this episode is a big one today we're looking into the biggest hitter there is the company that grew
over 850 percent in just 10 months the fourth most bought share on easy equities they announced 82
in dividends from their listing price i'm talking about none other
than some gala resources but what dangers lie behind the dividends is there something
eerie about their earnings is their share price going to the moon or will it crash
and burn in the atmosphere let's find out welcome to casual cash
now let's be honest you do not get a bigger story than this 850 share price growth the fourth most
bought share 82 dividend and all of this in under one year of existence a lot of people have made a
lot of money on tengela resources some think it sounds too good to be true and maybe it is or
maybe this is just the beginning of even more extreme growth so the question everyone needs
to ask themselves is do you buy in or do you hold for more or is now the time to take your
profits and sell we'll break it all down and find out and honestly what i found out was shocking
okay let's start simply tengela means ignite in zulu and in its current form started less than
a year ago when anglo-american demerged from tenguela resources anglo is getting out of
the coal business and into more environmentally friendly sectors so tengela is born and lists
on the jsc and london exchange on the 7th of june 2021 at 25 and a share and it fell 12 on the first
day as investors dropped the stock when it listed the company was coming off a 400 million rand loss
the previous year and it looked doomed but then when all hope was lost something amazing started
to happen in a stroke of luck right after they listed the coal price started to go up and then
it started to shoot up what started naturally as a return to pre-covert demand then became unnatural
as demand surged and supply was still trying to catch up from production and shipping delays
caused by lockdowns this all caused coal prices to go up 585 percent from its lowest in 2020
astronomical that meant for the same gram of coal they mined they were getting five times the price
then russia invaded ukraine and the supply side went down so the coal price soared even higher
naturally their share price started to climb and it continued to climb
then there was no stopping it fast forward nine months later today sengala is 800 up paying a
dividend of 80 percent of their listing price and their shareholders are smiling from ear to ear
and they should as investors this is the kind of return we dream of and they deserve all the
profit that is sitting in their accounts i was not one of them so well done to you guys
but that is for those who bought 10 months ago now we're sitting in the present day
and all investors have to decide what to do next i'm sure it's very tempting to see this and want
to buy shares or tempting to see the profits and sell but let's dig deep and look through
the bones of the business and decide whether we're missing out or if ton gala is a house of
cards this is the annual results presentation up to 31st december they talk about their share
price growth they talk about their massive 82 dividend from listing there and they talk about
their outstanding return to profitability okay get your goggles on it's time to dive
first the return to profitability from a 400 million round loss to a 6.9 billion rand profits
reduction of capital expenditure through tungeela lens a total dividend payout of 2.5 billion rand
this year great stuff or is it if we look further into the numbers immediately we see that despite
the increase in price they've actually sold less coal 1.5 million tons less than the previous year
the freight on board fob cost has increased increase per tonne from 804 rand to 830 on top
of that the amount that they're able to deliver has deteriorated in 2021 because transnet freight
rail or tfr has experienced challenges which might improve export equity sales decreased by 16
percent so how does a company that declined on all its major metrics make such a spectacular profit
the main reason is the coal price the coal price surged in demand mainly from china and ironically
our transit issues lowered supply and raised the price simply put record benchmark prices in 2021
and 84 realized increases in prices foots and gala but costs also decreased by three billion rand
some of this is because they sold less coal and paid less on rail because they didn't transport
as much the scary part for me is their decision to increase huge amounts in capital costs both
now and years into the future it's scary because does this mean less maintenance on their minds
we all know what happened at s-com when they spent the money instead of maintaining the power plants
now we have daily load shedding could this be a similar situation or did they just find a way to
save 20 of all their maintenance costs they have said their minds have a 5 to 11 year lifespan left
on them so i guess we'll see speaking of that when their minds do reach that end point they will have
to be closed and billions of rams must be paid to close them properly and repair any environmental
damage syngela discloses this and has provided 6.8 billion rand but many people think that number is
too small short selling firm boatman capital released a 39 page report claiming this figure
could be as much as three times higher and that it would bring their value as a company to zero
that might not be the case but environment regulations typically tend to increase all
the time and so does the cost okay let's take a step back i want to show you something
as a jc company all payments to directors are public and right now you can google and look up
their published announcements in the last few weeks tungeela has awarded tens of millions of
rams and shares to its own staff 22nd of march awarded 2.5 million random shares to its ceo
1.2 million ran to its cfo one million ran to its co 900 000 ran to head of
thousands technical of hr six hundred thousand corporate affairs six hundred thousand the
health and secretary six hundred thousand ahead of marketing even half a million to their company's
secretary but that's not all in march again another seven million random shares to their ceo
4 million to their cfo 3 million to the ceo their list goes on 2.6 million 2.2 million 2 million 2
million 2 million and all of those shares they're awarded will also benefit from the dividend
that they're going to be paying next month next question is this sustainable short answer no the
coal price has never been this high in history and it's impossible to lost the supply and demand will
likely even out as it always does and returned to its normal prices where the company was just
last year losing 400 million rand a year on and in their own words call is uncertain long term
and they need to diversify away from coal within the next 10 years as renewable energy comes in
so for you watching this video what do we have here in tengela to me personally i see
a company that made tremendous profits from a coal price that was and is not in their control
was not and is not in their control i see a company that was making a loss
in a normal environment and is steadily selling less coal in a slowing sector
it seems to me there's a desperate grab to take money out to the company while the taking is
good a sudden awarding of tens of millions in shares to all the company's highest employees
who will then also receive that huge dividend next month on top of it which by their own admission is
twice as large as it needs to be while the company drastically decreases its maintenance spend
and lastly i see huge environmental liabilities in the billions which will start to come due
in as soon as five years so to finish it off well done to those who profited make the most
of your gains and i hope you continue to make much more i personally won't be investing in ton gala
the price may go up still until the dividend maybe even beyond i don't know
but this is not a company i want to hitch my wagon or my money too so that's it for today's episode
guys i hope you enjoyed and liked the video and if you want more insights like these you're welcome
to subscribe to the channel but until then i'll see you again next time on casual cash cheers