Opg Power Ventures Share Discussion Threads

[lizardman_] 03/8/2019 12:56

BTW my guess on the scrip div cut is because they are trying to keep EPS higher/ equal for next year to make up for the other metrics being worse - hence trying not to dilute much.

[andycapp1] 03/8/2019 00:31

Lizard, very interesting. I was aware of the odd structure on solar but didn’t understand the debt implications. Just adds to throw general mystery of OPG.

[lizardman_] 02/8/2019 20:21

Probably not promptly

[lizardman_] 02/8/2019 20:20

Just want to chime in here. I've also sold my entire holding. Regardless of all the other discussed points - I was concerned with liquidity issues. Receivables is up by something like £20m. DSO is 120 days (credit terms 30 days) - it's not even the discom that's the issue, it's other customers. And their only provision is £1m, they only provide for a percentage of aged debt over 180days. Paying down debt is one thing, but you must collect cash first. Other thing is there had no choice but to sell solar - I didn't realise before, but the holding of associates, rather than as a subsidiary, was so the solar debt wasn't on the BS. If they ever wanted all the solar cashflow, they couldn't, as it would make the debt go up! Lol! So the only thing they could do was sell - as now it's classified as an asset held for sale, so the solar debt doesn't show on the bal sheet. PS check out the payables on the solar subs, looks like they've been loading up the solar associates with debt (not paying payables) to keep debt down on the main co. At least they have a positive nbv- so they will promptly get some dosh for them. Remember, cash is king! Will not be reinvesting here!

[the original goldbug] 02/8/2019 19:48

EBITDA is always compared to the Enterprise Value which is Market Cap plus debt.

What are more interesting and relevant metrics to compare against solely the market cap are net earnings or free cash flow (after maintenance capex).

It’s priced more or less correctly at this juncture and I would expect it to oscillate around 15 to 22 over the next year.

[jinvest1] 02/8/2019 19:33

I appreciate you guys frank assessments which convinced me to sell out first thing this morning, before it got too low. One thing I don't understand is the adj EDBITA is £35m on a market cap of what was 89m which I make as 2.5X? Obviously going wrong somewhere.

[the original goldbug] 02/8/2019 19:12

If you really believed that why would you be selling something that has 200% upside?

[the original goldbug] 02/8/2019 12:16

Saying all this it’s priced correctly, but I think it will take a long time to restate above 30p.

In fact I think the maximum on a 3 year view is 40.

[the original goldbug] 02/8/2019 12:14

Anyone listen to the conference call?

Did anyone grill them on this capex and downtime surprise?

[jozo] 02/8/2019 11:29

Either that or expecting significantly more down time than they're suggesting!

[the original goldbug] 02/8/2019 11:23

The Cenkos note is pretty depressing as it assumes flat earnings the next two years and zero dividends. I assume from this they will be expensing rather than capitalising the the clean up capex?

Anyone care to weigh in on this?

[jozo] 02/8/2019 10:52

Clearly as goldbug points out some big spendies the next few years.The cenkos note confirms that.Only light at the end of the tunnel seems to be 2023 once all done, debt free and hopefully a big income generator. It's like Groundhog Day all over again with the promise of jam tomorrow kicked down the line yet again.Anybody any idea what we might expect for flogging off solar assets?

[rivaldo] 02/8/2019 10:45

They haven't been posted here before, so to clarify here are Cenkos' new forecasts from their 1st August Buy note:

Y/E 31/3/20: 3.6p EPS (no dividend)
Y/E 31/3/21: 3.7p EPS (0.2p dividend)

They conclude:

"Investment case

OPG has high quality power producing assets which consistently perform better than local competitors (eg higher PLFs), ensuring the company is well placed to benefit from strong growth in per capita electricity consumption in India. Tariffs are expected to remain robust, whilst OPG should benefit from lower projected coal prices. Trading on a FY20E EV/Adj EBITDA of 4.5x and a P/B of c0.5x, we see excellent value for this highly cash generative business, which is expected to be completely free of term debt by CY23E. Buy."

[the original goldbug] 02/8/2019 10:27

As I observed yesterday it looks like the capex to clean up may well be considerable given they don’t expect to be debt free until the end of 2023.

The statement made familiar reading and harped on about Indian GDP and power consumption, yet shareholders in OPG have not participated in the growth story, in fact our money has gone to subsidise the Indian economy.

We have been far more generous and charitable than the likes of DFID or Oxfam could ever dream of being!

[dave4545] 02/8/2019 09:40

Would anybody buy them out ?

[andycapp1] 02/8/2019 04:53

It’s not on 2x EBITDA it’s on about 4x. 5x is about right for coal so it’s somewhat cheap apart from needing to nick cash to equity to pay for SCR. Oh and poor corporate governance. Oh and we (were) are a minority in a minority as the Guptanator effectively controls 51% so the loon can do what he wants!!

[talygarn tom] 01/8/2019 21:25

The question you should be asking is why the board is even bothering with a pointless scrip dividend when they are paying up to 13% on their debt. Surely, the best use of free cash is to pay down that debt.

[oldboffy1] 01/8/2019 20:58

andycapp1. Your thoughts chime with mine. The upside that was almost a given has shrunk. Yes it may be cheap by some criteria but let us wait and see. The good news is the potential sale of solar and - surprise - the reduction in Arvind's salary. However, the small scrip dividend makes me think that the Board is concerned about cashflow and the cost/disruption of meeting the new regulations.

[the original goldbug] 01/8/2019 20:58

It’s on 4+ times EV/EBITDA which is the relevant metric.

I’m at a loss to understand why they will only pay down debt by the end of 2023.

It beggars the question what new black holes will they sink the cash into in the meantime.

[jinvest1] 01/8/2019 20:23

Shame about today's price reaction but overall I think it is in a good place and well worth holding. Now it has returned to profitability, trading at just over 2X EBITDA and somehow just over 0.5 on it's tangible assets. That's just crazy whatever way you look at it and the share price should reflect that in time - even if it isn't a particularly exciting stock.

[ppvn] 01/8/2019 16:58

Really disappointed with how that went today!

Oh well. Still dirt cheap here.