R.e.a Share Discussion Threads

[ntv] 04/1/2022 10:12

Nice start to the new year on this one

[wigwammer] 04/1/2022 09:28

Thanks nobull, and I agree - there is a highly material asset base here that will hopefully and increasingly land in the laps of shareholders as debt is paid down. Hopefully we will get more clarity on the impact of the tax regime through 2022.

[ntv] 03/1/2022 21:30

Stockopedia way out on AEP current nett cash
interesting analysis

[nobull] 03/1/2022 19:33

CousinIT, yes, they cut the top rate of export levy from $255 to $175 in July, but in early December 2020, the highest export levy chargeable was just $55: they almost 5 timesed the highest rate of export levy payable - that's shocking.

My point is I don't think one can expect the share price graph to go up as steeply as the share price declined in April 2020 because of this. Were the old, early December 2020 deduction regime to have continued, we'd have absolutely cleaned up and repaid masses of debt and cleared the pref arrears by now, I wonder? Yes, I get that they are entitled to take back some of the benefit for supplying extra CPO demand.

[cousinit] 03/1/2022 15:36

Just to say that the various levies were reduced (crudely by 1/3) from the beginning of July - see 30/6/21 RNS

[nobull] 03/1/2022 12:05

Wigwammer, seasons greeting to you too. No, I haven't been selling - couldn't if I wanted to.

...the palm oil price is currently 50% higher than in the prior 2016/17 peak. So when you say the government is taking a lot more this time, it is a lot more of a much bigger pie. Can you be more specific about how much is “a lot more” as a percentage of sales?"



The short answer is no. The unhelpful answer maybe is I am thinking about the whole cpo price cycle, going back at least 10 years. I just get the impression that the amount of levy and tax being taken compared with 10 or 12 years ago, when CPO price was around this level, is a much bigger percentage tax take.

The higher percentage tax take seems more like an opportunistic windfall tax than a justifiable reward to the Indonesian government for its creation of extra cpo demand by legislating compulsory use of biodiesel; it feels like an extra tax to take away the benefits we've got from other parts of the world suffering from a poor soy bean harvest, which is not a nice thing to do: we need the high profits of the good times to help us keep going during periods of low CPO prices.

An indication of how the CPO export deductions regime changed in December 2020 is here:

"As such, the export levy will be raised by US$12.50 to US$15 per tonne for every US$25 per tonne increase in the CPO reference price beyond US$670 a tonne and up to US$995 a tonne. Previously, the export levy was fixed at US$25 to US$55 a tonne for CPO and processed palm products regardless of CPO prices."





Source:

So I expect our share price to climb back to its former levels (over £2), but maybe not as quickly as it declined at the start of the pandemic; a slower rate of recovery seems more likely because of the higher tax take and because of the anticipated dilution from exercise of the warrants in 2025 or whenever.

While I have forecast 8p eps attrib to the ords for FY2021, arguably using a method of questionable validity, I can't see how FY2022 will be profitable if we have to pay out 10p arrears to the pref holders. I hope for a share price of £2 by YE 2022, despite the grotty FY2022 eps outlook, grotty because of the pref arrears planned to be paid, not grotty because of there being anything unsound about our business model.

CPO futures prices at 6:15 pm today in KL, the front month price of which ought to keep the Rotterdam CIF spot price above the key $1,300 level, I hope.



Below is an excerpt of a spreadsheet comparing the three London listed palm oil producers, using their 2020 accounts. What is interesting is how their total assets are quite similar. However, the market caps, even if you don't use the out of date share prices used in the comparison are wildly different. The companies differ in the amount of equity supplied by the non-controlling shareholder (minority interests) and in the amount of debt used to finance the operations. Imagine if REA could just pay off all that debt and redeem the prefs, using funds generated from operations, then its market cap would need to go up 5 or 6 times what it is now, if it kept the same no. of shares in issue. AIMO. DYOR.

[nobull] 24/12/2021 13:24

Agreed, NTV, about dollar loan note and the stone interests. Although I don't like the debt, it makes sense to keep the $ loan notes going as long as possible at the same interest rate as it must be more value-accretive than if those notes were replaced with ords equity, I wonder?

Nice recovery today of front month to back over 5,000 ringgit a tonne again (equivalent to over $1,300 in Rotterdam, allowing for all the usual differences when comparing what are probably very different contracts?). I can't explain the recent REA ords price rises, unless it is in anticipation of news about the coal interests or unless the stock has been tipped somewhere.

Yes, I see if you re-run CPO price cycle, the chart maybe should be a reflection in a vertical line through the Feb 2021 mark on the x-axis, except the climb back this time shouldn't be so steep, particularly if some warrant dilution is taken into account, I wonder? Merry Xmas all.

Oh, I forgot - another thing that's different this CPO price cycle is the percentage the govt. takes - they take a lot more this time.

[ntv] 23/12/2021 08:48

To me , the last statement appears to imply that some bond holders want out next July and so the company will have buy those bonds back. It sounds as they intend to re sell a new similar bond back to the market
The financial position of the company depends on commodity prices and those are pretty good still
Selling stone could make this a very interesting company in a couple of years time hopefully

[nobull] 22/12/2021 07:52

Erik, not at all. I have made a few catastrophic investment mistakes, all my own fault, but I try to learn from them. Luckily, I've been given a second chance (by inherited wealth of a scale I had no idea existed, and which I am not proud of, so I'll have to try to do better this time). The pandemic has been a time of very easy pickings (well, so far), so I don't really count the recent successes I've had as sustainable, so not a proper test of ability at all. One day I expect I'll manage to go back and read the old chat threads and face my past delusions and errors more fully, but for now I've just got to look forward and keep reading all the investment books to get better. I've read a few grammar and punctuation books too, to try and improve. I hope my misplaced enthusiasm didn't lead anyone to disaster and I hope you prosper too - well, I am sure you are doing well. Regards Frank.

[eriktherock] 21/12/2021 17:01

Thanks Frank. Please receive this as intended : You are a top man. Massive talent.

[nobull] 21/12/2021 16:37

Oh, you make me laugh, Erik. Yes, doing much better. I try not to think about the past! I've had my delusions, and for now they are cured. All the best.

[eriktherock] 21/12/2021 16:31

To be Frank. Merry Christmas. I hope you prosper.

[nobull] 21/12/2021 16:25

Merry Xmas all. News on coal shipment coming soon perhaps?

[wigwammer] 21/12/2021 15:49

Another nice move up, despite some retracement of the palm oil benchmark in recent days. Happy Christmas all :)

[ntv] 17/12/2021 17:40

50k gone through @112

[ntv] 07/12/2021 17:10

Thanks for correcting me on the strike nobull
IG quote 5059 - 5071 for palm

[nobull] 07/12/2021 08:59

Yes, our shares are going to be above £1.515 in no time (£1.26 strike price + 25.5p Emba paid for the warrants). Yes, Mr Robinow, as I suspected, has massively multiplied his money on his first purchase of warrants. Brilliant stuff.

Anybody noticed how Bursa Malaysia now has a night time cpo futures trading session? Are they worried about losing business to the European time zone?

P.S. CPO futures have recovered a bit this week compared with last week's dismal performance, so the spot price should be over $1,300, I hope - the price at which we start to get the cpo price upside back.

P.P.S. McHattie, the author of the best book on warrants, refers to them as "deferred rights issues". They should bring in some of the money, just when we need it, to help pay off the sterling loan notes.

[ntv] 06/12/2021 16:02

A director buying a sizable chunk of warrants
Presume the strike price is £1.40?

[wigwammer] 26/11/2021 00:29

https://masterinvestor.co.uk/evil-diaries/evil-diaries-oil-in-your-palm/

[wigwammer] 25/11/2021 10:00

The valuation of the ords still makes little sense - way undervalued. They were trading 150p+ prior to covid, since when palm oil prices have roughly doubled and reported net debt has fallen from $209m to presently somewhere below $175m, and with a vastly improved outlook. Much more to go for, IMO.

[nobull] 25/11/2021 09:49

Yes, NTV, but I would have liked them to say something on the stone interests.

[ntv] 25/11/2021 09:32

Nice update

[nobull] 25/11/2021 08:06

Yes, a good start. I got it wrong too, on both counts. The prefs are down but maybe they went xd today?

Edit. Yes, the prefs needed to drop 5.5p (4.5p + 1p arrears) because they went xd today.

[wigwammer] 25/11/2021 08:01

Nice early reaction. I might have got that wrong then!

[wigwammer] 25/11/2021 07:57

Thanks nobull. You are only going to get loan extensions on attractive terms, or commit to paying pref dividends, if those in the know are confident about the underlying business. I suspect the ords won't see a rise today, but the story is building nicely..