Tom Winnifrith Bearcast 8 January: hard analysis, taking Magnolia to the cleaners

Comments

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   Daniel Victor

   8 January 2016, 09:35

   ‘Wherever you’ve been invested in this sector [Oil] you have lost money’. Sorry,Tom,the temptation to prove you wrong is too great.You have overlooked Pantheon Resources.

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   Paul Scott

   8 January 2016, 10:38

   Tom,

   I completely disagree with you re retailers. This autumn/winter was exceptional – the mildest weather since 1910 apparently. This has a major impact on fashion sales – see the chart in Next’s last RNS, demonstrating the link, and I can testify from my days as an FD in the sector, that unseasonably mild weather in the autumn has a very large impact on footfall & sales.

   So if people are not going to the High Street to buy clothes, then they won’t be spending on other things in the High St either.

   In my view, recent falls in High Street retailers are a good buying opportunity, because consumers have more money in their pockets (tax cuts, wage rises, cheaper food, and cheaper petrol). Once weather patterns normalise, spending will return to normal, and retailer shares will generally go back up again.

   That said, as always you have to be selective, and buy the right ones! ( I wouldn’t touch supermarkets, for example – too low margin & competitive).

   SPD is looking strikingly cheap at the moment, as sentiment is bad re various issues, but all are fixable.
   Also, Games’Workshop profit warning was very mild – not a disaster, as you made out in the bearcast – you do tend to wildly exaggerate sometimes!

   Regards, Paul.

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   VINES

   8 January 2016, 10:52

   the dozy bint who runs magnolia insists on pink hard hats with comic sans font. nuff said

   http://www.thisismoney.co.uk/money/markets/article-2153752/MIDAS-Oil-minnow-Magnolia-Petroleum-moves-quickly-beat-rush-new-Texas.html

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   Jason

   8 January 2016, 11:26

   Oil sector will struggle again H1 and those which have risen the most have the furthest to fall (potentially). My new mantra is ‘bank profits’ ~ with Pantheon I’d be certainly be doing so.

   With regard to NIPT, for all the potential, I just don’t see the merit of holding with the pending legal action hanging swordlike over the sp. If they lose sp will be decimated, if they win you could still ride the rise even if its from a higher entry price.

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   Drunken Sailor

   8 January 2016, 23:05

   Tom this is a really useful reference on auditors roles and responsibilities:

   http://clients.squareeye.net/uploads/3sb/events/181108_harris.pdf

   You often confuse qualification and emphasis of matters:

   The statutory framework of the audit is contained in the Companies Act 2006 (“the
   2006 Act”). The key task of the auditor is to provide a report to the members of the
   company which gives the auditor’s opinion on whether:

   (1) the annual accounts give a true and fair view of the financial position of the company (or the group as the case may be);

   (2) the directors’ report is consistent with the accounts; and

   (3) in relation to a quoted company, the auditable part of the directors’
   remuneration report has been properly prepared in accordance with the 2006
   Act.

   4. The auditor’s report must be ‘qualified’ or ‘unqualified’. A qualified report is one
   where the auditor is unable to give positive opinions on all the above matters and an
   unqualified report is one where he can. The auditor must also refer to any matters to
   which he wishes to draw attention by way of emphasis without qualifying the report.

   A report is qualified if the auditors cannot make the numbers add up properly – see QPP annual report it was qualified because there were still some aspects of the fraud that the new directors and the auditors could not get to the bottom of and therefore could not be sure of the true value.

   More often than not the numbers do add up (or at least the auditor has been duped with phoney numbers which make things add up) and the report is unqualified. The fact that the numbers are dire and the company will go bust if it does not get more cash in / restructure its debt is what leads to an emphasis of matter of going concern to an unqualified report. It would only need to be qualified if the directors report said they do need to raise money etc (the directors will always be confident that they can and therefore justifying adopting a going concern basis for the accounts, ie not valuing all the assets at fire sale prices) and the auditor disagreed with the no need part. The emphasis of matter will most likely highlight that the auditor is not quite as confident as the directors.

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   wildrides

   10 January 2016, 04:37

   Oh Whinning Froth ! ………… re LGO :-
   You very well know that the 6p SP you mentioned was the top of a very very high spike . About one person got that price . Most punters will not have got more than 3 – 4 pence tops . I never said it was worth 6p .
   The assets are fine . They bought a 30 year old field and reworked a few old wells to get some initial cash …… these declined fast …… as you would expect . BUT ……. they also bought un drilled acres . The have installed all the infra structure , pipes and tanks direct to market , they have done air borne surveys and they have new sites to drill . The new wells they have drilled have standard decline rates for that part of the world. The assets are cheap to exploit at $20 a barrel ( website ) . In short ……. the assets are fine and not shite . Get the loan restructured and they will be okay and they can sit quietly ( with a few reworks) and wait for oil price to improve …… which it will in late 2016 .