They will have a very tough 9 months. Very large costs without much revenue. Granted the long term outlook is decent but they will report poor comparisons for at least 3 quarters. Margins will look awful until volume builds. I am out see you in the fall.
Well, good luck to you but I think you are misjudging the situation.
The new contract period does not start until April 1st which means the next quarterly will be using the same revenue margins as were reported in the December quarterly. There will be added expenses to be sure but if the placement option is exercised this quarter there will be 80Mil in cash added to our current generous cash position. It will dilute earnings per share some but those shares are basically locked for four years as well which deserves to be taken into account.
The stock has been slow following the second quarter earnings to be sure but I am expecting that this will pick up and be stronger than ever within the next month or so.
I agree with orange that capex doesn't affect margins. But the capex does create some uncertainty since there is no guarantee that "if they build it, they will come". The company spends money to build out infrastructure, but what if the customers who use that new infrastructure under utilize it? People will look at return on invested capital as the new revenues come in.
Do you want to state a price at which you would buy in now?
I was out at $10 after I heard about the challenge. I thought the court challenge plus the capex plus just being in a corrupt area like South Africa was enough to put a dimmer on for a while. But I probably start to like them around $8 again.