Anglozurich

https://www.international-petroleum.com/investors/presentations/ Page 52 of the June 2021 corporate presentation. Market cap is currently $700m. This is still a 66% discount to NAV based on end-of-2019 conservative oil price deck and WCS discount was wider. Brent now $74 and WCS $59. The company should be producing $250-300m USD of Free Cash Flow on a run-rate basis at todays price. They are quite rightly delevering but the buy-back gun is close to going off in H2. Management are loaded up on share units. Hold on to your seats.

"I don't think this should be a 250m company" @kab60 Best quote on this thread so far and made me laugh.... It really shouldn't be, I agree. Mark Carpenter is impressive to the extent he could run a company 100x the size. He batted the analysts questions out the park. Everything he says screams of capital allocation running through his veins and you just know he has a big amount of his own money at play here based on everything he said. What a guy (I hope i dont come to regret that if this gets stolen by private equity - UK businesses are getting fleeced by private equity but i am confident with the big shareholders (Immersion, Punch Card, Forager) -a bid just wouldn't get through given the run way. The online story is very exciting, not just because of the runway and the sheer amount of cars sold online, but you feel like management can execute in a calm and organised way. I have noticed Cinch sponsoring Queens tennis and Cazoo sponsoring football teams. He took the words out of my mouth, once consumers know broadly who you are, the return on advertising £s diminishes. This is not a 'consumer brand' business. You need an 'employer brand' to motivate the staff - thats incredibly important and i know from contacts, people are very proud to work at MOTR - its actually very competitive to get a sales job there. I honestly dont think it matters whether you pay £250m or £400m for this business. Its going to be worth a lot lot more in 5 years times. Dont buy it if volatility bothers you. I personally love the illiquidity - the stock will catch fire on H1 results. I am hearing used car sales in the UK are going crackers.

Why would I buy OXY warrants when i can buy IPCO equity for 4x FCF and they will debt free by 2022.

Agree. I overshot with Costco lol. Point being revenue per seat mile for short-haul european flights fluctuate...wildly...the airlines are price takers but ryanair over time has beaten its competition by not worrying about seat prices and controlling what it can control - costs, ancillary revenue and capital allocation Having 'conviction over the oil price' is probably not the right characterisation. However, i do think the intersection of 1) irrational minds believing we no longer need hyrdocarbons due to intense ideologies over climate change (often driven by intense political ideologies, not facts)...combined with.... 2) a time when the world was using 15 million barrels of oil per day less than the norm due to the world stopping and sending the oil price falling through the elevator shaft..........has increased the probability of permanent changes to decisions on whether to deploy fresh capital expenditure for new exploration and production. In other words i am ascribing a greater probability to supply decreases over time versus the pre-covid situation......

@compounding i agree its not wise to bury ones head in the sand with regards to 'the commodity cycle' and just plunge money it at a point in the cycle that has so obviously peaked. We are no where near that point. In fact we are at the start of a cycle where new/fresh projects and capacity have already been choked off for years. I am not betting on roaring oil prices with IPCO. This notion that all businesses within a commodity industry are the same, is a mistake investors constantly make. Progressive, Ryanair, Lundin Energy, Costco, high quality US regional banks - they all sell commodity products but look at the charts over the long term and compare them with the industry average. They look very different. It means they are doing something different on the cost side, employing less capital and turning the capital over to give it back to shareholders IPCO is the best 'value investor' in the E&P business i can find. Not only does it significantly reduce its finding cost per barrel by paying next to nothing for 2P, it has the operational expertise to sweat the assets with EOR capability and turns the spigots on and off quickly depending on the oil price. I think they will do buybacks in H2 and then depending on oil prices, they will start to unlock 2P from Blackrod with either a partner or FCF from the other cash producing projects. Management constantly signal they are willing to extract that value and give it back to shareholders. They are shareholders themselves and the Lundin family havent sold a share. Why wouldnt they allocate capital in the best possible way. Are things getting better or worse for this company. 100% better. Yes the oil price is out of my control but investing is about expected probabilities. Do i expect brent to drop 50% any time soon. No i dont.

The manufacturers do have an impact on profitability of franchisers but more importantly they constrain return on capital. That is why franchised dealers in the UK can never be a great business and hence why they will never trade at multiples investors believe they will trade at. I am less knowledgeable on the US market. The CEO of Marshall Motors (Daksh Gupta) is a high quality operator and well respected in the industry within the UK. He speaks with younger and ambitious CEO's of franchised dealerships as a mentor....i will try and find the source but he simply tells them .....they will not be able to consistently generate more than 1%-1.5% net income margin over time as a franchised operation. He advises CEOs to budget for this as hes been around longer enough to know what they will end up with. Cambria are an exception but when you look look back at Vertu, Lookers, Pendragon and average out....his claim stacks up. You may say "yeah but low margin is fine" but on the capex side, SG&A and financing arrangements - this is what screws the ROE equation over time and the total capital intensity will always be directly or indirectly imposed by the manufacturers either through the balance sheet or P&L. Motorpoint Group Plc (used car supermarkets) is simply a much better business than the franchised models. The unit economics are significantly better...they can forgo service revenue but achieve double / sometimes treble the stock turns on a much bigger site with fixed costs and SG&A spread across more cars. The denominator is such that they are asset-light and not at the mercy of the manufacturers - low capex per new site and even lower for online sales and lower SG&A. This means more free cash flow at the bottom. Floorplan financing for newer cars (less than 3 years old) sold to prime customers is also growing in the UK and this plays into their hands. This becomes an advantageous cycle..the free cash flow can be reinvested into 1) new physical stores with the same advantageous economics 2) bigger investment into online capability, online marketing and advertising where margins are even better. The industry is going digital and those resisting this fact will get killed over time 3) buybacks / dividends - MOTR are aggressive with buybacks which is very unique as a UK company and great to see. I don't even think MOTR is expensive relative to other franchised dealerships and used car prices are simply on fire. I know some US hedge funds have bought into some of the UK franchised dealer groups citing discounts to US peers but i feel this is a weak argument. They will / have already re-rated but expecting multi-baggers for low return on equity businesses with increasing challenges re digital disruption / manufacturer-agency models is simply unrealistic. Motorpoint has a longer runway and the unit economics can be scaled.

@thepupil you seem to be frustrated that because this is not your one foot hurdle, it therefore has to be a 10 foot hurdle for everyone. Someone who has visited most of the gold brick properties / land parcels may have an acute understanding of the redevelopment potential and leasing rates in those real estate micro-climates. They may just have an edge on you or they may not. This thread seems to go around in circles. If anyone has anything to add on the potential of individual assets (like Dallas post above - helpful thanks) would be happy to engage.

Funnily enough my question got picked by Becky Quick at CNBC regarding the oil and gas sector and it was asked at the Berkshire AGM this year....youtube link below

@sbalsam I agree with your points. I will start with the only negative i can find......How did you feel about the 5m increase in PSU's to management? That p i ssed me off a little given the awards are linked to the SP and have been gifted at the bottom of the energy cycle. But i suppose Mike and his team brought across their own shares options in Lundin and have skin in the game. If they deliver big, they should be paid big so i whilst im not jumping out my shoes over the share units, its a fairly hefty award. Ok the positives - there are so many here. Buffett in an AGM - cant remember what year - stated that he would compensate management of an oil and gas company based on their finding costs per barrel - that should include acquisition cost, the geo, development cost, drilling, opex, maintenance, G&A, transportation - everything. How much has has each barrel cost them in total. I tried to work this back for IPCO and these guys are seriously impressive. Their capital allocation is just simply textbook. Watch the buybacks come and come heavy in H2. I was looking for an E&P company that could hoover up cigar butt type 2P and 2C resource at a cheap price in the hydrocarbon world, work the assets and then wait for the moment the 'woke society of investors' can no longer cancel the sector because a greater portion of the investor universe now realises that ermmmmmm we kinda need hydrocarbons for the foreseeable. The lack of investment / capex into new production will become a bigger concern over the next 5-10 years. We dont even have planes in the air internationally and india is on its knees and brent is still at $70........Anyway, i found IPCO. What an asset to own over the next 5-10 years. This is a significant position for me and given its a commodity business, i will constantly monitor their finding cost per barrel and capital allocation but i can not fault it so far. Lundin were always great at capital allocation and its no wonder its showing up in IPCO given these guys went to school there. On turning over the 2C into 2P, I am very excited about Onion Lake also. I think the French assets are high quality and i think there will be upside in Malaysia. Do you think they will partner up with someone for Blackrod? We are talking 20-25% FCF yield for this asset EV/FCF. Even if the WCS discount widens it is still ridiculously cheap

Is anyone following this? Still no takers? Q1 FCF alone represented 10% of the company’s market cap. Buybacks could be as early as Q3 given the speed of deleveraging. This is still too cheap.

Thanks @samwisefor the article. The dealer model seems to have been resilient over the decades because they’ve proved to be local businesses. I have no insight on manufacturers going direct to consumer and how likely it is to succeed. People are saying all sorts of things about how car retailing will change. Some of it is interesting to me and some is just zero interest policy and COVID~extrapolation leaking into the sector. Cazoo valuation being an extreme example. Carvana the same. If I shorted companies they would be in the book. Cambria is performing nicely and yes management seem to have stolen it. I don’t own as I don’t like being at the luxury end of the spectrum with dealers. With Motorpoint, I am giving up services revenue for much better unit economics on used car sales, higher roe, cookie cutter / optimum processes across all sites and good capital allocation relative to many of the dealer groups. I think motorpoints ev/ forward fcf is also cheap.

The AGM/webcast is on the 20th @Gregmal. I suspect you will get some answers to your questions based on the comments in the 10Q (below). Expecting a CEO, who started in March after a pandemic just blew a hole through the entire retail sector, to immediately remedy the situation and lift the curtain on shiny new redeveloped/gold-brick properties...in order to appease short-term investors...is a pretty bizarre expectation. The share price being 60% below pre-COVID levels adequately prices in your concerns. Its not like the market has brushed them off. The investors you mention probably anticipate communication of a redevelopment plan once a review has taken place by new management, and an improving picture over the long term regarding leasing and rates for the better properties and the non-core part gradually being sold and monetised. “This quarter marks the beginning of a new chapter at Seritage. After our asset-by-asset review, we’ve taken an important step towards this goal by restructuring our team to better align our human capital and processes. Now we have turned our attention to executing on our asset plans in a thoughtful manner that will preserve our flexible capital structure and maximize our value creation opportunities. We expect to share further detail on these plans once finalized.” said Andrea Olshan, Chief Executive Officer and President.

Is this the last positive trading update as a WFH/lockdown trade? Very curious to see how this plays out from here. There is a strong case for significant churn in 2021 as marginal consumers redirect spend into the on-trade and £25 a month of wine (to be drank in the house) becomes less of an unmet need. I do not believe this is a priority subscription for a big chunk of who they see as angels. Strong hands required indeed in 2021/2022.

thanks @kab60. Interesting. The have a track record of profitable growth for sure. I am not saying its the same business but this is more than what can be said for Ocado. Ultimately logistics, fulfillment and distribution are meant to be unprofitable for 99% of companies, hence why they outsource it. To me, Ocado is just zero-cost float funding merchants and retailers packaged as some technology power-house. i do not short companies but if i did, Ocado would be up there. What do you make of the founder and ceo halving his stake recently? That is a big offload. I accept you wouldnt enter here. People de-risk i guess. The true capital allocators dont though. If he thought there was a huge opportunity and runway surely he wouldn't offload close to 50%.

@kab60 what is the competitive advantage here? Logistics has been a commodity service since time began. Why is this different over the long-term? What is to stop new or existing outsourced logistics/fulfillment providers waking up, bidding for tenders and lowering pricing? Looking at this cold and i am seeing £20m in FCF for the last interim accounts and a £700m market cap. This is not cheap. I get there is new contracts but surely that is more than priced in?