some instances by subsequent photographic and written evidence unwittingly provided by the totally incompetent executive management. In others by shareholders contracting a light aircraft operator to fly over the site and take photographic images.

The Directors 'preferred' final design that was used to support the £37m additional cash raise should have seen a highly material improvement to the original design, considering it was equivalent to 65% of ITD's winning fixed price tender price of £57m to build the major civil engineering elements of the development. It has done no such thing.

Indeed, in our opinion, the revised port design specification should in fact have seen a material reduction in construction cost compered to the original specification - and therefore should not have required any further funds to be raised.

The executive chairman having a recent history of settling one regulatory investigation against him for alleged insider dealing via an out of court settlement made highly concerning reading. Then to be the subject of writs for the alleged siphoning of tens of £millions of shareholders funds out of a company he had executive responsibility for, into companies owned by him and his family made extremely disturbing reading to us, considering our inability to reconcile the very high level of cash burn in MPL with the construction progress to date and, the final likely cost for the original design specification against its potential market value, never mind the scaled back, lower cost revised design. Since he did't step down immediately to clear his name, once this news became public knowledge - in our opinion, it made this company un-investible on this matter alone - never mind the catalogue of red flags mentioned above.


AIOHO/DYOR

[diku] 07/5/2017 22:24

Not too late to turn into a holiday resort if the fishy port is not going to be financially viable...

[orinocor] 07/5/2017 21:03

MT There must be enough material here for a book. You're obviously an industry expert so you have the credibility to take this on. Just wait until the story ends.

Don't you wish you had gone short?

[orinocor] 06/5/2017 01:12

Mount Teide
It's very interesting reading through all your posts. So just to clarify, you think there is absolutely no way on earth the port, or jetty, can generate enough income to even come close to paying the interest on the debt?

[orinocor] 06/5/2017 01:09

If I remember rightly they were going to set up a camera so investors could monitor the progress of the port online. Then they ditched the idea claiming the area was being used by the Navy. More lies?

[orinocor] 06/5/2017 01:07

"Totally unacceptable that shareholders at their own cost to prove management were lying, had to hire a light aircraft to fly over the site to take pictures of what the management were describing as a port under construction with fully mobilised workforce - only to receive a classic in flight verbal update for their money from the concerned pilot, as he repeatedly flew back and forth over the area looking for the port; "what port?, there's only mudflats and mangroves". Lol !"


Ha Ha. Classic. That could have been a Monty Python sketch.

[diku] 05/5/2017 23:13

Is there really no recourse to those who bought into the IPO...was it 250p?...

[mount teide] 05/5/2017 18:02

A good example of why its important to have professionally qualified industry experts running ports and, particularly those directly involved with loading and discharging ships - because even the professionals can get it terribly wrong occasionally, particularly when the ship's officers fail to transfer water ballast quickly enough around the ship during cargo operations!

Two new $50m sister ships loading/discharging cargo alongside in Antwerp Docks



One sitting upright the other on her side! Showing well the benefit of having a solid fixed quay over a lightweight open jetty, which would have been severely damaged or even demolished as the full weight of the ship came over on it. Needless to say the ship was an insurance write off, as was most of the high value luxury car and electronics goods cargo, which had an insurance value much greater than the ship. Incredibly, there was no loss of life!

[mount teide] 05/5/2017 17:39

kramch - i suspect the jetty will actually be around 360m long, not the claimed 400m by management - since they are probably and somewhat disingenuously including the linkspan access road that will service the eastern end of the jetty in that figure(the area where the temporary piling was laid to facilitate positioning of the piling gantry to commence piling operations to the West).

The 600m is probably meant as 2 x 300m of workable length jetty berths after taking into consideration fixings for fore and aft mooring lines and other factors.

To be fair, this management would not be alone in the small port industry to use this ruse to potentially claim larger berthing facilities than actual! This is possible since they are only looking to attract vessels of a maximum of 4,000dwt which would generally be around 125m in length, rather than much larger vessel operators who would naturally ask what the maximum length of the jetty is to see whether they could safely berth their vessels on it.

[kramch] 05/5/2017 17:25

MT,

I am told the jetty is 400M long, the quay (length?) is 600M, apologies.

travel expenses £280k in 2015, £307k in 2014, interesting to see what they are in 2016, you would have thought we would have really good updates with directors going back and forth so often!

K

[mount teide] 05/5/2017 17:05

'Once a month for a few days?'

He's on £175k a year plus a first class travel and Michelin Star restaurant standard expense account!

A remuneration package most MD's of commercially successful small port terminals in the UK and Europe could only look on with envy at!

With regard to James Sutcliffe - spoke to him twice at length and learned precisely nothing - he did a perfect impression of Manuel from Fawlty Towers to each question i asked - 'i know nothing !' or 'can't comment on that' , which many would probably argue sums up his total value to shareholders in return for banking his £40k a year fee for the last 7 years.

[kramch] 05/5/2017 16:58

PJ1 I was told the operating company KTLPL have an accounts team of 4 or 5 with one being a chartered accountant.

I guess Jay has day to day financial control and get the impression Parvan Bakhshi, the CEO, comes in once a month for a few days.

It would be good to hear from James Sutcliffe and Peter Jones the NEDs, on what they are doing to ensure proper corporate governance, for their £40k+ pa!

K.

[mount teide] 05/5/2017 16:33

Photographic and video updates of site progress:

H1/2016 - 8 (prior to surprise announcement to raise another £37m @96% discount to IPO)
H2/2016 - 0
H1/2017 - 1

Less than 5% of the land reclamation target achieved between end of Q2/2016 and end Q1/2017
Zero berths completed by end Q1/2017 against target of 4
High value solid quay wall replaced by much scaled down, low cost open jetty

No update of the cash burn position since June 2016!!!! They are clearly waiting until they are forced to do so in the Prelims!

Executive Chairman served writs in connection with the alleged siphoning off of tens of £millions of funds while the Director of another quoted company, which has since gone into administration.

All project progress targets since commencement of construction proved to be a work of complete fiction with the benefit of hindsight - "i will stake my reputation of 25 years, that there will be a working port at Karanja by the end of 2015!" Nikhil Gandhi

Executive Management incompetence on an industrial scale( the less charitable might describe it as deception, considering the 100% consistency of their failure to deliver remotely what they scandalously and shamefully forecast in RNS after RNS).

Totally unacceptable that shareholders at their own cost to prove management were lying, had to hire a light aircraft to fly over the site to take pictures of what the management were describing as a port under construction with fully mobilised workforce - only to receive a classic in flight verbal update for their money from the concerned pilot, as he repeatedly flew back and forth over the area looking for the port; "what port?, there's only mudflats and mangroves". Lol !

Sadly, another huge AIM embarrassment, whose appalling lack of management accountability should have been dealt with by the II's much earlier but instead, has almost certainly led to them losing another £37m of their investors funds once the dust finally settles on this debacle.

Our money is on the man with writs currently against him for allegedly siphoning huge sums out of a previous company he had executive responsibility for, buying the port back from the Indian banks for less than the total bank debt left outstanding on it and, developing it as a modern storage and distribution park servicing the fast expanding JNPT terminals, with a small volume vessel operation over the quay just to ensure compliance with the 30 year operating concession for the site.

AIOHO/DYOR

[pj 1] 05/5/2017 16:04

kramche
As I see it the Company are, and have been, doing the minimum works required to keep the project alive with the goal to raise further funds. As far as I am concerned MPL is uninvestable until the NED's get off their backsides and find where the funds have actually gone. To date, as proved my MT, there is no way all the funds raised have been spent on what they have achieved so far.

There seems no Account controls at all, in fact it appears they call in a book keeper every so often to produce what they have to. Who is controlling the funds? Gandhi?

I think its worth remembering well we have already been lied to by this BoD's i.e. The no-fly zone.

All IMO