Hi Sabine, lots of info out there, lots of analysis on their website from research reports well worth a read also. Project is clearly a positive for Derby, well supported by the WA and Fed gov's, right project, right time as they say. I am pretty confident they will get the equity required to get things started within a couple of months, though it should have been ready by now. Why the delay and what it means for the equity raise is the puzzle the market is struggling with, exacerbated by a share price action that says no fantastic JV sell-down deal has been tabled during the UBS structured sale process.
The value of SFX shares moving forward are entirely dependent on how that equity is raised is the concern. IMHO, the sort of possible outcomes are:
Takeover.... happy days
High priced JV at project level best outcome, share price soars.
Modest JV or cornerstone share placement at premium and share price pops.
Large percentage sold into JV cheaply share price still rises somewhat.
Combo JV and market placement CR and share price rises so long as CR is not at big discount
Market placement CR only at discount and share price probably hang around current levels as the deal and reality of dilution is digested.
Market placement CR only at heavy discount and share price falls further
Market crashes, no appetite for CR at all and project delayed for 12 months. Share price falls.
I'll leave it up to others to apportion odds of each outcome but on balance there isn't a lot of downside risk vs upside IMO. The very large amount of equity to raise (~$275M suggested by Bridge St analysts) is why management want desperately to shake out a project level buyer. If leaks about the JV sale process suggest no decent offer was forthcoming, or are highly conditional, some players are motivated to push the price down to ensure they can get in on the CR when it happens more cheaply. Only a few not already long can afford to comfortably take a position now because averaging down (as most holders will be) is risky and uncomfortable if large a CR is coming. You're in the fortunate position to open your SFX account at a price well below other holders obviously, and I agree it looks a reasonable risk v reward punt from these levels.
I do want to make some observations on the Finfeed article on SFX that reference Stewart McIntyre. The company that runs Finfeed is a brokerage affiliated site that basically runs paid advertorials under the guise of independent research. Operated by S3 Consortium Pty Ltd, in the fine print disclaimer they make clear "S3 Consortium Pty Ltd fees are generated from services it provides companies who pay for content production, article publishing, and digital marketing.". The article is actually pretty poorly written, makes some odd observations, and is clearly a puff piece. That's OK, many such journals and the like put out articles at company's requests to generate news and interest for the company and its projects. Mrketing is all part of the game to guide, generate interest and funding. The coincidence that SFX had this article banged out on the exact same day a number of company affiliated posters new to HC arrived on this thread to defend against opinion posts I made earlier is surely not a coincidence lol.
Amongst the glowing praise of all things Thunderbird is nonsensical drivel like " Analysts appear to be putting the sharp plunge in the company’s shares down to profit-taking, which could have some merit given that it coincided with negative sentiment towards equities markets.It is also worth noting that the company’s shares have roughly doubled in the last 12 months, making the realisation of capital gains all the more enticing." Looking at the 12 month SFX chart above I think they push the spin a bit too far. Put your hands up if anyone here has been taking profits recently lol. Of course, not one mention all article of large the capex increases or the requirement for substantially more working capital and corporate costs in addition to the capex than anybody anticipated. That wouldn't have had anything to do with the selloff though would it... funny stuff.
The interesting thing was guiding the market to expect a resolution in 6-8 weeks. This to me was the reason for commissioning this article, to try and calm the market and let people know that nothing is wrong and it will just take a bit more time to get sorted. Blue Ocean lead the 2017 SFX capital raise and obviously has a long affiliation with the company and therefore Stewart was asked to guide the market for them with his 6-8 week call. Just so long as nobody ask how Stewart would know it might take anther 6-8 weeks when such a structured sale would be expected to deliver results, even subject to due diligence, pretty quickly? Certainly interested investment partners were throwing their hat in the ring since last November according to company announcements, the likely suspects were already in the room so nobody expected this to take 4 months from early January! I doubt Stewart came up with the fairly specific time frame off his own bat when, absent of any inside info, the deal already looks late and could be announced any day now.
This all raises more questions than it answers for mine.
Why is the sale process taking so long? GR Engineering are clearly frustrated by the unexpected delay, contractors up in Derby are obviously stressed by this unexpected delay, the wet season is over and the company expected to have started by now.
Why doesn't SFX just come out with an ASX 'sale process and funding update' announcement for investors? A simple and transparent way to steady holders nerves and reassure them the sale process is on track. One assumes management are adhering to the maxim 'if you have nothing good to say, better say nothing at all'. ASX has pesky rules about disclosures, so if they say something positive but no sale deal eventuates then the trouble starts.
SFX remains an enigmatic investment at this juncture. Much to like, obviously some recent disappointments, but also much uncertainty. Probably worthy of a punt for newcomers or those happy to average down but everything is pointing to a imminent CR component to the funding package. My bet is some sort of investment deal will be done, just not big enough to avoid also going to market with a sizeable share placement below 65c. Happy for holders if I'm proved wrong, my opinion is largely swayed by poor share price action during an epic market rally.
Good luck
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