Last week Conduril released their annual report for 2017 (Portuguese version only, the English translation follows later). The company is still struggling a bit, but I think there are good reasons to be optimistic. Compared to 2016 revenue was basically unchanged, while EBITDA increased from €29.1 million to €34.5 million and net income increased with 65% from €4.2 million to €7.0 million. Thanks to the higher profitability Conduril has announced to increase its dividend from €0.50/share to €1.50/share, a payout ratio of 39%.
This is of course all pretty decent, but I think the most important announcement in the annual report is that the Angolan bonds, worth €83 million, will finally be turned into cash. Last year I was already waiting for that, and it’s not yet reflected in the financials, but supposedly they were settled on March 21, 2018. Given that the company has currently a market cap of €77.4 million that’s a pretty big event. That means that they can repay the fast majority of their outstanding debt (€116.7 million in total) and the reduced interest expense should have a meaningful impact on their profitability going forward. Even after the settlement of the €83 million in bonds Conduril will continue to have a large exposure to Angola. The non-current “other financial assets” line item hides €55.5 million in debt securities that were previously classified as “assets held for trading”.
Given that the removal of Conduril’s debt could almost double its profitability I think the stock remains extraordinarily cheap. Right now it’s trading at just a 11x P/E ratio, and if we include the “other financial assets” in the NCAV figure it’s trading at a 50% discount to that number as well.