It’s becoming a pain in the neck in the Smallcap Oil & Gas sector, as with the Mining sector, to sort the wheat from the chaff. The bogus CPR’s, PV10 valuations, 3p Resource Estimates, JORC, STOIIP, BOPD, BOEPD, POTENTIAL, POTENTIAL IN PLACE BLATHER estimates, along with the paid for “Independent” Research notes that try to fool & deceive PI’s into parting with cash has got to mind blowing proportions. Most Investors have now, (Due to the Global financial crisis that has highlighted the greed and corruption that is Lion Passant in the financial markets) woken up & seen it for what it is; ‘crap’. This “Crap” is paid for by the company’s, it’s any thing but “independent” It is designed to deceive. Gone are the days when Private Investors would happily pony up when the hat came around. It’s with this in mind that I’m always on “The hunt for a decent punt”
I recently met up with Ajay Paliwal, OPG (AIM: OPG) Strategic Director whose C.V reads well; UK Chartered Accountant, Chemical Engineer (20 years of experience). At last weeks Proactive one2one forums. (I always try to get to them as they’re a great place to source info) Presently a Partner at Jiva Capital, previous appointments include Deputy CFO of Vedanta Resources Plc. Director of US listed Stillwater Mining, Director and Leader of UK Mining group at Ernst & Young leading FTSE100 listings, M&A transactions and IPOs. Prior to that he was with PwC, London and Middle East, focusing on resources, energy and fast-growth companies. I listened to what he had to say then questioned him as and when necessary. I was impressed. Ajay Paliwal is one of the Velveteen brigade. A sharp, smooth operator who shines under interrogation. After the cloying corruption that operates on AIM the man is a breath of much needed fresh air.
OPG is currently profitable and cash flowing, but the investment attraction lies in the strong ramp-up in revenues, profits and earnings coming over the next several years. This is a decent investment for PI’s to research. According to Shore Capital the revenue contribution per half year per 80MW plant at current prices translates to about £15mln in revenue at a gross margin of about 34%. So with output set to rise to 742MW over the next 2 years then investors should see their investment rise in tandem with output. *As you all now I’m sceptical when it comes to broker notes much preferring our own truly independent notes. But what I will say in defence of Shore capital is that unlike most they actually went out to Tamil Nadu and researched their note on site. Which does give them a certain validity. Hence why I’m quoting from it.*
Plants under construction are the 80 MW Chennai III, (On track for commissioning in Q2, 2013) 160 MW Chennai IV, 300 MW Gujarat (Both expected to commission in 2014) & the 12 MW Bellary plant which was acquired part completed in 2011. Bellary is a 120 acre brownfield site located in the industrial heartland of Karnataka state with a potential to develop into a 350 MW plant.
Results for the six months ended 30thSeptember 2012 highlighted a PBT of £2.51m with revenue of £17.8m. EBITA comes in at approx. £750,000 per month. Debt has increased to £62m (31 March 2012: £32m). Which reflects the roll out of the new plants and not their profit margins. Planned pre-payments on existing debt have actually resulted in OPG being twelve months ahead of their current debt repayment schedule on Chennai I. They are well funded showing cash & cash equivalents of £22.5m on the books as of the December 2012 update.
Viva! The Revolution