Skil Ports & Lg Share Discussion Threads

[mount teide] 04/11/2016 22:00

DVI - the pure container port developments James developed in Poland and Bangladesh are impressive, but are not heavily draft restricted like that proposed for Karanja under SPL's current plans. This brings a number of significant challenges for ship operators wishing to consider operating to the terminal, that they would not currently be concerned with at the Indira Docks.

In the proposed offer and placing document the approach channel to Karanja will have 4.5m. By way of comparison most of the 50 or so berths in the Indira Docks in the Old Harbour, where the general cargo and smaller container vessels are currently handled are all dredged to at least 11m. While the JNPT berths have a minimum of 14m available in the access channel and 16.0m alongside.


IMO - the approach channel to Karanja needs to have at least 6m at all states of the tide to attract many of the part/fully loaded coastal and medium trade vessels that currently operate services to Mumbai. Anything less, is likely to put restrictions on vessel arrival and departure times, even if the berth pockets are permanently maintained to a dredged depth of more than 6.0m.

I agree, the project execution and cost to date is of particular concern - as is the totally unrealistic development timetable to complete in the Open Offer and Placing Document.

It does not take industry expertise to work out that the pace of development expected over the next 8 months is many multiples of anything achieved to date. How do they propose to achieve this, as it suggests the rate of progress made with the quay wall piling and land reclamation is going to accelerate to around 3 fold of that achieved to date!

Will drop you a private message tomorrow regarding a conference call.

[deepvalueinvestor] 04/11/2016 20:46

MT- I went through the plans in detail with James Sutcliffe years ago and he seemed perfectly happy. He is very experienced with port building projects in Bangladesh and Poland. The key problem seems to be Pavan and the actual execution. As David mentioned, I would love to hear you question the team in a conference call.

[saikat] 04/11/2016 18:32

Forget the corruption angles, the technical aspect (the flawed plans and design of the waterways)of MT's posts are so serious, that every holder should benefit from a rethinking. Superb series of posts from MT. I always like his thinking. And I trust his views more than the management's or the institutional investors in this sector - neither have a clue or they are not bothered for some reason or the other.

And everybody should be able to change their position when new data arrives. In small speculatives,you survive as long as your thinking survives as an equity holder - especially in the current extraordinarily `high risk premium world' . And one should think before switching position and you should switch if your thinking says so.

[davidosh] 04/11/2016 12:19

DVI & MT.....Can you both email me if you would be happy to take part in a conference call and I will invite the NEDs to join ?

There are clearly some questions to be asked and I think directors need to be answering them.

[extrader] 04/11/2016 12:16

Hi spooky et al,

I'm surprised that spooky's 8751 got a 'thumbs down'. MT's Damascene conversion will have come too late for many here...as it did, IIRC , with Globo GBO and Tethys Petroleum TPL.

Persuasive eloquence can be a double-edged sword, if not tempered by healthy scepticism......and an ability to avoid 'anchoring' (boom! boom!) when challenged by alternative points of view (Paulypilot and others).

ATB

[mount teide] 04/11/2016 11:21

Hi DVI - my main concern is that the management has been unable to attract a third party port operator(the smart money) as a partner in a port development project with such high commercial potential. I would have been far happier if SPL had raised any further funds from an experienced port operator, or say 50% of it as a further bank loan, than to raise the entire £36m via equity investors and attempt to go it alone - in light of experience i no longer trust Nikhil Ghandi.

I do not believe a new port development in Karanja Creek built to what is a very modest technical specification( it does not need to be any more) should be costing anywhere near what management now suggests is needed circa £145m - a huge amount of money for such a development.

The Port of Tilbury is around 1,500 acres and has 50 deepwater berths and was bought by Forth Ports for £130m.

London Gateway when complete will have 2,700m of 16m draft deepwater berths, 1500 acres of container storage and light industrial/rail fed warehousing - for a total budget cost of £1.5bn.

Also at Karanja most experienced port operators would have built a third of the total design specification(say 350m of berths and 60 acres of hardstanding) as a phase one development - got that fully operational and earning revenue BEFORE attempting to complete phase 2 and 3 of the development. For example,at London Gateway the total development is expected to take 20 years to complete since after phase 1, the next two phases will be built in line with commercial demand.

It makes zero financial sense to virtually complete the build out of the entire port terminal before starting any commercial operations.

Also, i am not happy with the very vague contractual relationship between SPL and ITD that has been publicly disclosed, considering the size of the contract value. Despite considerable effort i have never been able to get any detailed information as to what exactly is in the contract for 'Marine Facilities at Karanja'. I suspect it is considerably less than shareholders will see and expect before the cash again runs out.

I estimate management has spent around £65m to date in cash and debt - an almost unbelievable sum of money for what is currently on show at Karanja - the numbers just don't add up!

If i were L&G, i would call in a shipping and ports industry professional and go through the entire project with SPL management in considerable depth - and unless SPL came up with satisfactory answers to the questions i have raised, and many others that i would want clarification on, advise L&G not to put in any further cash.

Lord Flight is putting in just £100k of his own considerable fortune at 10p - a 96% discount to the IPO price. I would suggest if he was offered the opportunity to invest in a part completed commercial property development in London at a 96% discount to the original investors, he and his investment funds would take up the entire £36m himself and leave nothing for other investors.

Sorry, i am unable to be more positive but the numbers, company statements, progress to date and revised development timetable and cost for the project simply no longer make any sense to me - and presumably the ports Industry too since SPL appears to have been unable to find any interest from any of the major port groups, who are currently cash rich. The Ports Groups are not suffering like much of the shipping industry is today, since the ports industry has increased capacity in line with the growth in world GDP, not many multiples of it as the low cost to entry shipping industry has done.


AIMHO/DYOR

[mount teide] 04/11/2016 01:21

When the news changes - i change my mind.

The reason i invested is because i am familiar with Mumbai Port and always believed the commercial prospects for a new general cargo port on the Uran Peninsula handling the type of shipping historically handled at Mumbai's Indira Docks in the Old Harbour is a commercial 'no brainer', due to the much improved geographical location, road and sea access. It very much remains the case.

SPL Management with a little prompting identified that Karanja would in fact be particularly attractive to short sea ro-ro operators - a branch of shipping that although mature in Europe is only just taking off in India. It offers by far the most productive berth and land utilisation - many modern ro-ro terminals now handle the equivalent of 8.0m tonne annual throughput with just two berths and 80 acres of hardstanding - but they need at least 6.0m of depth in the approach channels to handle the ships.



What changed my view of SPL is two things:

I grew progressively tired of the embarrassingly naive and evasive answers i continued to get from the MD, who i got the impression does not really like India, has no professional experience running a port or a shipping company, and is supported by a now COO also with no shipping industry experience and whose port experience/professional qualifications are well short of what i consider necessary to effectively perform that role for me as a shareholder.

The NED's although highly experienced have also been disappointing. IMO they have failed to provide investors with the necessary oversight as to how so much money can be 'spent' for so little physical asset return - i know of fully complete ultra modern 600m twin berth, 50 acre port terminals built in Europe for less money than SPL has currently spent to date. This is the primary reason i believe SPL has been unable to attract a third party partner from an industry which initially had considerable interest in the project and its prospects.

When a management is forced to raise a sum more than 50% of that raised at IPO, but at a 96% discount to the IPO price, to complete a port development project, something is very, very amiss with that management.

IMO none of the executive management would still be in the job if they worked for a major port group and had delivered the standard of project budget control shareholders have experienced at SPL.

AIMHO/DYOR

[spooky] 03/11/2016 23:43

MT - I do not have a position in the shares but i have followed the thread for several years. Your posts have been of no use what so ever to anyone assessing the company and its prospects. Up until the last couple of days you have been resoundingly bullish. Yes you may have been around the moon over the last few months but that doesn't really make any difference. Your posts are absolutely worthless because they have been proven completely inaccurate in the past in terms of assessing the investment merit of the business. On this occasion you may or may not turn out to be right but i believe anyone reading the thread would do just as well tossing a coin. Forgive the directness of the post but i have a strong dislike of people posting in a way that misleads other investors.

[mount teide] 03/11/2016 21:53

Enterprise Value(including debt) - please remember this is only my professional opinion.

The circular also stated the Port will have an annual capacity of 8 million tonnes. This is very misleading if the main cargo throughput is going to be bulk cargo and transhipment containers. It would be far more helpful if management were to give an annual throughput design capacity - which i suspect would probably be less than half that figure, as bulk cargo is very slow moving, compared to ro-ro for example, which they will not now be targeting, presumably because of the draft restrictions.

What is interesting, is that management has quietly dropped the 10.0m draft target for the second 600m of berth development( as detailed in the presentation video). I suspect because of the cost of dredging the access channel, which is probably also behind the decision to keep the access channel to a minimum of 4.5m.

My original research showed that when the first berths at the JNPT container terminals were built, for financial reasons the material from dredging the access channel and berths to a minimum of 11.5m of water depth, was deposited in Karanja Creek rather than out at sea - much to the consternation of the local fisherman who were subsequently financially rewarded for accepting this arrangement. No subsequent monitoring exercise was conducted on this dredge material to establish its stability, particularly during the subsequent monsoon season, since it was never anticipated at that time that Karanja Creek would be developed for shipping/terminal operations. I suspect, it has been found that this dredged material may be more mobile that was anticipated, and would cost considerably more than has been budgeted to dredge and maintain at depths below 4.5m. For example at JNPT, just to increase the depth by 2.5m from 11.5m to 14.0m had a budgeted cost of £200m, with Royal Boskalis eventually winning the tender at around £180m.


Whenever i questioned the MD about timing for the purchase of terminal handling equipment - he became increasingly evasive. The circular continues this approach -


'Whilst the Directors expect that the Facility will be capable of receiving vessels by the end of this year, the Directors are not forecasting revenues from operations until the end of the third quarter of 2017'

'By the end of the second quarter of 2017 the Company expects to have:
completed the sourcing of all necessary equipment.' Lol - they are taking shareholders for idiots!

Since a port operator usually plans to get the terminal handling equipment bought and on site for installation/testing some three months or so before commencing operations - it is obvious from the above that no vessels will be handled before mid summer at the very earliest because that is the earliest date by which the company expects to take delivery of all the necessary terminal equipment to handle a ship.

This just reaffirms my belief that at best around 300m of quay and 60-70 acres of hardstanding will be firstly available to start handling cargo around Sept 2017 at the earliest, by which stage shareholders are likely to find most of the existing cash, debt and newly raised cash will have been 'spent', whereupon the development of the rest of the terminal will slow to a snails pace.

Call me cynical, but bringing ITD onboard by getting them to take shares for what is a very small percentage of their total contractual revenue from the project is a 'nice touch', spun to give shareholders some additional 'comfort', but does not carry any weight with me.

AIMHO/DYOR

[hugepants] 03/11/2016 20:42

In fact, i would bet serious money that: "there is more chance of Nikhil Gandhi going to Mars riding side saddle on a Saturn 5 Rocket than having a fully funded and completed 200 acre port facility at Kajana by Sept 2017."

He wouldn't even survive the launch. Even if he somehow managed to cling on he'd be burnt to a crisp in seconds.

[saikat] 03/11/2016 20:10

Not entirely sure if $5m of equity valuation is before or after dilution. MT can confirm.

[saikat] 03/11/2016 19:38

I think MT is talking of an enterprise value (including debt) of $45 million or so - means equity have $5m or so valuation after coming dilution. Great post from MT.
Swindling is going on of a high order.

[waterloo01] 03/11/2016 19:28

Welcome back! Sounds lovely.

Ports insight aside (and I'm not questioning your knowledge) you are stating that the value is more likely around £50m rather than the £150m put in by early shareholders. Shocking I agree, but with the market cap at under £5m, with the dilution to get the £36m (on top of any cash left) then would be a cap closer to £40m (post dilution). Doesn't that suggest it's well priced (risk aside that they will continue to f@@k up.)

Doesn't help early 'investors's from feeling fleeced. What have the Neds been up to, I thought they were industry men?

[saucepan] 03/11/2016 19:27

Thank you Mount Teide

Anyone with any ideas as to how the observations made in post 8743 can best be put to management, or indeed the media, for a response? They are deserving of going further than this ADVFN thread.

[lefrene] 03/11/2016 15:16

Most likely they will always need a dredger on hand to cope with silting, so once operating there will be on going dredging there. Another way of looking at this site is the value of the land being reclaimed, it being on the fringe of Navi Mumbai and growing as an industrial area. The important thing is get an income stream going asap, there has to be more to this site than just the ship traffic. There can be industrial buildings, cold storage, and road haulage operations based there. The downer is that this bunch have yet to meet a single deadline, and given the track record they won't meet a single deadline mentioned in the fund raising. It's a pity, this had the opportunity of showing that India was a place where business could be reliable, instead we just have the usual old India, deception and, nothing happening on schedule.

[fft] 03/11/2016 14:52

Whilst I agree with the basic thrust of MT's post about timescales, I think he may have the change of draft wrong.

The original Arden document from 2013 mentions 4,000 DWT boats as does the latest placing document so the maximum size of boat doesn't seem to have changed. The original Dutch plans had a 6m depth turning circle and berth places. It does seem reasonable to leave 1.5m under the keel to prevent too much churning of the sea floor. Stand to be corrected.

[lefrene] 03/11/2016 11:32

Piedro, I suspect that he is employed by vested interests.

[piedro] 03/11/2016 11:24

lefrene,
I've learnt to be suspicious of those with the 'gift of the gab'
Perhaps he now wishes to buy in again

[lefrene] 03/11/2016 11:10

This never was intended as a deep sea port, but as part of a growing network for coastal shipping to open up trade with less dependency on the roads and railways. It could take transhipment barges if needed. Interesting how the MT poster has changed tune from being very bullish and now very negative, presumably selling out at the very time he was posting his most bullish case on here. Took me in, but now we can see this is plainly somebody not to be trusted.

[piedro] 03/11/2016 10:20

fft,

"... a waterway which is capable of accommodating 4,000 DWT vessels with a draft of up to 4.5 metres ..."

Ref: Placing & Open Offer doc.

[jailbird] 03/11/2016 07:21

What cash ?Azaliar.... Modi , the ministers and Gandhi's reputation did not deliver Come on let's here your drivel you have been posting during the last 2 yearsMT, With your experience , You were quick to post positive case for this Company when you were invested Why post so long after you sold out?

[azalea] 03/11/2016 06:47

PJ1
Sorry sport, I am poised to put my cash elsewhere.