Battery storage is definitely another sector to worry about. Depreciating assets are valued on the basis of assumptions about growth in the cashflow they generate that bears no relation to reality. And very few sector experts outside of the managers of these assets. The only meaningful NAV is the price the asset could be sold for in the market.
At DGI9 it was literally the equivalent of buying a restaurant with a profit of £100k for £1m, then saying you plan to spend £1m to double its capacity and increase prices so that in 5 years time you have profit of £500k, which you discount back for 5 years, get to a discounted profit of £300k, say that justifies an EBITDA of 25, and that £1m asset is suddenly worth £7.5m. And then, the real kicker, is that you don't have the funds to pay for the expansion!
To little avail I've been spreading the warning on Gore Street Energy Storage on Advfn for a while, which shares many of the similarities to DGI9 in terms of NAV calculation and dividend (but hopefully not the same fate; although shares are down 50% from their height). It's amazing though how holders are able to deceive themselves and brush away concerns, even when their counter analysis is demonstrated to be false.
Can't decide if this is vivisection or dissection? Hopefully the former for anyone still invested. Great job on pulling this apart in such a clear manner. A lot of lessons to be applied to other alternative investments and as you say BESS in particular seems to have followed a similar path. Thankfully I narrowly avoided DGI9 but have been singed by GSF, thankfully a volatile but range bound share price has helped trade back most of the losses.
Thanks for pulling this together and I hope the Jersey Regulator takes action.
It appears to me the board had forgotten the premise of the prospectus, went on an acquisition spree in an effort to “buy” growth, which is exactly the same tactic Trakm8 tried to do. DIG9 complicated the issue by also acquiring debt at inflated rates not seen for two decades or more. Of course, the new management will kitchen sink it because they want clean hands going forward.
Battery storage is definitely another sector to worry about. Depreciating assets are valued on the basis of assumptions about growth in the cashflow they generate that bears no relation to reality. And very few sector experts outside of the managers of these assets. The only meaningful NAV is the price the asset could be sold for in the market.
At DGI9 it was literally the equivalent of buying a restaurant with a profit of £100k for £1m, then saying you plan to spend £1m to double its capacity and increase prices so that in 5 years time you have profit of £500k, which you discount back for 5 years, get to a discounted profit of £300k, say that justifies an EBITDA of 25, and that £1m asset is suddenly worth £7.5m. And then, the real kicker, is that you don't have the funds to pay for the expansion!
To little avail I've been spreading the warning on Gore Street Energy Storage on Advfn for a while, which shares many of the similarities to DGI9 in terms of NAV calculation and dividend (but hopefully not the same fate; although shares are down 50% from their height). It's amazing though how holders are able to deceive themselves and brush away concerns, even when their counter analysis is demonstrated to be false.
Can't decide if this is vivisection or dissection? Hopefully the former for anyone still invested. Great job on pulling this apart in such a clear manner. A lot of lessons to be applied to other alternative investments and as you say BESS in particular seems to have followed a similar path. Thankfully I narrowly avoided DGI9 but have been singed by GSF, thankfully a volatile but range bound share price has helped trade back most of the losses.
Thanks for pulling this together and I hope the Jersey Regulator takes action.
It appears to me the board had forgotten the premise of the prospectus, went on an acquisition spree in an effort to “buy” growth, which is exactly the same tactic Trakm8 tried to do. DIG9 complicated the issue by also acquiring debt at inflated rates not seen for two decades or more. Of course, the new management will kitchen sink it because they want clean hands going forward.