See RNS. Perhaps a bit of a change at the top as announced today is just
what is needed. There have been miscalculations/misjudgments on coal
prices going forward which were the cause of poor performance last year.
Some decent buys last few days, very little selling. Potential for a nice short term 10% gain in my opinion if you are so inclined. Personally, I'm holding on longer term (unless it surges dramatically)...
AndyRB - Nice rise today, you'll be pleased. As for Tristel, I sold
a good while ago. Currently taking an above average interest in
Redt Energy (RED), may become a nice little riser, but as always
take care, DYOR.
Give it a year and the coal price coming down, the share
price could easily go double, if not treble. Just a few hints
of things going the right direction (margin-wise) and up
Not without risk, not for Granny, but very interesting for a
punt or two.
The material revenue growth has at least given the market a reasonable clue about the inherent profit potential once coal prices are sorted and the tariff rises flow through.
Has to be a strong and hopefully inevitable recovery play, albeit likely to take time for sentiment to improve. The sp fall was overdone, the problem is the lack of shares available in the the market to allow enough purchases to go through....
I have not looked at OPG for several years but did so to-day out of morbid curiosity. Back in 2011 when the price was 97, it became clear, as the year went on that the management statements were totally unreliable and, as far as I can see, have been so ever since. The excuses vary but the result is the same i.e a downward spiral. The only wise thing I did was to finally sell, at a substantial loss but much less than if I had held. I do not know what goes on in the company and, I doubt if any of the overseas investors do either.
The sp fall and general comment represents an over-reaction in my view. There are limitations to what hedging they can take out and fundamentally they run some of the most efficient plants in India. Load factors continue to improve, tariffs are due to rise and the coal price will fall.
I accept their rating will be affected medium term but a forward p/e of c.3.5x is ridiculous given the medium term prospects. Their market cap is lower than when they first floated with just an idea, whereas they are now a c£40m pre-tax business so must be ripe for takeover or eventual recovery. Darkest before dawn as they say....
305020 - I totally blame the management. Trading update 31 May 2017 gave no indication that it was at it was completely un-hedged and it was at the mercy of future roller coaster coal prices. What an utterly moronic way of running a business. Running this sort of business is relatively simple - agree a price and length of contract; hedge the profit for the contract period; once the contract comes to an end repeat. I made an investment decision based on what Gupta put out in that trading statement, which gave me comfort for 2018 projections. He isn't fit to run the business.
I am less angry than some posts on here...
or indeed anything angry at myself!
the coal price has been in a steady downtrend for several years with very low volatility,
and was forecast by industry experts and by the futures market to continue on that trend.
Then the Chinese Gvt makes an unexpected policy decision and the price "spikes"
OPG were hedged to a degree and in effect this has caused me to be lazy as an investor.
the OPG share price did not initially react to the large rise in the Coal price because there were hedged, but the spike lasted longer than expected and now they have had to 'come clean' (excuse the pun!).
So, the company ahs many failings, but I was aware of those, and the risks with a majority dominant controlling shareholder but thought I had them priced in, but I was not monitoring the price of their underlying cost i.e. coal. If I had then the recent share price fall could have been very easily avoided. So , yes I am angry, but I take full responsibility that my lazy investing has cost me to lose value on OPG.
In this instance I am now actually glad to have a controlling dominant shareholder, as this might force his hand. I've always thought that OPG would be worth much, much more to a large Power conglomerate than be by itself. The finance cost would be lower, the operational risk would be diversified, and the industry risk would be spread between coal and renewables in a way appropriate to the Indian economy - so the value of OPG to a larger power concern would be much much higher than the value given to it by the stock market - recent examples of the same would be the heavily geaered GKO (take over premium 150%), and INB last year take over premium 130%). I believe that previously when there was some chance of success Gutpe would have been tempted to 'go it alone' - now that he realises the risks the business is exposed to he might well be tempted to sell out and start again - this time in renewables. No dobt there would be a premium for the equity and he could get a nice little earner as a condition so that the retun he achevies would in effect be higherh than the average shareholder. Its not great but it is the way the world works and it is the risk buying shares which are 60% held by some-one else.
So despite the loss, from here the future is bright. They have no problems with Cash Flow (unless coal price rises further) so they will come through this, they may sell out, of the coal price may fall back down. For me I have only 25p to lose now and a good 50p to gain ... it is still a risk investment and i'm not brave enough to buy more yet but i'm watching, and watching the coal price, as there will be a good return to be had here (very likely) at some point relatively soon.
All IMHO, DYOR + BoL
OPG is in my portfolio - sadly :-((
I wish you the best of luck. Gupta has messed up really badly here and what on earth were the non-ex doing! Gupta should go, but he won't and minority shareholders can expect nothing from the cardboard cutout board. I hope Gupta has learnt his lesson and I hope what he has done doesn't lead to the collapse of the Group. He really has to get someone in to run it at an operational level, otherwise shareholders will be left with nothing.The whole episode is really quite shocking and institutional investors won't be rushing in to mop up stock from the queue of sellers IMHO
Well down she goes again and the message here goes way beyond its inability to properly hedge. Investors just don't believe the company is being run properly. I have just changed my electricity supplier and have signed a 24mth contract. Eron will lump my agreement and others for this particular promotion and will lock in its profit and forward hedge. OPG on the other hand just leaves it open, in some divine belief it knows better than the rest of the commodity market and the price of coal will work in its favour. Doh. That's just gambling! I have met the management and I ashamed to say I trusted them. Now, until confidence is restored ie recruit someone who knows what they are doing, this could easily go sub 20p
Banman - Not rigged. Market makers are the 'go-between' doing the actual buying and
selling of the shares. If they are confronted with more sellers than buyers or anticipate
such situation, then they drop the price, and vice-versa raise the price when they
see more buyers coming onto the scene. I daresay they got stung buying up shares
early on the bad news day when the drop was not yet so large, so don't blame them
for not stocking up.
Spakaroo - I agree, looks like management is not on the ball, but busy
blundering into contracts that can only pay when the price of coal is low.
I apologize for my earlier enthusiasm for this company. I was fooled
by high EPS forecasts /anticipation.
I have just had a look at Newcastle Coal Futures chart and back Nov 2016 it was over 110, so I can only conclude past favourable forward ended for it full yr ending 31st Mar 2017 and it has been left buying coal at uneconomical prices. This makes the business model very risky, especially as it has a huge debt mountain to maintain. I notice in its last trading update in May it thought coal was expected to fall - it called it wrong and shareholders are paying the price. So if it can buy at 60-70 it can make good profits and at todays prices virtually nothing. It can't even pass costs on quickly. This is not how to run a sustainable power generation project, so under current ownership, its uninvestable, especially with debt repayments and interest charges hanging over it.
The company pays you £1.3m for results and part of that is getting the hedging of your one a most important input commodity COAL. Resign and lets someone else who more competent run the show. What a complete load of .............
Today's Trading Update look worrying to me. Higher price of coal
could more than wipe out all profits for current year if my reading
of it is correct, i.e. every £! rise in the coal price reduces profit by
£3.5 million (correct me if I am wrong). Does not look good to me.
At now 43p nobody can argue that the shares are over-valued.
The fall-back is without rhyme or reason. Such fall-backs tend
to reverse into a rise-up with rhyme and reason. Patience is the
name of the game here, I have learned to master that over the
many years I have been in the market. Look at IQE, wholly
unwanted little more than a year ago....look at the share price
there now (currently a 6-bagger for me, in just over 12 months).
It never ceases to amaze me how stubbornly low the share price of
a Company can go whilst the Company itself doing nothing wrong.
Then, when the share price takes a turn north, it can go seriously
north. Here at OPG the likelihood of the share price taking a turn
direction 80p+ is in my view substantial, indeed almost unavoidable.
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