DEL 7.50% 4.3¢ delorean corporation limited

Ann: DEL Awarded Yarra Valley Water's Waste to Energy Project, page-17

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    Nice write up, thanks @desertredlion

    My understanding of the decision to list on the ASX relates to access to capital. Sometimes people forget the actual role of the stock market - not just about trading pieces of paper, but for companies to access capital! And the problem I reckon for Delorean would have been as a private company with limited equity, they wouldn't have been able to issue as much debt. Hamish Jolly and Joe Oliver despite the idea of share dilution (capital raisings), and would much prefer debt-finance. As a shareholder, I 100% endorse this. Would they have been able to plan for a $200m Planum debt facility without being listed? I doubt it.

    The financials for me is about (1) time arbitrage, and (2) margin of safety. It's not the raison detre for investing in Delorean - that's the business model, which I think they are executing on brilliantly. The time arbitrage is that the earnings will by necessity drop due to high growth CAPEX and delayed revenue. In the end, this is an infrastructure company. If Transburban builds a toll road, then they pay up front and clip the ticket for the next 30yrs or whatever. While we should get some positive earnings, FY22 may be poor and we won't really gear up until FY25. General market participants HATE this, they want returns in 12-18months. So the time arbitrage is that I can be patient and not fear any quarterly update that may not have amazing numbers - people who don't do the financials won't have the same patience. And to the margin of safety, well the financials tell me I am not buying a 19xPE company in FY21, but rather a 6xPE in FY23f or 5xPE in FY25f with just the current developments in the pipeline.

    One risk I do like to highlight is there is no moat with a company like Delorean. There are a raft of international companies that could do this in Australia, and some bigger Australian companies that could shift into this space. Increasing competition in renewables is already driving down the internal rate of return that companies can generate. Essentially they are bidding lower prices to win projects. This is not a slam dunk.

    And in the end, I just love following the bioenergy story.
 
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