Fraser's REAL growth engine for the next two years (forget EVs) !
Quote:
Originally Posted by
Aaron
What is ROIC (I assume return on invested capital or return on assets)
Correct me if I am wrong but with a 5.1% return on assets and interest of 9.4% doesn't that mean any debt is reducing value for shareholders.
As assets are being revalued every year. Should I look at the discount rate used on their DCF model to revalue assets. It all gets confusing for a simple person like myself.
It isn't sexy. But some relief from debt is on the horizon with those high interest loans rolling over.
From p63 of AR2017
"The company's relatively high average interest rate of 8.7% on net debt of $1.038 billion reflects interest rate hedges put in place in 2008, prior to the global financial crisis and subsequent decreases in interest rates, ahead of the company's significant geothermal development program. These hedges mainly mature at the end of 2018 financial year. From that time the estimated net cash flow benefit at current rates is approximately $20m per annum."
$20m in interest payments saved should see $20m (1-0.28) = $14.4m flow through to the bottom line after tax.
$14.4m / 1,400m = 1.0cps
That may not sound game changing, and it isn't. But it is five times more than the profit gain I expect to see from the incremental energy Mercury will sell to power EVs after four years (to the end of FY2021).
SNOOPY