Opg Power Ventures Share Discussion Threads

[whentobuy] 02/3/2017 18:16

Like other power providers in India these company is moving away from concentrated regional public sector customers who are playing the price card and credit days against OPG. This as meant presenting a changing product and customer profile. Coal prices may move against them but there can't be much more to price down on the variables. Personally I got out at 63p and now back in at 49p with a stop loss and accumulate if it goes north

[source] 02/3/2017 16:39

Piedro I did. My buying was mostly around 60p though.

As for OPG 3 years IS long term and despite all the apparent positives (all late I might add) it is currently drifting down below 3 year lows...On a long enough timescale we're all dead.

Regards,
Source.

[smithless] 02/3/2017 16:28

Well I'm in again for what it's worth - drip feed buying. There are issues, such as average debtor days way to high and as someone else said, why not refinance at a lower interest rate and the management need to steer consensus forecasts a lot better. Looking beyond this, energy problems are not going away in India.

[andycapp1] 02/3/2017 14:40

I think, Source, that is the nub of the issue. The management is really not that good. Sure they have put up 5 coal plants, albeit generally late but tolerably to budget. However,they were too bullish on load factors, and pricing has disappointed. Their debt is in my view excessive and leaves little room for error and their governance is terrible. The non execs are weak and they continue to use any excess capital for solar rather than their own shares. The debt extension adds nothing to equity value. In fact I think increasing the duration either masks some other issue, possibly weaker cashflow going forward or else actually increases risk. I'd much rather they had tried to renegotiate the rate leaving the duration unchanged. That would have palpably added some value. So in short why invest in OPG? Where is the investment thesis? Why will it be rerated when all the above factors are in play. I agree it is a slow drift down to the point where they take it private. The "drift down" will terminate rather lower than the current share price I fear.

[source] 02/3/2017 14:20

Another way of looking at it I suppose is why when the stockmarket is roaring and there are a plethora of better opportunities around then why would anyone hold onto OPG?It simply continues to drift lower and lower all the while its management continue to be completely aloof to the long standing value destruction?...Regards,Source.

[the original goldbug] 02/3/2017 13:12

Ballychan, I think there is a real risk that it does get taken out at 70p or so. What are the company going to do with the possible cash from the refinancing?

The AIM is a terrible market with a whole host of orphaned stocks. If I was Gupta I would look to take it private and refloat in India when the adverse trends affecting profitability reverse and in the process also capture a higher multiple.

[jeffian] 02/3/2017 11:58

I'm not saying it's fraudulent, I'm just saying that when companies are inexplicably 'cheap', there's often a reason!

[ballychan] 02/3/2017 11:51

I think patience has worn thin rather than any fraudalent activities going on.They've deliveried the 750mw they set out to do, plus 200mw solar on top of that, but the lower than expected earnings due mainly to external factors (weather + coal) has clearly had an impact on investors. Their communication may not have been the best either. The Market opened up after the Q3 results, but some sellers want out, it's a very illiquid stock so it doesn't take huge volumes to trigger it down, or vice versa.I just hope they don't get taken out privately at a small premium to these levels.

[jeffian] 02/3/2017 11:40

I used to follow Asian Citrus Holdings and that used to attract similar comments - valued at less than its 'cash pile', making profits, paying dividends, incomprehensibly low PER - bonkers! Only it wasn't. It's suspended now.

[jeffian] 02/3/2017 11:28

Or something isn't right.

[ballychan] 02/3/2017 11:27

Forward PE of 6 now.NET assets are valued at £181m. Market cap is £168m.As I mentioned earlier - bonkers!

[andycapp1] 02/3/2017 10:56

Not such a ridiculous PER given their track record, high leverage and exposure to both coal and power prices. As I've said around 7x PER is probably right.

[ballychan] 02/3/2017 10:38

Smithless, good point about us trading at discount to net tangible assets.Markets factoring in zero profits and just valuing them on their assets alone - bonkers! LSE website has NAV at 51.5p!Par I see KSK climbed from 25p to 95p in less than 5 months - I expect OPG to go through a re-rating similar to that.It can't continue to make a profit, pay a dividend and be trading on such a ridiculous PE.

[jozo] 02/3/2017 08:17

Agree Source - Brokers and company need to earn back investor trust.

FT.com has estimates

2017 eps 6.1 / rev 204.51m / dps 0.8

2018 eps 7.5 / rev 216.08 / dps 1

I'm pretty sure these estimates are pre TU

The big question is how will the 14m (approx) annual savings due to debt restructuring impact any broker upgrades.

If everything goes to plan for opg then eps figures should be upgraded 7% ish for both years with reduced annual costs for company.

However with broker downgrade yesterday I am even more concerened that 6.1 and 7.5 eps forecasts for next 2 yrs is not so certain.

Hence my sceptism over the debt restructuring and reasons for it - is it to try and avoid missing already reduced forecasts?

I cant's help but see the TU as a disguised profit waning - the share price and continued downward pressure also seem to recognise this.

I'll be watching closely for any change to eps estimates at same time.

jozo

[jozo] 01/3/2017 21:27

just found this on marketbeat.com - don't have details f report but if an analyst downgraded yesterday after results then things can't be too rosy.


2/28/2017 Shore Capital Downgrade Hold

2/2/2017 Macquarie Reiterated Rating Outperform GBX 120

jozo

[par555] 01/3/2017 18:53

I made some money in KSK years ago and fortunately got out before it crashed. This share has been deja vu. Seems to be the way with Indian energy shares.

[jeffian] 01/3/2017 17:48

They always say you shouldn't fall in love with a share. I wonder if the opposite applies?








I'm beginning to loathe this one!

[whentobuy] 01/3/2017 17:40

I spoke to investor relations some time back when the KWH price dropped from 5.5rp to 4.4rp. However, this was covered off by the softening in the Philippines coal price. Risk is now probably on the downside for cost of sales. The shift in the Sep' 2106 presentation towards solar makes sense given the more limited variables and the big push centrally on renewables. Take a look at Mytrah who are also undervalued according to analyst, but are a sole renewables play.
Hybridan have got OPG down for EPS around 8p for fye March 17. Even with risk on margin % the 6'ish multiple looks harsh.

[source] 01/3/2017 17:29

Talking of quality. Certainly doesn't seem present here in OPG. Markets are booming and OPG just drops even further down. Some would say the price is telling you more than the rosy words of the management and its consistently wrong analyst base. I can imagine how frustrating that is to see and more so experience. Regards,Source.

[par555] 01/3/2017 17:00

I'm waiting for Azalea so say 'sell' before I pile in here again.

[smithless] 01/3/2017 10:21

Yes it is cheap, but building and running a utility company comes with its own challenges, especially in India. I have done my research and anything at the current levels is a buying opportunity IMHO as it is trading below tangible net assets. It won't be bought out yet and I suspect if it is, it will be to a large specialist fund. Likelihood it will sell its power stations one by one as they reach optimal free cash flow and will reinvest into new projects as this is where it skills are.

[chalky] 01/3/2017 09:53

i cannot understand why opg is valued so lowly a market cap of approx 180mill,last 5 years of increasing profits,last year approx 19mill ,this year between 30 and 40 million, revenue over 200 million and now paying a dividend albeit a small one.
Compare that to say Blue prism a market cap 284million revenue 35 million a trading loss of 4.4 million no dividend. opg also has a large amount of physical assets.it seems that pi,s have been brainwashed into thinking this is a bad company it,s not,if i was the major shareholder i would take this private or negotiate a takeover at this rediculous valuation. it could price its self off the market. if i was a company specalising in takeovers this would be a prime asset,profits, increasing revenue,its a steady company with a valuation that does not reflect this

[jozo] 01/3/2017 09:44

Big Jim5,

Thanks for that - that's as I originally thought. One one hand it's good that they've managed to increase cash flow etc in such a way.
On the other hand, with interest rates at say 10%, that still makes almost 72m in interest payments over the next 4 years add on capital repayment of 14m and that's about 86m.
Admittedly the total cost under the previous terms would have been more like 140m (repayments and interest)
So overall cost savings of approx 55m over next 4 years assuming rates of approx 10%.

While a very nice extra payout for the banks (extra 12m or so over next 4 years over and above what they would have been receiving and more going forward) it does give opg a little wriggle room. I hope they utilise/invest it wisely.

I have to wonder though, what hole they might have been in without this new facility. That's what concerns me - the trust is simply not there for Pi's and Ii's and the company really needs to address this.

House brokers cannot sell this to investors with such little trust. They should be advising the company on managing realistic expectations as well as ensuring governance is as squeaky clean as possible.


I myself have recently increased and extended a 5 year loan for my business to a new 7 year loan. This helped enormously. I also took the option of a 6 month repayment holiday at the outset which was perfect while the new part of the business was established. Of course interest payments had continued in this grace period. The business is establishing itself well and growing very nicely. So I have a fair idea on how negotiating new terms etc for loans can be highly beneficial for a company if used/invested wisely.

jozo

[oldboffy1] 01/3/2017 09:13

Big Jim5.

Your understanding of why the Company has taken this step accords with mine. The awful performance of the share price IMHO is much more to do with poor communications than by the actual/future profitability. I thought that the January RNS was downbeat and affected sentiment. In 2015 they had floods in Chennai and in 2016 a cyclone. Yet for all these things output was relatively stable and OPG continues to go forward. My only concern is that the patience of the institutions (and PI's) much be getting stretched.