By Tom Winnifrith, The Sheriff of AIM | Tuesday 8 August 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Credit where credit is due. Andalas Energy (ADL) the AIM dog created to fund the lifestyle of Dave "Rule Breaker" Whitby has announced that it has signed a legally binding deal to develop the Jambi-1 30+MW independent gas-fired wellhead power facility in Jambi Province, Indonesia and to procure gas from Pertamina, the global fortune 500 national oil company. Andalas will have a 49% stake in the project and state owned construction outfit PT PP Energy will have 51%. So far so good but hang on Henry!
1. We are told the plan will have revenues of $10 million per annum olver 20 years from late 2019 but told nothing about what profits it will make.
2. we are not told how much it will cost to build
3. We are not told what Andalas brings to the party to earn its 49% stake since it has no cash at all. And it is its partner who will build the plant.
4. We are told that Andalas and PT will review project financing options with PT's existing Indonesian and international banking relationships but why would they regard Andalas which has no cash or assets of note as a good covenant. And surely any bank will demand some of the cost is equity funded so how will Andalas fund its share of that?
5. And above all, Andalas has to repay a loan & costs of £600,000 by the end if this month and with its bloated cost base it has almost no cash at all. So it also needs to raise funds urgently just to keep the lights on. It is - as things stand - more or less bust if it does not raise fresh funds ASAP
That the shares have raced ahead to 0.115p thanks to buying by Bulletin Board Morons will be handy for joint brokers Cantor Fitzgerald of African Potash infamy and Beaufort Securities as they try to get away a heavily discounted placing. £1 million should do it to clear that loan and pay the bills through to 2018. Then there will be another placement for PLC costs and another to fund 49% of the equity component of this deal.
Did I mention the word dilution? Ahead of a placing at a massive discount the smart move is to use this spike as a chance to sell.
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