Hi Jehangir, I have to say the price and timing of the raise is a bit of a shame, given the dilution to the number of shares issued. Despite new contract wins and importantly the Tanami project completing, the share price hasn't re-rated, presumably due to the market not being comfortable with the amount of debt the company has. I would be hopeful that the equity raising sees the market re-rate the stock going forward, now that there are no perceived gearing issues; as per the company's announcement, some new institutional shareholders have joined the register and may provide some buying support. The issuance of FY20 guidance (and FY19 guidance reiteration) demonstrates the cheapness of the stock, together with strong expected EBITDA growth.

On Zenith Energy: Fueling Growth -

Hi Wayne, WEB have just put out a presentation after-market today on the ASX for a presentation they're making tomorrow at a broker conference. A large part of the presentation is on Rezchain. The company certainly seems to be making progress on rolling out the initiative internally which is good to see. Cheers, Naheed

On Webjet: Growth at a compelling valuation -

Hi Wayne, I don't disagree at all. It's been 2-3 years since Webjet started talking about this initiative and the efficiencies that it might bring by having one 'source of truth' when it comes to bookings. Recall data mismatches occur in up to 5% of bookings, so reducing this when you're talking about billions of dollars of TTV is meaningful! The company themselves haven't talked about this topic too much in recent presentations, so probably not surprising that there isn't much commentary in the market about it. Still, I understand that they're rolling out a solution internally, yet it continues to be a work in progress. We may in fact be seeing some of the benefits in recent results given margins in the business continue to expand well. I'm unaware of any other travel company implementing a similar blockchain solution to drive efficiencies internally. Being able to monetise this to third parties (by clipping the ticket when providing a solution to third parties) is something that Webjet have talked about, but I think it's potentially something still 2-3 years away still. That could be a meaningful source of profits. Something to watch out for. Naheed

On Webjet: Growth at a compelling valuation -

Hi Stan, the contract with Ok Tedi Mining had the 3 year option exercised in 2017 (ending in 2020 as you say), so a positive sign that ZEN have done good work to date. There's a further option to potentially extend to 2023. In the event the option isn't exercised, it's important to note that while the headline 142MW of power is sizable, this is a managed contract (Managed, Operate, Maintain - MOM), not a BOO contract, meaning that the profitability is relatively low vs what the company derives from its BOO contracts. For example in FY18, EBITDA from the MOM segment (made up of several contracts of which Ok Tedi Mining is one) made up 17% of Group earnings. The main driver of growth and basis of valuation is largely from the BOO contracts.

On Zenith Energy: Fueling Growth -

Hi Greg, unsure why the pullback has been so large. ZEN are yet to win and announce a number of PPA contracts in their pipeline (albeit they have announced a couple of amendments to existing contracts which adds capacity and is positive) - I think lack of newsflow along these lines hasn't helped. The pipeline seems intact however, and the company reiterated guidance at their AGM recently. Importantly, the large Tanami project which is currently being built seems like it's on time and on budget, and should part contribute to earnings in FY19 and make a full contribution in FY20 (the basis for valuation).

On Zenith Energy: Fueling Growth -

Hi Brad, it’s a positive and unsurprising development. If you look at slide 5 of their corporate presentation to the market on 31 May, they mention how they’re in a process to secure more debt funding, and this is it. Their lead funder, Commonwealth Bank, have provided ZEN with a $40m corporate facility already, and CBA are comfortable with ZEN taking on up to $125m total in debt. A business like this (asset heavy but with good returns and cashflow) can bear a fair bit of debt in their capital structure. As a side note, the pipeline of opportunities that the company has is pretty substantial. If a number of these opportunities are won (as per their track record), that’s obviously a positive because the returns on capital deployed are very attractive, and will need funding, both through a combination of debt and equity. Debt funding clearly isn’t a problem, and I imagine any equity funding required will be strongly supported given the strong returns as well as the cheap valuation that the stock is currently trading at.

On Zenith Energy: Fueling Growth -

Hi AD. Flinders does hold a position in SHJ in our Emerging Companies Fund. Given the size of the class action and the several years that it has been running for, I would estimate about $20-30m is tied up in WIP and disbursements (all fully funded by SHJ, as opposed to a disbursement funder or litigation funder). So in a positive scenario, they would recoup this amount fully. Additionally, SHJ would enjoy a cut of the total proceeds of any damages awarded, whatever that may be, as payment for their services. As I mentioned, a number of similar cases globally have started to settle in the tens of millions of dollars.

On Shine: good chance of a significant positive catalyst -

Rudi, thanks for your note. I’ll have to respectfully disagree with you here on several fronts. Firstly, I think it’s incorrect to say that the charts are ‘full of noise’ as they are constructed by a reputable and well credentialed provider of indices globally (MSCI). Secondly, while you are correct that there are small cap resources and mining services companies in the Growth index, they also exist in the Value index. I cannot explicitly talk to the composition of those indices as I don’t have access, but to give you an idea, I do have access to the S&P/ASX Small Ordinaries universe and the ‘Resources’ component of that index is currently around ~23% of the index. In fact, when you add other ‘domestic cyclical’ sectors such as media and retail to the mix, cyclical companies make up ~60% of the index! That is, the small cap universe is heavily populated by cyclical companies. As an Australian small cap manager, I believe your suggestion to exclude those stocks to get a more accurate picture is incorrect. As I mention in the piece there are several drivers of growth (organic, acquisitive, and cyclical), all legitimate – we just have to be acutely aware what type of growth we’re dealing with and value these companies appropriately. As you invest in ‘non-cyclical growth’ companies only, of course your returns look different to these charts. Hope the above details clarify a few things for you.

On Growth vs Value in Australian Small Caps -