black_white

Just gone through more of the company's annual report and earnings. Got a few questions...
1) how does the company intend to refinance the 2018 bonds, do they have bank lines secured?
2) The company is trying to make USD 90 million of acquisition of PT Tanah Bumbu Resources (“TBR”) and another USD 16 million for for PT Parisma Jaya Abadi (PJA). How does the company intend to finance these acquisitions?
3) The company has already received USD40m prepayment as part of the coal offtake agreement, does it mean that there wouldn't be more operating cash flow
4) any concerns on the overdue receivables?

ThumbTackInvestor

Reply to @l0nEr : 1) Refi with new MTNs with new terms. They've already announced how it's done, but maybe its not clear cos many people seem to be asking about this. Basically they are getting a waiver of covenants from existing MTNs to allow them to issue new MTNs, and use the MTNs to retire the previous ones. The new notes will have much better terms, finance costs will likely come down very substantially.
2) Kinda lazy to go into details now. Specifically for TBR, it's part cash, part payment with shares.
They'll be issuing 117mil shares to pay for TBR, that'll bring the share base to 1,329,273,113 shares.
Which is why in all my personal calculations, I've used the projected new share base to be conservative. Not so for analyst reports who don't use the enlarged share base. Which doesn't make sense to me cos either you expect the TBR deal to go through, then you might as well use the projected new total shares, or you expect the deal to fall apart, in which case, all the TP can be thrown out of the window. The company would not likely meet 10mil tonnes if there's no TBR contribution.
3) This one can be answered simply by looking at the FY17Q1 results right. There's $28,416,440 in operating CF before changes in working capital. So, kinda obvious there.
But I'll go further to elucidate something, and this is something I like to do. If we peer into the financials, we get valuable clues that someone doing a cursory look wouldn't find out.
The $40mil prepayment is parked under "Current Liabilities", under "Trade and other payables"
As of FY16Q4, this amount stands at $106,899,123
As of FY17Q1, this same amount stands at $73,394,054

The difference includes not just changes in the prepayment sum, but production costs for SDJ and other payables.
As of FY17Q1, it includes $32.5mil prepayment from ECTP.
This means $7.5mil of "credit" was utilized in Q1 from this prepayment.
Yet the company delivered 2,212,893 tonnes at an ASP of $39.45. This works out to $87,298,629.
The difference between this $87mil and the $7.5mil of credit is how much the company should technically receive as CFs, but of course, in reality the bulk of it is in receivables etc currently, some is collected as operating CFs.

So if you peer into the details, it basically answers all your questions.
Mainly that the $40mil is a small portion of the actual revenue that the company expects to book in from the prepayment (In Q1 alone, the bill for the coal delivered is $87mil!) , and that no, it doesn't mean there's no more operating CF, cos the prepayment will be utilized over 4 quarters with the rest coming in as receivables that will be collected after the credit term.
4) This one is easy to answer too: Not concerned unless you think ECTP is going to go BK!

black_white

price dont look very good today, hope u are right. :)
But even if at 10mt of production at $5 margin per ton, still look cheap at 6x EV/EBITDA. Moreover the company is targeting $10 margin per ton.
Newcastle coal should hold around $70-80, but not sure where the Chinese coal prices will go. Could be driven by liquidity situation in China.
https://www.platts.com/latest-news/coal/lo...

fanoflynch

Reply to @l0nEr : I agree, a super extreme assumption produces a super safe and conservative valuation, and it still shows that it's worth, for the current stock price at least :)

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Smallcapasia

seems like you done a lot of research during the coal market, rainfall etc. that can affect the biz.. broadening your aspects on the coal industry.. Nice job! Hope you huat!

ThumbTackInvestor

Reply to @Smallcapasia : 362K, not quite 400K.
Mostly from a capital injection after I sold my hdb.
Some from investment gains.

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