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By Nigel Somerville, the Deputy Sheriff of AIM | Tuesday 13 March 2018
Disclosure: I own shares in one or more of the stocks mentioned. 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.
No-one could ever accuse AIM-listed Minoan (MIN) of doing anything quickly, but this morning’s announcement appears to suggest that things are finally moving. It is still speculative (both in terms of whether two deals happen, and how long they’ll take) but the shares are a buy.
Firstly, on the sale of the Travel and Leisure division, we are told that an exclusivity agreement has now been signed and due diligence is under way. We are also told that the sale (assuming completion) will leave Minoan “substantially” (ie not quite) debt free. But at least we can expect the Hillside loan to be paid off. We are also told that trading has improved, with Q1 gross sales up 15% and commission up 10%.
That is good news, and one might hope for a deal to complete in the not too distant future.
On the company’s Cavo Sidero project in Crete, where they have had full, final and irrevocable consent since the formal announcement that final appeals had been dismissed back in June of last year, things appear to have taken a significant turn for the better.
You have to have had the patience of a saint to see this through – and we are still not there yet! But that is why the shares are as cheap as they are - and that's the opportunity here, for I believe that we are within months of significant news which will turn the company's fortunes on their head. This morning the company announced:
The Company has recently received an approach from a credible party which has expressed an interest in acquiring a significant stake in the Project. Discussions are at an early stage and the Company will provide shareholders with an update in due course.
Ok, it is at an early stage, but we are told that this is a credible party. We were also told that the potential buyer of the travel division was credible and that looks to be progressing in line (if slowly!) with what we were originally told. So this looks to be a very positive development.
What we are not told, sadly, is an order of magnitude for any potential deal. Given that discussions are at an early stage, I guess that Minoan is playing its cards close to its chest. However, this appears to be the sort of deal Minoan was talking about when I chatted with the company at last year’s UK Investor show.
The company goes on to say that its share price is currently so low that issuing shares via a placing is just too expensive and that it is in discussions over a small debt fundraising which will keep the lights on whilst we await the above potential sales to materialise. The implication for me is that a sale of a “significant interest” in Cavo Sidero would pay that off and leave the company well funded. Indeed, I would hope for a dividend!
We are told that the market capitalisation of Minoan was (before today’s announcement) at a discount of over 70% to the last published NAV of £43 million. That starts to give an idea of what could lie ahead.
Minoan’s FY17 numbers are to be published at the end of this month. If the company were in discussions over a deal to sell off a substantial portion of Cavo Sidero at a discount to its book value that would surely have to be noted in the accounts. As such, I would fancy that discussions with this “credible” buyer will be focussing on a price which Minoan’s board will be happy to shout about.
That would see the shares move higher, meaning that the 70% discount to NAV should be much reduced, if not eliminated.
Minoan has had a long history of diluting shareholders, and today was no exception: we find that 1,293,333 share have been issued at 6p a pop to “meet certain prior obligations” – whatever that means! (Perhaps a prior obligation to keep the lights on?!). But it is only £77,600 worth, so I’m not overly concerned at that.
More to the point, it does sound as though Minoan is avoiding dilution ahead of what just might be a major transformation in its prospects.
The shares have been sliding in recent months but this morning they are up a decent enough 32% (last seen). If the above deals play out as I expect, there are plenty more days like this ahead.
As per my Christmas/New Year tipfest recommendation, the shares are a buy and will be heavily re-rated when the risk of dilution goes away and questions start being asked about dividends instead.
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