STA still getting flogged for the "Current throughput was running at 55-60%, to move to 75-80% and to 100% by year end" presso soft guidance as per @gemboy post (haven't watched it myself). As we all realise, that is a big change and slippage, especially compared to the positive commentary around Dec and Mar Qtrlies and shipment updates. The market had not factored in such a long delay to 100% nameplate by the looks, and I have to admit it is a kick in the guts to shareholders even after accepting downgrade guidance in the July shipment update.
So the major issues STA share holders face are:
increased risk of reaching and timing of hitting nameplate production, from where analysts can lock in a new valuation.
decreased cashflow and questions on whether it will become a tight enough squeeze for another CR
Lost management credibility discount, temporary or permanent depending on whether improvements match Luke's effusive confidence
Min sand prices heading forward.
Just did up a table to examine the issue of cashflow, which we will have a better idea in a weeks time when Jun Qtrly is released. Table assume average percentage of nameplate for Qtrs moving forward, and the delay of last shipment cash from June into july Qtr. Sales revenue assumes ~20% higher than DFS prices over next 12 months, lifting compared to HMC sales because of finished product premiums, but reducing compared to last 6 months due to slow down.
Anyway, I think prices assumptions are fair, what I am really interested in ais where the cashflow goes and how stressed it might get. Based on Q1 commentary I assume that Acc APyable dropped $7M as part of Q1 expenditure closing out capex contracts, stays at $15M steady moving forward. Also assumed that $24M per Qtr is steady state opex moving forward, which is a good 25% higher than DFS.
Should be self-explanatory, STA only gets down to about $40M cash plus $15M Acc Payable in one Qtr then starts building cash so long as ramp up smoothly to 100% reached before end of year. There is also a $15M line of credit if required, thank goodness Luke raised $50M with that Tanzania bait and switch last year... or we'd be having a different conversation over a different share price by now. Bottom line, I see no real risk of a cash squeeze CR unless min sand prices collapse or the ramp-up doesn;t get near 100% and Luke is BS'ing us with hopium...
Not happy to be underwater myself, not as unhappy as most holders given how long it took for Luke to confess issues while the price was selling off by those in the know... but not worried issues won;t be fixed, even 100% reached well before year end in a 'deliver diamonds' effort to resurrect reputations. Fingers crossed.
GLTAH
STA Price at posting:
22.0¢ Sentiment: None Disclosure: Held
(20min delay)