Opg Power Ventures Share Discussion Threads

[the original goldbug] 01/10/2016 09:55

Well if you were clever/fortunate enough to spot the 30 bagger ASOS, you would surely not hold every investment to the same high standard!

The point remains that almost every company involved in fixed asset, civil engineering, capital intensive type investments struggles to come in on budget and time.

Here's a question for the moaners to ponder on. Obviously the stock did trade at 90p for about a year, so what crime did management commit for the stock to drop to 60p? And what wonders did management do, to get the stock to rerate from 50p to 90p from 2012 onwards? I remember reading this board and people were jumping to conclusion that the Chennai floods were to blame for the fall in share price. That turned out to be a red herring, but an understanble rationalisation to justify the fall in the stock price.

The truth of the matter is that active fund managers have seen an ongoing wave of redemptions and that hits smaller stocks such as OPG disproportionately hard. A hedgefund forced to wind up is a forced seller of OPG into a thin market and bingo the result is a 30% markdown. Of course it is preferable to pin the blame on Azalea or management rather than accept the reality that we were unfortunate in our timing and hostage to factors we did not initially recognise.

The corollary is that when the tide turns (eventually) and the stock rerates we will think we are geniuses with genuine stock picking prowess...

[source] 30/9/2016 21:50

Errmm yes. Numerous, but just look up ASOS in the same timeframe. Regards,Source.

[the original goldbug] 30/9/2016 19:31

I take a more sanguine view on this. Can anyone actually name an AIM company that has 'over delivered'? These guys have broadly done what they said they would. On large capital projects, there is invariably cost creep and time delays. To raise money you have to put on your optimistic face and bear in mind the IPO was I believe just before the big crash.

If the share price was at 90p all the criticisms would melt away. Now management could of course do more to try and market the company and be more expeditious with their reporting etc, though I maintain the real head wind is the small cap and emerging market bear, which is beyond their control.

Of course this stock may never rerate and it is conceivable that it could derate further. That being said, given all the information available, I find the stock at this level offers a compelling opportunity over a 3 year view.

[azalea] 30/9/2016 14:48

Revenues H1 2016 £56.57M. Q1 2017 £57m.

[eddie1980] 30/9/2016 14:40

Another top record for OPG - releasing their full annual report only on the deadline it has to be submitted to companies house, a full 6 months after the year end. Not sure why they bother with all the narrative updates in it as its so outdated by the time they let their shareholders actually read it.

[kevjones2] 30/9/2016 13:20

Andycapp et al, I agree with all your views on the moron Azalea. He is ramping this company to the point that he's undoubtedly turning people off investing here. On the other hand he is still visiting the Tullow bb but only to post de-ramping comments. Mentally unwell, I'd suggest.

[oldboffy1] 30/9/2016 13:07

Thanks andycapp and ballychan for your thoughts. I have been chewing over why Lanco would only get 1600 crores for the plant when it must have cost 3 times that figure. Pure speculation but, apart from the need to create quick cash to complete the other plants, any buyer would do the sums on any long term contracts (maybe as low as 3.5 rupees per kWh), plant efficiency and knowing that they are dealing with a forced seller. Your point about the reorganisation of the State utility sector is well made.

The Company certainly needs to under promise and over deliver (compared with the forecasts at the time of the IPO) so my hope is that the interims in November will provide the answers that the presentation on the 15th September implied.

One thing still comforts me - I truly believe that Arvind Gupta is a cautious, long term player.

[azalea] 30/9/2016 12:20

Source
Can you give the dates and sources of these "various press articles'?

[andycapp1] 30/9/2016 12:15

Azalea. I've been reading your posts and I agree with Source et al that your comments are generally moronic and add nothing to the debate. If power companies (or say banks) are failing then similar companies will invariably see their ratings impacted. Yes the fact that there are companies to mop up is possibly good longer term but generally if your equivalent companies are failing that is pretty bad for your rating! As for Gupta (and OPG) not putting a foot wrong that is also balderdash. Their plants were late, somewhat over budget and OPG has generally over promised and under delivered. That is part of the reason why the share price (and rating) is so poor. The other part of the poor rating is the generally low regard of investors for Indian corporate governance - Essar and Greenko - the generally poor performance of IPPs over the years and risks around the majority ownership by Gupta/family. Gupta and the Board need to pay far more heed to maximising shareholder value - better dividends; consistent delivery, under promising and over delivering and even then I fear that an ostensibly coal generator in a volatile mkt with fuel input cost uncertainty, PPA uncertainty etc will never achieve a multiple much beyond 4-5x EBITDA. Too many uncertainties. So I'm a holder and I hope any Lanco deal is low capital invested and doesn't overgear the resultant entity. If they issue shares at 50p then that is potentially dilutive but we will have to see what the resultant EPS/ROE/ROCE/ capital structure looks like before judging.

[source] 30/9/2016 12:08

Ballychan - the governments restructuring program is just starting there seem to be numerous zombie companies in the space waiting for some form of clear up according to the various Indian press articles. Regards,Source.

[azalea] 30/9/2016 09:45

The more electricity generating companies-private/public that are failing, all the better for OPG, which will achieve its largest output this year and next, along with the biggest revenues in its history. Eps will not be far behind.

[ballychan] 30/9/2016 09:05

Source, I wasn't aware many power companies are failing, who else is under the chop?

[larva] 30/9/2016 08:38

lot of stock on offer

can buy 60,000 inside the price

guess someone has a whiff of a placing at 50p??

[source] 30/9/2016 08:37

...There are a lot of Lanco's at the minute, OPG needs to prove why it won't just be a late comer to a very large and growing "failure" list in the new power generation game in India. Regards,Source.

[ballychan] 30/9/2016 08:27

That's why we're mere shareholders and not running a multi-million pound company. As Goldbug mentioned, it's about having faith in the guys that do run it. If anyone believes they're idiots I'm sure they would have sold up already.Should get Q2 update in the coming weeks, let's see if Lanco are mentioned.

[source] 30/9/2016 08:21

Yep Ballychan & as I said earlier seems very transformational indeed if we can come to terms with the extra risk, debt and cash strain...Regards,Source.

[ballychan] 30/9/2016 07:40

So the newly formed company will contain £17m from OPG and Lanco will add £178m which they'll get from their 1200mw plant sale. They'll then have enough cash to finish off the 3 projects in construction totalling 3,960MW.The completed 1,800 MW in operation from Amarkanta I and II will also be moved to the new company – totalling 5760 MW versus total debt of £578m. At present they have 750 MW with £258m debt.On the face of it, this could be a very lucrative deal, if it even exists!

[source] 29/9/2016 10:47

Thanks GoldbugRegards,Source.

[azalea] 29/9/2016 10:38

If the maiden dividend is at least 1p, the CEO will receive £1.75m. The year after, the figure could be notably higher. In the event of any deal that reduces his controlling staka in OPG, he's certainly going to make sure that it will guarantee to make him significantly more money in the next two FY, than the income he is virtually guaranteed to receive from dividends over the same period.

[the original goldbug] 29/9/2016 10:03

It's all rumour at this stage and I wouldn't take anything from the Indian press seriously or literally. I happen to have faith that Gupta is not an idiot.

My 50p is an educated hunch based on them buying assets at a 30p EV adjusted basis from Lanco. If OPG starts issuing stock at sub 50 to either finance this or pay down the debt of the new acquisition it suggests that Lanco and the banks would need to take further writedowns so that OPG can get an accretive deal.

The bottom line is that the deal will be accretive, if there is one...

[source] 28/9/2016 22:49

Not so sure gold bug. OPG Taking on an extra 5400 Crowe in debt and taking control of over 3 unfinished power plants, which don't seem connected to the grids yet, suggests quite a bit of risk being put on shareholders. Especially when many were looking forward to some benefits after a very long build out of its 750MW. I.e. Big cash flows and hefty paying down of its debts etc. Also not sure why you say a 50p ish placing won't dilute, not sure how you are calculating that. Regards,Source.

[the original goldbug] 28/9/2016 16:26

There will be an equity injection/debt reduction to appease the banks. OPG will not be getting something for nothing, but nor will OPG shareholders be taking on too much risk and getting stuffed in any LANCO deal.

If anything happens it will be a sensible and an on EV basis marginally accretive deal, provided a funding is done above 50p.

Just my two cents of course.

[ballychan] 28/9/2016 16:03

Goldbug, the article stated OPG would cough up 150 crore for their 51% stake, that's only around £17m. I'm sure they can fund that with cash and loans, so there would be no dilution?

[the original goldbug] 28/9/2016 15:01

I think it is reasonable to work on the assumption that any Lanco deal will be accretive provided any issuance is done at +50p.

Lanco looks like a 'receivership' situation so buyers have all the negotiating power, not Lanco and nor the banks who will not want to get into the business of operating power stations.

Remember Gupta will lose control if OPG does a transformative deal and I think he will only be prepared to do that if the deal is too good not to do.

If the company doubles in size in terms of cash flows you could expect a rerating to occur as OPG moves into being a midcap company from a small cap.

Of course this does create uncertainty (and frustration) in the short term.