Thalassa Share Discussion Threads

[mark2market] 07/10/2014 15:07

Saw the 10k trade go through - good luck with your investment, though personally I would have waited a few days until the chronic investors had all read the sell tip (I imagine some will only read this evening, some when the mag is published at the weekend).

[rcturner2] 07/10/2014 15:01

My limit order for 10k shares went through at 100p.

Small cap shares being battered all over the place right now.

I am happy to take a risk here.

[mark2market] 07/10/2014 14:56

Support at 100p seems to be crumbling - so what now? 70p? 50p?

[bookbroker] 07/10/2014 13:06

Soukoup needs to clarify the relationships between the trust, himself and the company, it's become quite ridiculous the price action of recent following the revenue warning, shareholders deserve better and if he had any common sense as regards his own interest here he would act and explain the cross holdings, it's hitting himself as much as others!

[rcturner2] 07/10/2014 12:56

There is an article online today.

[propercharlie] 07/10/2014 12:53

paleje

where did you get the info that Simon Thompson has pulled plug. this is the latest from IC

Buy
The last IC recommendation on Thalassa Hldg Ltd shares was Buy at 140.00 on 17 Sep 2014

[rcturner2] 07/10/2014 12:35

WH Ireland forecast full year revenue at $26m and pre-tax profit at $4.5m.

These are the updated figures after the interims.

[pugugly] 07/10/2014 12:34

New Fortress Finance Holdings Ltd BVI cannot be too happy at the moment- If they decide to cut their losses then a potentially massive overhang but being a BVI company data virtually impossible to find via legitimate search media.

[pugugly] 07/10/2014 12:21

RCT Possibly on a "normalised" basis with a follwoing wind - Even than having quickly relooked at the figures I can only improve possible p/e at current share price to about 11.3 - I prefer to look at on a kitchen sinked basis - Hence my comment on uncertainty. and a need to stimulate comment - Thanks for coming back.

House brokers (as I know to my cost usually use RTG's (rose tinted glsses)

[pj 1] 07/10/2014 12:11

I accept this is hindsight but now we know why they wanted such a cash pile. Is that what ST is hinting at?

Bad debts have the same habit as profit warnings, they can happen in x3's, is the 'hostaged' kit required for other contracts?

[rcturner2] 07/10/2014 12:06

er the last broker note gave a likely reduction in full year eps of 10% to 10p per share?

[pugugly] 07/10/2014 11:59

I have tried but admit i have failed to put a rough valuation on the coy and forward p/e.

Aout the only thing I can be certain of is the cash at 30th June of some 21.2M usd or 52p cash per share .

I find it impossible to put a value on the IP and equippment. If they obtain the contracts they think they will get then possibly near book value at say 38p (I have allowed a small discount against book and excluded goodwill). If they fail to obtain the expected contracts then (imo) nav of IP and plant may need to be heavily discounted.

In addition there is the risk of SMG failing to pay or repatriate the kit - While noted that in store in Ecuador no mention of security of storeage and insurance -I trust secure and insured but who knows.

Worst case scenario could be a 2nd half loss and thus increased cash burn.

Conclusion. Potentially interesting recovery play but even assuming best case scenario that results in 2nd half are the same as 1st half I make forward annual p/e (at the current price of £1.04 somewhere in region of 16.9 on a normalised basis or 28 on an IFRS3 basis (this seems a bit high so i suspect I may have made a mistake)

Thoughts - comments - clarification ?

Very much on the side at the moment.

[theprovosts] 07/10/2014 11:37

i was going to mention something on the THAL trust issue, but i think gnnmartin just answered it.

any more chat on the "THAL Discretionary trust" would be most welcome.

[paleje] 07/10/2014 11:10

Simon Thompson just pulled the plug on them, management clarity of communication, or lack of, being the reason. Like I said a couple of weeks ago uninvestable with level of management transparency.

[gnnmartin] 07/10/2014 10:42

Before I make my mildly negative comment, I will say that I have been most impressed by the company, and had/have great hopes for them. There are uncertainties, of which the status of contracts involving Russian interests is the most obvious. Has anyone quantified the involvement of Russia? I haven't gone back through the RNS, and I suspect even if I do I might not be able to identify those with Russian involvement. The word 'Russia' does not appear in the last annual report.

A second uncertainty is the investment in Go. This could well turn a star company into a superstar company, but there is a small risk that it turns out to be a black hole sucking in development money but never actually working well enough to earn money. IMO of course.

What has moved me to post is the discussion about the discretionary trust, and I do think that this needs a bit of clarification. As far as I can see, the discretionary trust gives options to employees to buy shares in the company at a price roughly equal to the market price at the time that the options are granted. Thus if the options are taken up, the trust will accumulate a chunk of cash which will be money that (in effect) should revert to the company. The company can (in effect) get the benefit of this money if the money finances further staff incentives. However, it is desirable not to let the possible cash balance of the trust grow too large, and the loan is designed (IIUC) to roughly equal the money that the trust can reasonably confidently expect to receive from the exercise of options. In January the company sold the trust 1m shares out of treasury at 26.4p per share, and the trust bought a further million shares at the market price of £2.70. This was (again, I assume) thought to provide the trust with enough shares to satisfy the options that have been granted, financed partly by a charge against the current accounts (for the shares sold from treasury at below market price) and partly by a loan that the directors (presumably) thought was almost certain to be repayable out of the money received from options exercised.

The steep fall in the share price could mean the fewer options are exercised than confidently expected, in which case the loan will have to be written off in part.

This setup looks complicated, so at a time when the share price is falling so sharply and everyone is looking for a rat, the trust attracts suspicion. The accounting of options and shares given to employees is difficult: different people have different views. Different people have different views about whether options should be satisfied from new shares or shares in treasury, or even from shares bought in the open market. I'm not going to take a view on this, other than to say that the arrangement at Thalassa seems to be a fair enough compromise between those different views.

The scheme as intended tries to make the cost of the options fall as near as possible in the year when the options are granted (as opposed to when they are exercised). It avoids the yearly swing in value of those options which arises from the usual annual Black-Scholes revaluation. All the same, while I have sympathy with what I assume are the aims I think the benefits are not worth the complication. I think the trust should be consolidated, although I don't know if there are any tax implications.

Worth asking about this at the next shareholder meeting. The AGM was in France last year, but the company held a 'non AGM' presentation in the UK a week later.
Nigel Martin

[caradog] 07/10/2014 10:16

It's not the debt so much as what it says about the people who made the decisions to do it in this way, and what motivates them, in much the same way as the decision to rent the headquarters off the chairman, who also has the role of chief exec, ignoring the risk associated with this potential conflict of interest. It may come as no surprise that the company "does not, currently comply fully with the corporate governance regime in the UK, as set out in the UK Corporate Governance Code."

[pj 1] 07/10/2014 10:03

I guess the lack of comments about the possible bad debt is not concerning many and expect it to be settled in due course?

[rcturner2] 07/10/2014 10:01

Caradog, there is a clear incentive for management to get the share price above 143p, for their benefit and our benefit. That is theory behind options, as practiced by every listed company on the planet (virtually).

[caradog] 07/10/2014 09:59

Maybe not. However, either the company needs the cash or it doesn't. If it doesn't, why wasn't it returned to shareholders? It's their money, after all. If it does need the capital, it will presumably be used within the next 3 years.
The point is that Thalassa has chosen a method of providing share bonuses that has exposed the company to unnecessary risk and loss of cash. The Discretionary Trust now controls 12.3% of the company. At whose discretion?

[stemis] 07/10/2014 09:08

Why would they need a rights issue? They have $21.2 million in cash. If trust can't repay loan in 3 years time (bearing in mind the average cost of shares held by Trust is 143p) then presumably THAL will just have to take a write off and beneficiaries will effectively see their 'option' expire worthless.

[rcturner2] 07/10/2014 09:08

edit, answered above.

[caradog] 07/10/2014 09:03

RCT, how's this for a possible scenario: Share price tanks. Trust warns that it can't repay loan without being given right to buy more shares at below market value. Share price drops further. Trust defaults. Rights issue does not get institutional support, company taken private.