# Birds of a feather, let us flock together, share your portfolio ideas



## suhm (19 November 2010)

I have been liquidating my holdings as of late and haven't really found anything that I am all that keen on investing in at the moment. The discussion in the forum is quite interesting but at times I find there isn't actually all that much talk about individual companies.

If you have or had similair holdings if you could share what else you hold I think it may lead to an interesting discourse as part of the reason why we all post here is to learn and share ideas with each other. It will also help me to save some time  if we have similair criteria for identifying companies to invest in.
*
Low P/E companies with high ROE and scope to increase earnings reasonably realiably for a few years, these are the ones I prefer but hard to find.*

CCV - Earnings should increase by converting franchise stores into corporate owned stores

FGE - This is one of the ones I am liquidating, mining services company with a good history of increasing earnings but has been lucky to not have any contracts go sour and no longer cheap as chips.

MMS - Bought interleasing for a steal which allowed it to deploy a lot of capital relative to its size which should set up to increasing earnings over the next few years.

RHD - Another company which I will probably be forced to liquidate, human resources company being taken over for less than a premium price as the founder wants out and the 2nd largest shareholder is working with CMG to buy it out and between they own about two thirds of the company.

*Biotech companies with commercial products that lead their field and do not need to raise capital.*

BTA- Good wad of cash but potential relies on the company getting a good outcome for the licenscing of their next generation anti-influenzae drug, but given the deal they got from GSK for relenzae and the dominance of tamiflu even though it is an inferior anti-viral this may end up more costly for me than it already is.

SRX - Good treatment for liver mets potentially useful for primary hepatocelluar carcinomas which is a much larger indication. Trial data will take about 3 years to come in and if positive about 5 years for dose sales to grow exponentially. As is dose sales are increasing at a linear rate and it does not have an excessively high p/e if you take out cash backing and it is one of the few aussie biotech shares with any e.

*Gold miners*

DRA - Scandinavian gold miner chosen because of it should be able to increase reserves, had lacked cash to drill exploration holes as had to close out a unprofitable hedging contract and has recently released some high grade holes from a future mine site. Chosen more because of its high cashflow relative to market cap due to the closing out of the hedge book and rising gold price.

TBR - Aussie gold miner who likes to hoard their gold instead of selling it. Had at one point more than its market cap in gold bullion in inventory and low cash cost gold mine.

*High cashflowrice*

IPX - Extremely small IT company involved with cloud computing, IT support as a subscription service, overinvested in capacity and suffered for it so now any contract wins should translate to the bottom line quite readily.

*Oil and gas producers/explorers*

New theme based on rising energy consumption and hence prices and not a very successful one as I basically chose companies which had a high cash backing and hoped that they would spud oil or gas without having to raise capital which TAP did anyway.

COE & TAP - High cash backing with producing wells helping to fund exploration.


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## suhm (3 December 2010)

New addition to the portfolio, Hawkley oil and gas (HOG), 100% owned tenaments with higher than expected flow rates from their first hole drilled, expect a resource upgrade after further flow testing otherwise will be out.

I've also topped up on COE and TAP to standard weightings as spud dates approaching.


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## ParleVouFrancois (3 December 2010)

Have you had a look at GDO recently as an addition to your Gold section? An underrated South African producer, earnings per share forecast to be 7 cents in 2011, price still in the mid 30's. Have a look at the recent presentation .


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## suhm (3 December 2010)

2 new additions Coretrak (CKK)- In the process of commercial testing of a new drilling probe and drill rig. The probe will potentially decrease the amount of downtime for oil and gas drill rigs, so hence decrease the cost of drilling significantly. The drill rig should allow the company to become cashflow positive once further contracts are won. It again has been designed to decrease the downtime and cost of drilling exploration holes this time by reducing the interval between changing drill bits, the drill bits are expensive and it takes a long time to change them when holes are over 3-4km deep.

Ceramic Fuel Cells (CFU)- Been watching this for a long time, first commercial order for 200 units, pending approval for funding under government subsidies, hopefully the first of many which would make this a long term hold, otherwise a short term hold selling on weakness.

Ross Human Directions (RHD) - Sold out to fund above purchases unlikely to get an increased bid price given peoplebank's declaring their bid final and option granted to CMG by Julia Ross for 19.9% of shares.

Thanks for the redirection to GDO - I may be wrong, I often am, but doesn't quite fit my profile, my appraisal was a fair amount of the value was due to its gold reserve base. I prefer to pay for current production with exploration upside as I can't really tell whether one tenament is better than another and usually companies are able to extend the life of current mines with extra drilling, which seems technically easier to me than developing a new mine.
The convertible notes also will limit upside and mine is not yet producing at a steady state and production projections often have a habit of being wrong on the downside and costs on the upside, but there in lies the reward if you get it correct, not familar enough to asses it properly though.


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## suhm (6 December 2010)

Rest of Forge sold off for 4.62 to increase position in CKK 0.22.


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## suhm (7 January 2011)

Timing of the last few trades hasn't been astute, increased holding in biota as timing for lani deal is approaching, flu on the increase in the UK and volume picking up the last few days. Missed out on the open, didn't expect it to gap up that high order was in at 1.07 ended up buying at market for 1.15


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## suhm (10 January 2011)

MAD- Another energy stock for the collection for when COE and TAP drill more dusters and I finally sell. Poor flow rates on the wells but it owns the rigs and the oil is onshore so drilling costs are low. Market cap around 90m 1p reserves of 7.8m, >400 bopd at present being pumped out with 2 drill rigs active and2 more by mid year, should increase the production rate steadily. It also performs contract drilling for other companies and intends to continue doing so. Purchased for exposure to rising energy prices, increase in cashflow with new wells coming online and because it made a new high. In at .265.

Partial selldown of TBR to fund above purchase as I have held for just over a year and its subsidiary RND has acquired an option for an iron ore tenament, not sure what it is worth but new shares will be issued which will dilute the percentage that TBR own of its Raleigh gold mine due to the companies cross share ownership. In at .78 out at 2.08.


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## suhm (14 January 2011)

Sold out of CFU today, price has not increased after first larger volume orders, still only 200, they need about 20000 then it starts getting very interesting, will look at reentering after the selling has abated, I think ASCI now has a sell on it at this level and on news of new contract orders. In at .18 out at .15.

Additional MAD added at .27


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## suhm (6 February 2011)

IDM acquired at 0.185 after legal injunction to its building of mineral sands plant was thrown out of court. Subsequent to my purchase the plantiffs have decided to appeal the decision but I am assuming the merits of the case can't be that strong given it did not go to trial.

As again timing of purchase is terrible, IRR is expected to be about 70% based on their modelling. Main product is chromite for foundry use as a replacement to zircon, zircon and garnet. Most of the money will be made from the chromite but is a new product as a zircon replacement. Modelling was based on a zircon price of around US700 but as seen with illuka prices are now >1000 so returns are potentially higher. Will buy more when the plant starts producing and am anticipating that to be sometime in may or june


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## suhm (11 February 2011)

CKK sold at .165 doesn't look like a long term commercial contract for the gt3000 will not be signed anytime soon and might need to do a cap raise if they don't get one. Funds used to purchase zgl at .365 for reasons look at skc's thread.


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## suhm (12 February 2011)

EXS also purchased at 0.61, low cost gold producer expecting net cashflows to be about 60m pa, mine life only about 2-3yrs atm with a market cap of 210m. Upside is from further exploration increasing minelife and possibly bringing on a new copper gold project very soon with a NPV of 400m, uses 8.5% as a discount which is a bit low and ausd at 80USc but 1000USD/oz for gold and 3USD/lb for cu is low so it cancels each other out. Possibly very low capital outlay if they can negotiate a deal with Xstrata which is mining a deposit 8km away and has an extraction plant with spare capacity.


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## prawn_86 (12 February 2011)

Nice work Suhm, watching with interest


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## suhm (15 February 2011)

Small position taken in UOS at 0.35 today due to illiquidity of the stock as senior management own 70+% of the stock as they have been taking dividends as stock and completing regular buybacks. Ownership structure is also very complicated.
Malaysian property developer/manager/owner anticipating a 120m pre tax profit this year from an upswing in the value of their developments, market cap is 347m. They had 420m in net assets at their last half yearly which should increase this year as booked above and rental income of approximately 30m/yr. 
They have proposed selling off some property to a REIT controlled by them for 500m RM, approx 165m AUSD, 90m AUSD in cash, 75m AUSD in stock.


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## suhm (2 March 2011)

Rebalancing portfolio partial selldown of MAD in at 27 out at 23.8cents to help fund SPP application due to capital raising to increase drilling program, thought it would eek its way out to being cashflow positive but was wrong.

Sold out of IPX, in at 0.152 out at 0.14. No new large contracts won since its deal with wilson HTM but will take another 6 months or so before cashflow improves, will look to renter if results are better at the next report or new contracts are won.

bought TXN at 0.76, price down due to recent capital raising to purchase new acreage and accelerate drilling program, new wells online should allow good cashflow generation with scope for reserve upgrades as drilling program continues with decent resource vs market cap, not as good as HOG but this is in the US rather than the Ukraine


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## suhm (4 March 2011)

Post results season update of current portfolio stocks.

BTA- Savaged, actually saw it going down soon after and was considering selling out to renter and in retrospect should have done so. Hindsight is so 20/20. If the product was not so good I would not be in this stock, but potentially that is not enough, it already had the better 1st generation flu treatment but has been outsold 9:1 by tamiflu which has a poor resistance profile but is a pill. LANI however is the only 2nd gen flu treatment and now only needs one dosing so is more convenient than tamiflu and in Japan has outsold both Tamiflu and Relenza at launch. Every time management speaks however the share price seems to tank, they are good at developing drugs but absolutely pathetic up to date at commercialising it. In the lawsuit against GSK they were offered >100mil but in the end abandoned their lawsuit and settled for 20million. Nothing Peter Cook said in the announcement but he seems to be a weapon of mass destruction for shareholder wealth, when he speaks the share price goes down.
He said relenza should have been a billion dollar drug and it should have been but LANI is even better and hopefully this time they have learnt their lesson and they co own the molecule with Daichii Sankyo so hopefully we don't get screwed again.
There seems to be a huge discount for poor management, mesoblast's market cap is 1.6billion and is years away from a product, albeit a potentially huge one, a treatment for heart failure, given there isn't one at the moment only optimising other medical management but surely a drug that could treat the next flu epidemic, H1N1 and Sars were just a taste of what could happen, think the Spanish flu which killed more ppl than world war 2 and this was back in the day when you needed to go by boat to spread the disease. 
Vaccines aren’t the answer in this day and age when a small infective cluster can spread across the globe within one day. All of this and more, they have a treatment in the pipeline for the common cold as well all for a market cap of 200million of which 78 million was cash, cash burn is high as they are spending 25 million for the phase 2b trial for HRV treatment.
To put this in context biocryst has received >300m USD in grants to develop premavir an IV flu treatment that doesn't work that well, it has the same resistance.
That is why I love this stock and why I won't sell any until they do a deal to commercialise LANI for the rest of the world. Potentially if they got grant funding they could commercialise it themselves as it has been significantly de risked post the phase 3 trial in Japan and its commercialisation there.

CCV- Chugging along nicely with a good increase in profit, EPS increase not so good given it has only started to finally deploy most of the money it raised during its placement to EZCorp like the placement forge did to Clough for strategic reasons. EPS should now enjoy the full uplift.
COE- Drill results drive this stock and they really need to start finding some oil on the holes they operate.  PEL 92 program seems to be working well but its Menzel Horr which will provide the blue sky in the short term but this has been delayed because of the civil war in Tunisia but the delay in results post resumption of drilling are a bit ominous.

DRA- Good profit as expected given the price of gold. Expect good drill results from Kusamo given the bonanza grades they found previously. They have increased the reserves of their mines but they have a very short mine life but they have been proving up extra reserves, share price is definitely in a downtrend though.

EXS- Still waiting for a development plans for its Cloncurry copper mine, share price going down in the interim. Production from its white dam gold mine is good though.

HOG- Started production from its initial well, news events are an increased reserve base after flow rates have stabilised on the final choke size, should be in a month or so and after they drill more holes and show that oil will flow commercially in their other lease with cash flow to increase rapidly after they drill more holes to exploit their fields. Same sort of no brainer upside as I see for BTA with the only downside being that this is happening in the Ukraine.

IDM- Not much news here waiting for production to commence in April and for final resolution of the legal action. Less worried about the legal action given it was dismissed without going to trial but the litigants are appealing the decision. What I am more worried about is the plant actually working properly and the price that they will receive for their chromite given it is a new product.

MAD- A bit disappointed with my analysis of this sold out half for the SPP, guess management didn’t want to skate so close to the wind with their cashflow and wanted to accelerate their drilling but this will take 6 months longer to play out post their capital, not quite the exponential potential or downside protection of my other energy stocks, more of a steady increase in cashflow as they bring more wells online, flow rates are extremely low for the holes they drill but they drill them themselves and they are cheap to drill.

MMS- They are bedding down their interleasing acquisition well and it has set them up for further profit increases in the future.

SRX- Need to wait another 2-3 years for this one to pop, they have rapidly expanded their trial program which is eating up the cashflow increases from the steady increase in dose sales. Currently they are only being used for 1% of the market. If the trial results are good profit will increase geometrically given the huge margins they have for their drug.

TAP- Finally found something instead of dust, Zola-1 being commercial would be the next news trigger for an increase in share price.

TBR- Opaque as always, profits are good and they are developing a new gold mine. However I have always been wary of management and with the increase in shareprice the risk is increasing and while the reward is still probably >100% I may recycle the rest of my capital.

TXN – Only entered it post results season so no real effect at this stage, waiting for flow rates of its new drill sites and for cashflow to increase.

UOS- Result as expected rental income is enough to support the current share price with development as the cream.  Risks are a downturn in the Malaysian property market, liquidity, there is none, slightly more than TBR when I bought it however because management is constantly buying back shares. The final risk is that management will reach 90% and screw over the minority shareholders as they already hold >70% and have reinvesting dividends at a 5% discount to the market price and have been buying shares on market. 

ZGL- Result good as expected, management not ramping up expectations but matching the first half would already see profits rise again and they were excited about the prospects for their divisions and new products coming online for the companies they invested in.


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## moreld (4 March 2011)

Excellent summary on Biota, suhm. BTA is my largest position.
A number of possible catalysts for the share price exist this year:

1. BARDA grant for funding of LANI program. While the market will see that as highly positive I think it would be the runner up prize. Management should really have secured a partnership for LANI RoW rights. A partnership deal would have a better risk/return profile and better net present value with upfront and milestone payments hitting the bottom line and therefore improving shareholder returns.

2. LANI royalties. It has been a bad flu season in Japan and if LANI sales from the first 8 weeks are anything to go by even the 4-5% royalty will start being meaningful and more importantly will highlight the potential.

3. Reduced R&D spend. I think the market freaked out at the high R&D spend last half, without understanding that was simply front loaded costs from the HRV study. Many people extrapolated the burn out for a few halves and thought Biota was running short of cash; crazy lazy stuff.

I recently took a punt on *ADO*. I think keeping an initial investment small and adding on an improving story is the way to go with that one.

Prana, *PBT*, is my ultimate long shot. Terrific science and great product in one of the last true mega blockbuster areas left, AD. If they could get funding from some where then it would fly. Sadly their progress has been appallingly slow.

*RCO* is a slow burner that I've been looking at recently. I like the royalty model and it appears to be a classic heads I loss/win a little tails I win a lot. Acorn Capital recently took a stake.

I continue to watch *CFU* and many other companies with potential, but most are best left to they have earnings. If CFU gains traction investors will have years to get in and still make tidy profits. It's only appropriate for small risk capital at this stage.


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## suhm (7 March 2011)

RCO and PBT both look interesting, RCO looks cheap but don't see earnings increasing rapidly, PBT has issues with funding but the science looks good.

COE- Sold out, doesn't just find dust, it drills >500m past its terminal depth and still can't find its primary target, hopefully i'm not wrong as its a huge target and its back down to cash and reserve values with the upgrade from PEL-92 but as an operator that seems to be a phenomenal misinterpretation of their data, which makes you wonder maybe that's why they have such a poor drilling record as an operator. In at 0.435 out at 0.385.


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## suhm (8 March 2011)

2 new positions today

PBT- Do like the drug for this, the treatments for dementia are quite poor, aricept is a 3billion USD drug but only slows cognitive decline and has a lot of problems with anti-cholinergic effects. Phase 3 trials targeting amyloid plaques have not been that promising so despite only having phase 2a trial data, there aren't that many drug candidates more advanced than it. Needs to clarify its funding proposition for its phase 2b trial anticipate a cap raising with one previously organised with souther equity lapsing at an 80% discount, will have to see if the Ballieau government will cough 15mil like the Brumby government said they would, which would fund half the trial with a cap raising post that likely. Will go to a standard weighting in a follow up SPP post the raising. They would then be funded until a phase 3 trial partned with a big pharma.
Its co-founder also got an NHMRC australia fellowship, only 39 of those and is one of the biggest funding blocks available from the government worth 800k a year.
In at 0.145

ABY- Reasonably high copper producer which should see cashflow increase dramatically given the high copper price and restarting of a mine put on care and maintainance due to low copper price previously, catalyst is that it was in the news recently. No real debt, receiveables are quite high 90m mostly owed by a related party its parent company which owns 50.1%.
In at 1.33


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## suhm (14 March 2011)

Partial sell down of 2 positions for capital preservation, tax purposes and spare capital to see how all this volatility plays out to scale up again at a later date.

CCV in at .58 out at .77, still think it has great potential and will reaccumulate at a later stage as potentially may decrease in share pirce and has less blue sky upside in this environment.

MMS in at 3.83 out at 8.80, same as CCV.


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## suhm (15 March 2011)

More portfolio trimming

MMS - I have completely exited in at 3.83 out at 8.82

MAD - I have completely exited in at 0.265 out at .202

Reasons are the same as previous, seeing what opportunities will crop up and will look to re enter both in the future.


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## tothemax6 (15 March 2011)

This is an interesting thread, suhm. Please keep it up!


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## suhm (16 March 2011)

Topping up TAP today, good report out on their drill for Zola-1 they currently anticipate it to be at the top of the 1-2Tcf range they have previously anticipated and have not yet fully transected the pay zone. Awaiting full wireline logging results and to finish drilling as their drill rig is stuck before a statement of reserves is made.

Top up at 1.03, will anticipate selling back this parcel post release of formal results.


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## suhm (17 March 2011)

More TAP at 1.093 should have just loaded up completely yesterday.


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## moreld (22 March 2011)

suhm
Prana (PBT.AX) which trades as PRAN on the nasdaq was up 103% overnight in the US if you include after hours trading. It closed after hours at $USD2.99. The ADRs are 10:1 and with the exchange rate at around parity that indicates it should trade for 30c here in Aus today. Though in the past there has often be a divergence in prices.

While the release yesterday was encouraging, I didn't view it as groundbreaking news as it was what many of us believed anyway. What Prana need is funding and if they don't get a good deal soon then in hindsight this would be a good time to trim. Of course if they soon announce a good deal, then in hindsight now would look like a good time to add. Such is the market. Perhaps the news will help them get a deal, but I suspect having an IP lawyer as the COO has hindered their deal making ability.


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## suhm (22 March 2011)

cheers moreld, explains why the big and delayed rise today to the news, it is good to know the mechanism of action rather than theoritically how a medication works but its still a long way to development, maybe they will make use of the higher share price to do a cap raise and fund their trial.


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## suhm (23 March 2011)

Many thanks again moreld for PBT, just wish I had purchased a standard parce size, reason I am selling is that it looks like a pump and dump to me will look to re-enter when the dust settles, in at 0.145 out at 0.361 not bad for <2 weeks. If I were management I would raise the money to do the trial now and forget about big pharma.


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## skc (23 March 2011)

suhm said:


> Many thanks again moreld for PBT, just wish I had purchased a standard parce size, reason I am selling is that it looks like a pump and dump to me will look to re-enter when the dust settles, in at 0.145 out at 0.361 not bad for <2 weeks. If I were management I would raise the money to do the trial now and forget about big pharma.




Very sensible and great return for 2 weeks. We are know that the position size is never big enough on a winning trade 

PBT sure smells like pump and capital-raising - and look at those sharp spikes that occur on regular basis in the past - definitely a take profit imo.


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## suhm (23 March 2011)

It was a cap raising for PBT, very lucky timing on my part an hour later and I would not have been very happy, 6.1m at 0.225 + 6.8m free oppies at 0.225 strike price.


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## skc (23 March 2011)

suhm said:


> It was a cap raising for PBT, very lucky timing on my part an hour later and I would not have been very happy, 6.1m at 0.225 + 6.8m free oppies at 0.225 strike price.




Lol. Great timing indeed and not a moment too soon. Now trading -2% having been up ~50%. 

Did they read my post on this thread and decided to go cap in hand?


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## suhm (28 March 2011)

Rest of CCV sold today at 0.84 in at 0.54. Timing of previous sale was unfortunate as they received a proportional bid from their major shareholder EZCorp for 0.91 cents for 30% of your shares. Seems like another low ball bid approved by the management team and the board so will probably go through. Think there is more downside in the market as a whole possible than upside and upside for CCV will be capped by this offer. It is probably unlikely that I will be able to pick this up on the cheap though given the offer is in place but I think it discounts the sustained growth this company should see by converting to company owned stores and there is no control premium. I don't have the money to fight management though so all I can do is get out.


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## suhm (29 March 2011)

TSV- Transerv about to spud the Warro-4 hole with Warro-3 abandoned because of influx of water, market cap is around 100m, not my standard play as shares on issue is about 3bn, but it is free carried for the first 100m of spending on the field by Alcoa, they farmed in for 65% of the field based on spending targets and they have committed to the further drilling even with the failure of the Warro-3 hole. They think with new fraccing techniques for their horizontal well they can access the tightly spaced gas and have less influx of water as the fraccing fluid is distributed more horizontally so less interruption of the layers of the field and they are also now prepared for the water problems. They are close to production pipelines and the free carry is anticipated to take them to production. Exit would be based on whether it gets ramped up in the spudding process or with initial production rates. They should be good even if the well is abandoned ideal outcome is to transition to a sucessful producer. Field size is 10Tcf, recoverable anticipated at 2.1Tcf 735bcf net to TSV.
In at 0.029

So reasons for investment 1)free carry by Alcoa
2) Horizontal instead of vertical well being drilled should lead to higher flow rates, so greater potential for ramping  if fellows from the other board get along.
3) The gas is there, it has flowed commercial quantities, the problem was water flowing in restricting flow rates after initial production, they have designed this well to remove that water.
4) Close to pipelines and in WA where due to LNG terminals gas prices are much higher than in the rest of Australia, so if the wells can produce it should be able to commercialise them.


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## suhm (30 March 2011)

Additional DRA added at 1.68, price of gold is holding up and company has been adding lots of extra cash which should be able to fund production at Kusamo. They anticipate an extra 60k oz a year of gold in 2014 and have been proving up reserves with their drilling program. First results from drilling program in Kusamo out this morning and given previous bonanza grades could add excitement. Gapped up yesterday on strong volume which has taken out the downtrend.


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## suhm (1 April 2011)

Busy morning today, news out that BTA got BARDA funding, its non-diluive and greater than its market cap the previous day, funds the treatment study to productions , thought it would be a day bagger on the news but nowhere near that, so have liquadated a lot of positions to fund more BTA.

Partially out of DRA in at 1.68 out at 1.68 
Out of TSV in at 0.29 out at 0.28
Out of ABY in at 1.33 out at 1.46
Out of TBR in at 0.77 out at 2.29
Out of SRX in at 5.01 out at 5.27
Partially out of HOG in at 0.30 out at 0.42
Partially out of TAP in at 0.81 out at 1.10

All transactions done to fund extra BTA average entry today 1.47


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## skc (1 April 2011)

suhm said:


> Busy morning today, news out that BTA got BARDA funding, its non-diluive and greater than its market cap the previous day, funds the treatment study to productions , thought it would be a day bagger on the news but nowhere near that, so have liquadated a lot of positions to fund more BTA.
> 
> Partially out of DRA in at 1.68 out at 1.68
> Out of TSV in at 0.29 out at 0.28
> ...




Are you sure the concentration is a good idea?

I tried to value BTA in light of the announcement... since they are a loss-making entity, it takes a whole bunch of assumptions to come up with some numbers. 

No doubt it's a big slab of money from BARDA - the question is how much of the market cap (based on yesterday's price) has already include the future upside of the drug. I certainly wouldn't just add the BARDA money (which arrives over 5 years anyway) on top of yesterday's market cap (not suggesting that's what you are doing).


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## suhm (1 April 2011)

I've always run a pretty concentrated portfolio, previous to this my largest position was 5 times the size of my smallest, now BTA is my largest position and is 12.5 times the size of the smallest.

I like to scale into high probability positions and I have been burnt a few times when the news flow was not as I expected and exited the positions but if the ball is just sitting there the mistake for me is not to swing at it hard. Liquidity can sometimes be an issue when I find that I am wrong and I do take that into account as to how far I

I scale back once they hit my price targets as I did with FGE, I left a lot of money on the table on that one but as you said concentration risk can get a bit high.

Thesis for BTA is 1) They are funded now to production. BARDA money is essentially free money. I don't think the market would quite understand this given less examples of leading biotech shares, MSB is changing this I believe. MSB skyrocketed post their deal with Cephalon. In this deal BTA have retained full ownership of their molecule. This is a much better deal than big pharma giving them 250m upfront and then royalties to follow.
2) Cash on hand + NPV of BARDA funding is = to almost current market cap.
3) They do not need to do a licencing deal now and comments by management suggest that Daiichi Sankyo might get a similair arrangement for rest of the world as Biota gets in Japan. I was at the meeting in Melbourne and similair comments were made in the webcast today. i.e. 4% royalties on sales.
4) They have 2 royalty paying drugs already. One is relenza which has a better resistance profile than tamiflu but sales have been poor as is inhaled and is not marketed as well as tamiflu. The other is LANI which received the BARDA funding.
5) LANI while not a slamdunk to pass phase III trials in the ROW has a much higher probability than most other drugs as a) it already has passed a less rigorous phase III trial, b) its mechanism of action is a derivative of relenza and relenza passed its trial.

Risks 1) LANI doesn't pass the trial - That would be the worst outcome but is 5 years down the track, by then I would have scaled out of the position.
2) BTA is about the most "retarded" stock I follow on the ASX, it whipsaws up and down for no apparent reason, seems to be the plaything of those with a lot more capital than I have and price always seems to do something different than what I expect. All that frantic selling I did this morning was for naught.


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## suhm (1 April 2011)

Largest year for flu NI antivirals was bird flu season and anti viral stockpile building 2009 USD4bn, biota went to $3 on the back of relenza about a 4% royalty, Peter Cook gave a figure of 1bn that GSK made on relenza in that year, it still has relenza, the drugs have expiry dates so stockpiles if governments wish to have them will have to be repurchased, a 4% royalty on LANI in Japan and at least 50% and potentially 96% for ROW.

Forgot another risk factor is if the prophylaxis trial that DS is doing fails that would be a bad sign, but that would give also give a serious uplift into the value of LANI if it is succesful.

I think at that point BTA would do a cap raise to fund the prophylaxis phase III trial in the ROW if the Japanese study was succesful as it would be able to run concurrently with the treatment trial.


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## suhm (7 April 2011)

TKL - In at 0.282 out at 0.296. Saw it written up in Gampiero in the age quite soon after the article was released, recent cap raise at prices not far off current share price should fund additional drilling in large tenemant, low market cap and illiquid so seemed like it had the potential to spike and enough volume on the buy side to liquidate if need be given the small position size taken.
Not a huge fan of doing these trades as am not comfortable taking a large position so returns are not stellar given the poor rationale for the trade and large trading fees as with comsec who have also charge a transaction fee on top of brokerage. My strike rate for these trades is a lot higher than for my normal trades however always seems like picking up pennies in front of a bulldozer.


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## suhm (15 April 2011)

Sold out of TXN in at 0.76 out at 0.815, should be some SPP selling as they filled all the applications without scaling back. Have been thinking there should be a correction in the market soon so have been taking money off the table to keep some money around for opportunities that crop up.

Bought DRXO at 0.03, strike price 0.15 sept 2013, market cap 35m with a further 80m options on issue,  a very spec stock, zircon play, with a reasonably large proposed production rate about 66ktpa around the same size as the other 2 zircon plays pending a go ahead for building of production and larger than the other stock IDM where zircon is a byproduct. Recent cap raise at 8c should provide an anchor point for the share price in the short term and there is a short term catalyst for a rerating as they have been in discussions with BaoTi the major Chinese consumer of zircon about developing the prospect with both parties aiming to reach a binding heads of agreement by the end of June 2011, capex estimated at about 200m to bring to production. Not actually my favoured zircon play but I like to chase bubbles I can understand and Iluka is most definitely in bubble territory. Not my favoured play as production only mooted for 2014/15 but figured the ops are a good leveraged play for the confirmation of a development plan in the next 3 months, will exit on weakness after agreement signed or if a agreement is not reached with BaoTi.


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## suhm (20 April 2011)

I've been looking at silver stocks for awhile as part of the gold/inflation type theme and have chosen ARDO as my exposure. Large deposit which they have just moved to 100%% ownership of, the deposit is low grade but shallow so does not require much so the strip ratio is reasonable and is open at depth with previous drilling only done to about 60m with the deposit 3km long. 
Reason for investment 1) Silver price has doubled recently and share price has been flat over the period.
2) Strike price of the options have been reduced they are in the money currently and represent huge leverage on any increase in the share price. The strike price was reduced as they sold of a gold deposit and did an in specie distribution of shares in the acquiree.
3) Previous feasibility study was done at silver prices half what they are currently. Potential for a massive resource upgrade simply by accepting a lower cut off grade and from the additional drilling. An update is expected in June before option expiry, likely designed to keep them in the money as they will other.
Initial scoping study was for a 600ktpa plant, with a 1000ktpa plant then modelled and the DFS expected to be completed in Dec11 is for a 1.5Mtpa plant, the timelines have slipped as the DFS was previously expected earlier

I've only really found 4 pure silver plays, this is probably the furtherst from production, but hasn't been rerated like the other as it previously was developing a smallish gold mine cast off from Barrick in tandem with the silver exploration. I wish I had an order in yesterday to mop up the person who dumped his oppies, there was about 900k in the queue which got dumped at the close, was waiting for them to decrease their asking price before buying in. Don't know why they chose to work their order that way, there are only 40m oppies in total and 80m shares so they couldn't have expected that the liquidity could handle that, I probably need a broker so I can place a pyramid order, the difficulties of being a retail investor. Must have needed some cash quick.
Big risk as the share price only has to drop 10% for the oppies to be OTM, but silver price has gone ballistic, which should eventually be reflected in the share price and resource upgrade is expected before option expiry date.
In at average of 0.032.


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## suhm (20 April 2011)

On another note I have been trying to calculate my portfolio return, I have previously just been keeping track of my net equity position, as 1) thought it would be hard to annualise given cashflow out with dividends, equity deposits and withdrawls and 2) The current portfolio has only really started in earnest in Sept 2009.

Its been about 18months since then and I decided to use an IRR to determine my annualised return. This was 69.7%pa, leverage was reasonably high at the beginning which boosted returns.

Biggest contributors to the performance TBR-Still undervalued gold producer but shockingly dodgy management.
RHD- Taken out for a song as management wanted out.
MMS- Solid company operating in an area where margins are fantastic.
FGE- Wish I had been able to pick up more of these early, mining services was the place to be and got smacked in the GFC.

Biggest detractors from performance.
1) Far and away the biggest cause of lost profits is me recycling capital into new ideas. If I was able to hang on to the companies where I didn't see them as cheap but were in decent uptrends and not overly expensive my profits would be much higher. I am moving to macquarie prime as it should allow me to reinvest more of my profits without churning through the portfolio and will also help with the taxation problem.

2) Following the hype - VIL, energy has been one of the sector plays I was following and was trying to get a grip of the sector. Initially was going more with asset plays as did not really, still don't understand exploration upside and production rates, declines and reserve valuations. Blindly followed what the presentations were saying and what management was saying but didn't have the skill set to interprept the BS.

CKK- Same blue sky potential but where are the contracts.

NBS- Just got conned, definitely increased my skills in forensic accounting but was an expensive lesson.

The problems with an IRR for me are how it deals with the equity withdrawls and deposits as I am not sure how it time weights it, most of my equity deposits besides the initial outlay have been over the last couple of months and the time weighting of the deposits and withdrawls doesn't seem to be adequately reflected.

Is there a better method to calculate your return which isn't excessively time consuming?


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## suhm (20 April 2011)

Seems like I have a tendency to buy a bit to quickly, should let the bid come to me instead of bidding up the price.

Big news day for my portfolio HOG out of a trading halt, cap raise for 15m 10k for us plebs.

EXS went into a trading halt and went out of it, sold its main project to Xstrata for 175m, expects to have 220m cash post settlement with its current MC after coming out of the TH 250m with a 100m franked dividend to be paid from profits, I topped up at an average of 0.73. Has a low cost gold mine 60koz net PA but low reserves. A royalty payment and additional tenemants to explore.

To do this I sold out of BTA was in at 1.47 out partially at 1.31, will look to top up once I transfer over to macquarie.

Out of ZGL completely to fund above purchase in at 0.365 out at 0.585. Will look to reenter on a dip.


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## skc (20 April 2011)

suhm said:


> EXS went into a trading halt and went out of it, sold its main project to Xstrata for 175m, expects to have 220m cash post settlement with its current MC after coming out of the TH 250m with a 100m franked dividend to be paid from profits, I topped up at an average of 0.73. Has a low cost gold mine 60koz net PA but low reserves. A royalty payment and additional tenemants to explore.




Thanks for the heads up on EXS. Got a position in at 69.5c. Cash backing 62c so pretty cheap price for all the other assets. Expect the price to go up after they announce the capital return (even though it is flagged now) because that's how irrational the market is.


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## skc (21 April 2011)

skc said:


> Thanks for the heads up on EXS. Got a position in at 69.5c. Cash backing 62c so pretty cheap price for all the other assets. Expect the price to go up after they announce the capital return (even though it is flagged now) because that's how irrational the market is.




May be not that smooth sailing on the sale.



> Anglo-Swiss mining giant Xstrata has moved to pick up two copper tenements from local outfit Exco Resources for $175 million, in a move designed to expand the acreage of its Earnest Henry Mines. However, it looks like one of Exco’s shareholders, Ivanhoe Australia, may yet throw a spanner in the works for Xstrata. Exco has told the market that not all of the $175 million will be shared between shareholders, with a substantial amount put aside for exploration and development work. However, The Australian reports that Ivanhoe – which holds a 22.8 per cent in Exco – has warned that it's all or nothing and the proceeds from the sale should all be paid to investors.




http://www.businessspectator.com.au...0421-G4SG8?OpenDocument&emcontent_wheelsdeals

And here

http://www.businessspectator.com.au...roject-to-Xstrata-for-175m-G4CDB?OpenDocument


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## mr. jeff (21 April 2011)

With regards to playing the EXS sale, I would suggest that you should weigh up the situation carefully. IF they distribute capital, then their SP will fall immediately after to reflect this. This copper asset has been one of the main drivers of EXS and if they sell it they are again a small small gold producer (making good money but short term only) with a pile of cash for exploration and a bit of dirt to drill. The ground of which nothing is known and hasn't returned EXS any great results to speak of so far....
They have struggled with SP action for a while and the idea was that IVA was going to eventually just buy the company entirely and flick off the gold bit...now that looks unlikely and we end up with short term cash. Of course it could go either way, but its no exciting takeover play at the moment.


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## suhm (27 April 2011)

Yeah EXS hasn't really played out as I saw it would, same as BTA, down a ridiculous amount today. Looking like it might attempt to close the gap from the spike up following the BARDA announcement, if it does I would look to load back up as the pricing would then be quite irrational.

From the statement from Ivanhoe they were trying to split EXS between in and Xstrata so that Xstrata would get the copper deposit next to its Ernst Henry mine which it would value much higher as it has spare milling capacity <10km away and that Ivanhoe would get the rest of the exploration tenaments. Ivanhoe probably still wants the exploration ground and wants EXS to pay out all of the cash it recieves from Xstrata as 1) It would give it money to take out EXS, 2) Would decrease the amount of money it would have to raise to take out EXS, 3) The premium offered would appear to be larger as a smaller percentage of the company would be cash backed.

Purchased more ARDO today at 0.051 as the time value of the options were negative. The options were in the money 0.067 at trade time due to the spike up today in ARD.


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## suhm (28 May 2011)

Additional HOG bought at 0.325, reserve report should be out soon.

Update on stock holdings,

ARDO - Looks like this one may not work out was a short term play based on silver price and expected news flow. Silver price is coming back up but the recent capital raising, not sure why they did that was expecting them to maybe underwrite the option expiry not raise 1.5m has meant I lost most of my profit on this. Just waiting for the drill results and mettullargical studies which were anticipated to be released before option expiry to help get them across the line.

BTA- Think I will have to wait until start of next year when the SHIELD study for use of INAVIR as flu prophylaxis for the next catalyst unless they sign an INAVIR ROW license in the interim. They need to clarify the relationship with Daiichi Sankyo for the ROW, they have said that they believe that the agreement would be similair to the deal they have with DS in Japan but in reverse which would be fantastic, but market does not seem to believe that.

DRA- Seems like the increase in SP was someone spiking it up to distribute more stock, keeping this as my gold play, not much in the way of production increases for 2-3 years but solid free cashflow at present.

DRXO- Waiting to see what sort of agreement they get with BaoTi to develop their heavy mineral deposit, no idea at all what the result will be but management have a lot of skin in the game and timeline is supposed to be before june 30.

EXS- Waiting for sale of the cloncurry mine to go through, share price seems to be picking up and confirmation of the sale should see a further improvement.

HOG- Another one of my stocks to do a cap raising which was unexpected given they are getting quite siginificant amounts of revenue at present. Good news is that the money was to drill a couple more wells in the current resource which should see revenue increase dramatically and the size of the reserve increase with the update given they think that it is worth drilling a couple more wells to tap the reserve. They are also building a gas plant as 3rd party processing is costing them 17% of revenue which should see a further uplift, notably the gas plant will be rated at 30mmcf/d whereas they are currently pumping about 7 a day at present which gives an indication about future revenue.
Big uplift will be from the Chets well as this would give them a second field if succesful. Selldown will be quite bad if it fails though.

IDM- Plant is starting its initial processing and waiting for it to ramp up. Unsure what sort of price it will get for it spherichrome as a zircon replacement but they were projecting US 500 when zircon was about US 700-900, zircon is a lot higher than that now but until the revenue breakdown comes through unsure what the profit will be and there are all the problems with plant commisioning to go through.

TAP- Seems to be having a good year with its drilling now 2 for 2 with the big Zola gas field, almost large enough for a single LNG train and near the pipeline to the proposed whatsone project and apache already an equity partner there. They have also found some oil near their HJV. Share price however has done diddly. Perhaps there is some uncerntainty regarding the alcoa suit against TAP for US 158m, whilst a big number Alcoa is suing 2 suppliers for the sum in the explosion at Varanus Island and TAP is a 12.2% equity partner in 1 of those joint ventures but the east spar JV was less affected. It may however lead to further suits if succesful and I guess will need for that to be resolved for an uplift in value.

UOS- Good increase in SP, discount to NTA thus decreasing as with the increase in the AUSD, management is still buying back shares so probably still see it as undervalued. Very opaque balance sheet though.


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## suhm (6 June 2011)

Two new positions

ROS- Red october has an option to acquire a copper tenament in Kazackhstan, apparently has had about 700 holes drilled in there and russian c1 and c2 reserves, figures sourced are from 200m to 1m tonnes copper, wide range but a bit expensive at low end and cheap at high end, just had a small IPO and light on cash to acquire the project so only took a small position as was expecting a cap raise.

Cap raise came in today but also says that they are going to acquire a project, not sure if that means they are exercising their option, wouldn't want it to be a different reason.
In at 0.34

FAR- Drilling a large wildcat well, 440m barrel prospect, has 100% WI licenses next to the Kora prospect and has a reciprocal farm in agreement with Ophir the operator for the Kora prospect pending the result of the Kora drill, Net result would be about 35m boe if well is succesful and would mean that the other acreage would become extremely valuable. High risk play but good short term upside with spud in the next few weeks.
In at 0.10


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## suhm (9 June 2011)

In for some more pain with CKK in at 0.157, have just announced that they have signed a letter of intent for use of their drill rig in the oil and gas industry, small contract 1-2m but small market cap 30m. Will stay in if they sign it as a contract and out again if not or if large price spike.

Forgot to add that I subscribed to IDM rights issue so more at 0.20 and free oppies, the secondary mineral sand plays have been having a run since the price announcement from Illuka about large price increases for zircon.


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## suhm (15 June 2011)

Exited ARDO completely in at average of 0.032 out at average of 0.043. Played this one very poorly, got greedy and over extended with my purchase at 0.05 at that point I had about 3% of the options outstanding and had to liquidate a bit post the capital raising which came out of left field for me as I had no hope of exercising all of them. It only raised 1/4 of what they will get from option expiry if they underwrote that which should have been cheaper option to do given the options were in the money but knocked out all the profit from what was a short term trade for me. Worse of all I was overseas at the time so was unable to act on the news appropriately.
In the end it was a D&D reccomendation that got me out with a decent profit, definitely one trade that will change how I operate in the future.


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## danbradster (16 June 2011)

I sent this to suhm by PM, but I'll make it public here.

My holdings:
ALB - Low market cap for a potentially profitable and significant producer.  The next production update will be an important one.
AMA - Sitting on a big capital gain waiting for ex-CGT (might sell).  Unsure if this one is still good value or not, I have so see a quarterly to decide.
AOH - Like this one, tripled my holding in the Japan disaster...now is still a fairly good price.
CNH - Maybe bankrupt! Goodbye $5000.  They were building a second steel mill to quadruple their production, now they are in court and not paying the contractors.  Insider trading before the suspension of trading, then very little news at all...just months of suspended trading.
CUP - Good yield, small company.
GXY - Crazy downtrend, but could be good in the future...
III - Strong plans, will do a capital raising at $0.075.  Will be entering the capital raising.
KCN - Like this one, good value and projects ramping up and coming online.
LYC - Sitting on a big capital gain, it has both risk and upside.
MRE - Simple to understand, many minor initiatives in the works and a strong yield.
OGC - Good value and projects ramping up and coming online.
PBP - If the news turns positive this one will more than double...
PLA - Seems cheap...
RFG - Love this one, hoping for the SP to fall so I can top up more. 6%+ fully franked dividend yield, projected growth, seemingly safe...
TCQ - Sitting on a big capital gain, limited upside from here.

My resource shares are looking a bit too red after the past couple of months, but I imagine they will turn green in time.  I have a small amount of leverage, like 20%.

Now only like 25% of my portfolio pays dividends, but I intend to move that up towards 50% in the next 12 months.  Waiting for the 12 month ex-CGT date is a slow wait for me...like AOH was up 30% just a month after purchase (since I topped up in the Japan disaster), but I can't sell for 11 months without paying double tax...

Also I put 2.5% of my portfolio value into my own new business venture.  Higher risk but higher potential than the share market, I think.  It's a shipment of products from China, 200 products, I'll run an Aussie targeted ecommerce website.  I'm doing further business/marketing planning now while I wait 1 month for the products to arrive through sea freight.


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## suhm (27 June 2011)

Capital preservation time and a note to self not to fall in love with stocks. 

Made a mistake with CKK, recognised it basically the day after I bought it, the contract wasn't something ready to go but was for later this year, instead of doing what I should have and sold I held to await further contracts to drill water bore holes. In at 0.157 out at 0.11.

More bad news today surrounding BTA, offloaded due to release of preliminary results for LANI prophylaxis. This was supposed to be the catalyst I was waiting for and was expecting results out in March or so next year. Preliminary shows it probably does work as a prophylaxis as the risk reduction was half vs placebo, but they were modelling the trial based on a 70% reduction which means that they may not be powered enough to reach significance and will need to extend the SHIELD trial for another flu season. In at 1.46 out at 0.92.

Confessing I still like BTA as a stock given the price at 0.92 it is now worth less than the grant it is recieving from the US government to progress LANI, it also has plenty of cash, relenza and LANI earning royalties and a pipeline of drugs but unless something comes out of left field there is nothing left in 2011 that will act as a catalyst and it is most definitely in a downtrend. Will pick the shares back up when it starts to go back into an uptrend or if it gets to cash backing, which at the rate it is going down might not be that long.


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## exberliner1 (27 June 2011)

i am totally overweight in TRH - bought in March for an average of 39.7c and now 53c having touched 90c a month or so back.

Mkt cap will be around $35mn after the recent CR of which close to $20mn is in cash or RAD shares.

TRH is sitting on approx 3bn tonnes of Sylvinite yielding about 25% potash on average with drilling to start on 4 holes in August to firm up a JORC. Historic drilling records are available. The resource sits in Utah, USA, so no country / political risk.

Only 67mn shares in issue after the CR.

EV is only around $18mn

--

I also hold MWN - Fe play in SA yielding 69.9% Fe after benefication.

Only 30mn shares in issue at 10c each for an EV of just $100k.

These 2 are the majority of my portfolio's risk capital.

I am also free carried in MNM & EVG

--

I fully expect all 4 to be major gainers in H2 2011 whatever happens in the wider market.

EB


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## suhm (5 July 2011)

New position STS structural systems, mining services company with forecast NPAT of 4-4.5m including loss of 5m from discontinued operations, should finally stop the losses as contracts are nearly all fulfilled. PE of around 10, little debt, mining services income has been improving, forward PE should be around 5, less if they continue to increase income levels. In at 0.745.


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## skc (5 July 2011)

suhm said:


> New position STS structural systems, mining services company with forecast NPAT of 4-4.5m including loss of 5m from discontinued operations, should finally stop the losses as contracts are nearly all fulfilled. PE of around 10, little debt, mining services income has been improving, forward PE should be around 5, less if they continue to increase income levels. In at 0.745.




Saw the announcement today but didn't pull the trigger. Their P/L looks OK and like you say forward PE _could be _as low as 5. But there were several things I didn't like.

1. What constitute discountinued operation? In H2 FY09/10 they have loss from discountinued operation of $4.4m. Last half it was $2.3m. And now the update says it's $5m for the full year, implying H2 was ~$2.7m. So it's bleeding at the same rate, but it was discontinued 18 months ago? Where is the clarity around when it will be truely discontinued?!

2. Their cashflow numbers from the half year was pretty terrible... op cash flow was -$850K. It's so bad that they claim 'not needing to draw down bank overdraft' as a positive achievement on the cash flow side in today's announcement.

3. Their balance sheet is also pretty weak. Cash minus bank overdraft is a whopping $500K (less than my trading account ). Debt ~$14m. And heaps of accounts receivable ($54m!). Considering their annual revenue is only $115m, they have >45% tied up in working capital. What's their payment term? Half a year?! They need to hire a receivables manager nice and quick.

4. With the shape of the balance sheet I see little prospect of a dividend. It will be imprudent to issue a dividend. A cancelled dividend will likely see the share price fall, while an issued dividend will further weaken the balance sheet. No win either way.

May be more will be revealed in the full year report but with the information at hand I couldn't quite be sure STS is a bargain. I will look out for them and see if they can pull out a good positive cash flow half year for H1 FY12.


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## suhm (6 July 2011)

As you said, many things in this stock which have very little visibility. The discontinued operations just seem to keep popping up and from the statement it appears this won't be the last result where they will be popping up.

Cashflow was a problem in the half year but as you say they are no longer using the overdraft (they don't have other bank debt) but the cashflow was strong in the previous year and a decrease in trade receivables would solve that problem. My thought was that some of this must be related to their discontinued operations as the contract for these seem to never end. At this stage the market cap is is less than the trade receivables so bringing it down to the amount of trade payables would release about a 1/3 of the market cap in cash. Maybe they need to get Mick Gatto to pay their customers a visit.

Profit in the previous year was inflated by a tax benefit, that is clearly unsustainable and that appears to have reversed in this set of results without unduly affecting the underlying number.

Not sure whether it will be a bargain at this stage, my gut says yes but my head doesn't have all the figures yet as about 60m for continuing operations would be quite cheap which gives you a value of around -10m for discontinued operations which gives you a couple of years at the current run rate.

Will review my position when the annual report comes out.


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## skc (6 July 2011)

suhm said:


> Profit in the previous year was inflated by a tax benefit, that is clearly unsustainable and that appears to have reversed in this set of results without unduly affecting the underlying number.
> 
> Not sure whether it will be a bargain at this stage, my gut says yes but my head doesn't have all the figures yet as about 60m for continuing operations would be quite cheap which gives you a value of around -10m for discontinued operations which gives you a couple of years at the current run rate.
> 
> Will review my position when the annual report comes out.




Definitely positioning as a turnaround story. Figures don't support that yet but a similar story over at SIP see them free up their balance sheet with much improved customer terms and sent the share price up 60%...



suhm said:


> Maybe they need to get Mick Gatto to pay their customers a visit.




My thoughts exactly


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## suhm (19 July 2011)

Some TAP sold for 0.83, have to do some home renos, will probably buy back when market bottoms


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## suhm (22 July 2011)

More FAR bought at 0.084, has been going down coming into terminal depth for the KORA drill, POS is supposed to be >50%.


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## suhm (28 July 2011)

Cacophany of errors recently, will need to reasses what I am doing to learn from my errors. FAR sold out of at 0.046, no oil in KORA, POS was supposed >50% which given upside was 2-4 time the sp vs downside of 50%, i thought that it was a fair play especially since it was nearly double the share price I had bought it for pre-spud.

Oil and gas has really not been a good play for me, quite a few of my big losses have come from them but was bullish for the energy sector.


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## skc (28 July 2011)

suhm said:


> Cacophany of errors recently, will need to reasses what I am doing to learn from my errors. FAR sold out of at 0.046, no oil in KORA, POS was supposed >50% which given upside was 2-4 time the sp vs downside of 50%, i thought that it was a fair play especially since it was nearly double the share price I had bought it for pre-spud.
> 
> Oil and gas has really not been a good play for me, quite a few of my big losses have come from them but was bullish for the energy sector.




I don't know anything about FAR but IF the risk/reward was truely as you say then you will take that punt every time. An individual loss means very little. You do however need to make sure you have the right position size so you stay in the game to realise the edge. The more important question was if your 50% chance was the right number...


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## danbradster (29 July 2011)

Bought CUP: only 33% dividend payout ratio, but still a solid 6% fully franked dividend yield.  Most businesses in their portfolio are >10 years old and in the safe (I guess) financial sevices industry.

RFG: Had good news since buying it and the SP is still low.  They are buying out one of their NZ coffee suppliers for $3.2m, which will be earnings accretive.  50% dividend payout ratio and 6.5% fully franked dividend yield.

PLA: Had bad news, then the news was fixed within 2 days. SP is 20% lower because of it.  Can't say the company feels like one of my safer ones though...  Still, this could be good value.

LYC: Seems to be progressing well.

AOH: Had a nice resource upgrade, time is running out on Xstrata's option over their roseby resource.  Comes due in 10-11 months, I think.

III: Did their capital raising, they are very quickly working to get the tungsten plant online.

MRE: Looking damn cheap and ripe for a Glencore takeover.  Glencore is buying on market.....  If I can come up with some money, I might but more of this.  Now my money is going into advertising rather than shares though.


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## suhm (5 August 2011)

Absolutely smashed in the open this morning down 7%, a bit sickening to be honest, should have packed up my bags and sat out this market, hindsight is always 20/20. 

Low volumes though for the large downard movement, no one wants to buy and I don't blame them, who knows where this is ending up. Indicator of the low volume, a $6k sell order dropped the sp of one of my stocks by 15% and market cap by 17mil.

I think I will wait for a bit more stability in the market before topping up, some of the large caps are starting to look interesting, but the US probably needs to drop a bit more before there is an upswing.


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## danbradster (5 August 2011)

8.4% for me.  I only wish I had more cash available for buying.  The volume thing is definitely true.

One of my safe ones is down 12% on $30k volume.  They're in the personal accounting industry...which should be resilient in a GFC.  I am attempting to buy more of this, but there's low volume.


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## suhm (5 August 2011)

I've been looking at shorting the index as there are less problems with gap ups which can be problematic when shorting individual shares to net off the beta for my long positions when i'm market neutral or negative but sadly hadn't really gotten comfortable with the process as yet or how the products work and the variables involved.

It didn't really feel like capitulation selling today more like ppl offloading to trim holdings after seeing the carnage overnight, there should be some margin calls come monday with many 10-25% downard moves today in individual stocks and also given the downtrend the past coulpe of weeks.

It pretty much has gone through the previous support levels so wouldn't be surprised if we saw another -20-25% back to GFC levels at that sort of stage the banks would be at P/B ratio of 0.5-0.6 so I would probably be tempted to buy some.

I seem to have timing somewhat right in that I reduce my net position as the index has been moving down the channel and increase it when it is going up but I prefer to hedge my bets a bit.


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## suhm (9 August 2011)

Sold out of sts at the open at 0.675 in at 0.745, willing to take the loss as catalyst is not for 6-12 months and these small stocks can just implode without respect to value, I think FGE went down to a forward PE of 1, was interested in getting some extra IDM as it had gone down to 0.155 from 0.19 but only volume was at 0.17 and thought the index has more to go down.

I've also been trying to exit DRXO, Baoti doesn't seem to be coming to the ball but there isn't enough volume without me dragging the issue down and with the heads tanking the options are looking expensive.

A bit shocked coming back to work to see the red erased, don't think I've seen this amount of volatility before, even in the last downturn. IDM for example was -18% down and then ended up 16%. I've seen a 34% range before but from down to up in the same day, I mean . I'm not really able to trade that and you don't really see that in a secular bull market.

I have a feeling this up move was short covering after sales to hit margin calls, but does also feel closer to capitulation selling than the other days, I see this grinding down further at a slower pace baring something else out of left field.


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## drworm (9 August 2011)

Very interesting thread suhm, thanks for sharing.

Quite a few of the stocks mentioned (FGE, CCV, MMS) I have also owned in the past, and being quite a concentrated investor this comes as somewhat of a surprise. I guess our thinking might be alike in some respects.

I'm still holding STS and have been for nearly a year now, confident a catalyst is only 6 month away.

A couple of ideas that might be worth your time:

CCP - Debt collections. Ran into trouble overextending itself a few years ago, but rebounding hard. Once highly leveraged, now probably only a year away from being debt-free with no cap raising in that period. P/E a bit over 8 for FY11, decent ROE, conservative depreciation policy, decent divi, predictable and has a habit of exceeding their own guidances.

MCE - Manufactures floaties for offshore oil and gas. Growing, fantastic ROE, P/E around 10 for FY11.


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## suhm (10 August 2011)

Cheers, I have looked at those but were on the expensive side at the time, they would be core type holdings I have when markets are going up, the other plays are more news event based holdings. IT seems like its geting to the point where I will buy those back again.


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## suhm (31 August 2011)

Update on holdings

BTA- Share price creeping up again, bird flu is in the news again. It's a bit silly, it goes up on hysteria but down on the BARDA grant.

DRA- AUSD POG going through the roof, but they will struggle to make much money this year whilst they dig the decline in svartiladen and are exploring like crazy at kusamo, 32m at 45g/t is not to shabby. They will need to build a mill there so that will use up their free cashflow and cash reserves. THey also entered into a silly hedging program which is now out of the money

DRX/DRXO- Should have sold out of the options when they were getting expensive and bought DRX. Still waiting for Baoti to come to the party.

EXS- This thing doesn't seem like it will move until they pay out its cash. At the moment probably has -ve EV for its White dam gold mine but has poor reserves there and large exploration ground.

HOG- Sorichyka choke was increased because flow rates are declining due to decreased pressure. Hopefully not an ominous sign for the future. Waiting for the chets well to hit terminal depth.

IDM- Starting production of chromite, zircon and other heavy minerals. Zircon prices looking at illuka are going up but not sure of the pricing for its spherichrome.

ROS- This trading halt has been going on forever. Not sure what is going here. Hyperactive since it was listed but haven't heard a peep out of them for awhile. Picked up a silver project with massive grades and an option on a copper project.

TAP - 2 for 2 this year at zola and ficune 1 finding gas and oil respectively which should come online in the next few years. Low reserves otherwise but will be booking manora reserves soon. Not much production until 2 yrs time with nearside upside from WA-351P drilling and resolution of its lawsuit because of the gas explosion operated by APACHE. They actually found some hydrocarbons for once and the SP has gone down. Not sure what will cause this to go up.

UOS- Share price about 1/2 of NTA and 1/3 of NTA is cash. The rest is property held for sale and rental properties but the REIT that makes up a large proportion of its NTA sp has gone down.


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## suhm (24 September 2011)

New position BSA at 0.20. Does maintenance contracting work, large amount of revenue for its market cap about 9x. PE of about 5, was net cash but currently no net debt as it bought a new company and price to cashflow of <2. Growth prospects uncertain though and its an uncertain market.


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## robusta (24 September 2011)

suhm said:


> New position BSA at 0.20. Does maintenance contracting work, large amount of revenue for its market cap about 9x. PE of about 5, was net cash but currently no net debt as it bought a new company and price to cashflow of <2. Growth prospects uncertain though and its an uncertain market.




Good looking company suhm, I will definately put it on my watch list. I like the fact you can buy well below book value, is there much goodwill on the books?


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## suhm (24 September 2011)

There is a fair bit of goodwill, actually more than its current mc of it on the balance sheet. Franking credits are another kicker though, it has 1/3 of its market cap worth of it in the kitty and seems to be willing to use spare cash generated to pay out dividends now that it has paid off its debt.

I still see the market going down maybe another 20% and I'm already in the red with BSA and probably expect it to continue doing so because 2 big holders are selling out, the current price range seemed like a temporary plateau though and was one of the better priced oppurtunities i have found.


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## suhm (1 November 2011)

Update on positions

BSA- Not much action here just trending sideways.

BTA- Still believe in its products for the long term and any flu outbreak would see this soar. A bit disappointing to see that there was no sales of Inavir in the last quarter which doesn't exactly bode well and is well below what DS is budgeting for Inavir sales forecasts.

DRA- Decent exploration results but unsure of the environmental impact of their expansion project as there appears to be cobalt, uranium and rare earths in the area which could complicate processing

DRX/DRXO an entry at this sort of level would have made a decent punt on increasing viability of the project with increasing zircon prices and increase in the NPV but Baoti still not coming to the party.

EXS- Soul Patt has taken up the overhang from overseas investors and now trending up cum dividend sp 70c and 28c franked div and 10c cap return should see some dividend strippers come in. Will sell half in my higher taxed holding environement depending on sp at the time and hold the other half ex div.

HOG- Seriously must win the award for slowest drillers on the ASX. TD will probably be reached in Decemeber now and the cost of their gas plant is now 7m instead of 2m. Gotta be disappointed with management for getting their budget off by that much when even I thought the initial estimate was to low and my knowledge of how to build gas plants is 0.

IDM- Seems they are having problems with the start up of their processing plant as the grades of heavy minerals are much higher than expected. Its a good problem to have in the future if they can overcome these problems but it is delaying cashflow at present, will probably look to buy more when i get the proceeds from EXS and when the commissioning looks like it has resolved the production problems.

ROS- Blue sky stories always seem to tempt me and I seem to get burnt every time, exception would be PBT but if I held that one I would have been at square one anyway. Small position but still hurts. Only has enough cash left for 1 quarter after raising 5 mil in a cap raise this year, blown it all by overreaching.

TAP - Exploration success doesnt seem to have been the catalyst for a price rise i guess legal uncertainty is still weighing on it. That will continue for years so hopefully they are able to flog off their Zola discovery which is what the press seems to be reporting and then I can exit on the upswing.

UOS- Not much action here either still decent value but catalyst for an upswing are unknown, doing a capital return and with the DRP and share bubyback the majority holders the family that runs it is slowly creeping into the position to compulsorily acquire the rest of the shares.


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## suhm (8 December 2011)

Extra IDM bought today at 0.15, not much stock available. Rationale is the large price increase for high iron annouced by Illuka >$1000 USD a tonne. Operating costs are basically covered by the zircon output leaving other minerals as gross margin.
A lot of the initial production of spherichrome is contracted at $500USD a tonne so profit won't be great initially but that pricing was when zircon was $700USD and it is billed as a zircon replacement in foundry applications and you are now looking at prices >$2000USD.
The high iron output is more for foundry rather than pigment as the presentation says but price increases of 80-90% bode well for pricing for IDM.
Still looking at recycling my EXS payments into this or HOG if the find oil in chets but market outlook in general still uncertain so portfolio is still pretty much risk off to watch and wait.


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## skc (9 December 2011)

suhm said:


> Extra IDM bought today at 0.15, not much stock available. Rationale is the large price increase for high iron annouced by Illuka >$1000 USD a tonne. Operating costs are basically covered by the zircon output leaving other minerals as gross margin.
> A lot of the initial production of spherichrome is contracted at $500USD a tonne so profit won't be great initially but that pricing was when zircon was $700USD and it is billed as a zircon replacement in foundry applications and you are now looking at prices >$2000USD.
> The high iron output is more for foundry rather than pigment as the presentation says but price increases of 80-90% bode well for pricing for IDM.




How do you view their cash situation? On my back of envelope numbers, if cash revenue is not coming in they will have to do a capital raising soon...


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## suhm (9 December 2011)

Hehe, problem with this one is that if you buy you will move the market, I was the only person to buy yesterday and today's purchase was for even less shares and it moved the market by 13%, so not all that much interest from institutions, macquarie and sentinent between them hold nearly half the company, with resource finance and management its nearly 2/3. The free float is minimal.

I have most of my fill but had wanted to wait for cashflow numbers to come through and spherichrome pricing for unallocated tonnage to see what sort of revenue figures they would have. A few to many blanks at the moment. The Illuka announcement made me pull the trigger early.

The last cap raise was done at a minimal discount to the sp as macquarie and sentinent took up their full subscription. I actually tried to get an oversubscription at the time but was refused as they said the underwriter wished to take up oversubscriptions. Go figure, thought the company was supposed to look after shareholders first so there is unlikely to be a large discount if a cap raise is done.

I think they should get over the line without a cap raise as they have stockpiled product so that they can ensure consistent supply to their customers and thus far have not had any revenue. They might not though if there is a hiccup or customers are late in paying debts, they could get trade finance in the interim though.


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## skc (9 December 2011)

suhm said:


> Hehe, problem with this one is that if you buy you will move the market, I was the only person to buy yesterday and today's purchase was for even less shares and it moved the market by 13%, so not all that much interest from institutions, macquarie and sentinent between them hold nearly half the company, with resource finance and management its nearly 2/3. The free float is minimal.
> 
> I have most of my fill but had wanted to wait for cashflow numbers to come through and spherichrome pricing for unallocated tonnage to see what sort of revenue figures they would have. A few to many blanks at the moment. The Illuka announcement made me pull the trigger early.
> 
> ...




This is the most critical quarter for the future of the company imo. Because the SpheriChrom is a new product, it is going to be disruptive to the foundary operators. If they get some larger ones on board as early adopters others are more likely to follow suit. Then there's operational issues with commissioning which is quite difficult for outsiders to judge how that is coming along.

Sort out commissioning, get some traction on sales and deliver a quarter of positive cashflow and they have a great business. 

Otherwise, they will need to fund the gap for another quarter or two. Hopefully that means a $3-5m placement with the two large holders without too much discount. 

Too illiquid for me in the current climate - can't buy meaningful position and certainly can't sell them either. But the liquidity will return if the good news eventuate... 

Watching with interest.


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## suhm (12 December 2011)

No kidding about the lack of liquidity, IDM down today 8.8% on the back of a $1600 trade.

Very good info out from a trade journal, alerted to it by a poster on the other forum.
http://www.foundrymag.com/Classes/Article/ArticleDraw.aspx?CID=88253&Re

Full production not expected until Feburary as they need extra equipment to help with the seperation of the product.

Not sure if it was paid for yet as there was capital expenditure in the last quarterly but not sure what equipment that relates to. I also don't quite remember the timeline from when the commissioning started and the previous cap raise occured and whether it had any relation to that.

Chances of a cap raise are much higher if this equipment has not already been sourced and paid for in a previous quarterly.

I will probably sit back and wait for the next quarterly to see revenue numbers and unless there is some silly flash crash and I can pick some at circa 10c at which point I would probably pick up another chunk to add to the rest.

If there is a cap raise that should see me at a full allocation, hopefully it would be a spp as then I could get a much larger percentage, but would not be a good look given they could have easily raised enough in their previous cap raise but refused further dilution which means their budgeting skills are defective as they would have eaten through their budgeted figures and the contigency in the budget allocation.


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## suhm (16 December 2011)

New position MXI, in at 0.39.

Rationale new 52 week high on the back of a profit upgrade to 5-6m for the first half with a market cap of around 65m. Orders up strongly in the first half and cashflow greater than profit. Will comment more definitively later.


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## skc (16 December 2011)

suhm said:


> New position MXI, in at 0.39.
> 
> Rationale new 52 week high on the back of a profit upgrade to 5-6m for the first half with a market cap of around 65m. Orders up strongly in the first half and cashflow greater than profit. Will comment more definitively later.




Got in at 37c 

The chart's looking pretty good. It's a turn around story but their half-on-half variations can be pretty dramatic. Will look to offload half at mid-high 40s.


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## suhm (16 December 2011)

lol the benefits of trading being your primary job.


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## skc (16 December 2011)

suhm said:


> lol the benefits of trading being your primary job.




That's why trading is a competition. There were not many shares on offer at 37c.

Now I better go actually read up on MXI's financials.


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## suhm (16 December 2011)

More of a cigarette butt but was looking for mid 50s for an exit


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## suhm (3 January 2012)

Update on positions.

Not much has changed since my last update 2 months ago, have only added MXI, one should have bought is TRF, up 50% on announcement that IFE's iron ore project was getting up but is an asset play based on an iron ore project which is not yet producing. I don't really like the iron ore field long term and prefer things that are in production. BAU also looking good asset wise given trading at half cash backing but is in the bauxite business which I don't like. They should just sell off the licenses and give back the money for a 100% gain but then who is going to pay their wages. Problem I have found with asset plays is unless they get taken over management just keeps wasting money until the value of the company meets its price.

Still thinking the market should have another leg down as there has been no resolution to the US and EU debt issues and I don't think they can muddle along like Japan has for more than a decade.

I only make real money from about 20% of my trades so I am often wrong or only partially correct.

Current positions.

BTA- Having a nice uptick. Consistent buying by East Hill supporting the share price. Had been hoping to pick up some in feb or early march after recycling my drx/drxo money before phase2b results were out in the 70s but it is back up in the 80s. Hopefully there is a down tick in the market so I can pick up a few more of these but the chart is looking healthier.

BSA- Still plodding along celeste fund management is <5% now but should still have stock to sell from 9.52%

DRA- Its expansion gold project in Kussamo is starting to look a bit shakier approval wise due to extra possibly radioactive mineralisation, company doesn't seem to concerned but should return to having good margins soon as has been expensing stripping costs rather than capitalising them.

DRX/DRXO- Seriously disappointed with these guys, PFS not due out now until feb 2012, with BFS by end of 2012, timeline is pushing out and BaoTi still have not come to the party. Management's commentary is still positive, will await the BFS results.

EXS- Played this one all wrong, drill results unremarkable and has tanked post distribution of money. Is self sustaining in its drill program after royalties and has decent territory and a quite high grade deposit so will hold for the moment and after the distribution is not that large a position.

HOG - Disappointment here again, have very poor form in the oil and gas industry. Had thought that energy was the place to be going forward. The oil layer was wet so they decided to push onto b24/25 to look for gas, previous flow rates have been low in the surrounding area. Trading at less than NPV of its sorochynchka production so will continue to hold

IDM - Waiting for production and revenue numbers, cash was getting low, they have just got another 1m USD with their major shareholders Macquarie and Sentinet cashing in some ITM options. They expire April 2014 so I suspect management were being prudent by asking for some extra support until they became cashflow positive.

MXI - Hasn't gone anywhere since its profit upgrade. Will look to see how sustainable it is or if revenue and profitably can increase.

ROS- Waiting to take my cap loss still, management probably shopping around the corporate shell company to see if anyone wants it.

TAP- Poor for in oil and gas continues here 2 for 2 in 2011 drill wise and still lost money, here is hoping for more success in WA-351P with BHP drilling soon so that the share price can go down further. Waiting for resolution of all the legal action and is probably what is keeping the sp down. Apache looks like it will win the Burrup bid which would see gas prices increase from $1-$5 so would increase profitability of the HJV markedly.

UOS - Cash backing has decreased post the distribution. NPAT this year should be around 100-120m AUSD given guidance by the company. I don't know how much of this will relate to property revaluations or to its rental book so will need to wait for the report. Market cap is 400m, should have 240m in cash left and 480m investment property, 190m inventory with 130m debt from their last half yearly, not sure how their REIT investment is accounted for as they own 2/3 of it still and investment in assoiciate is only 5.7m given they sold 1/3 of it for 330m AUSD.

Back of the envolope gives 240+480+190-130 = 780m vs market 400m, will probably buy more when annual report comes out. Again managment is dodgy here, it looks like a shell holding company with a buyback and simultaneous DRP at 5% discount to VWAP. Sounds sill ay but management participates in the DRP and have a very large percentage of the shareholding so issue about 20m shares a year mostly to themselves and buy back 5m a year using the companies money. They put Kerry Stokes to shame. They should reach 90% soon and be able to mop up shareholders soon, especially if they use their capital return money to do so and hopefully if it does happen it will be somewhere closer to NTA.


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## suhm (6 January 2012)

New position GUN in at 0.191

Announced yesterday that it had signed an agreement for the plans of a natural gas pipeline to its mineral sands deposit in regards to design, construction and costings. Other updates included with regards to early stage work for development of the deposit.

I am a fan of the zircon space due to the large rise in cost and because it has been exponential there has been very few projects that are ready to go live. GUN was basically the only mineral deposit left unfunded after MDL solved its funding problem.

Is in talks with an East asian company farming into the project (40% stake is what was mooted previously) and paying a promote (valuing the project at more than GUN's current market cap). Debt funding is supposed to cover half of the capital cost 180m and between the promote and the debt funding the subsequent capital raising is supposed to be small and doable.

Feburary is supposed to be the deadline for the term sheet to be made binding. Still a risk that they don't come to the party like BaoTi has done to me in DRX but GUN has already done a DFS and with ILU saying they can't supply their current customers with all the zircon they require and very little new supply or product replacement.

Has a tenament near olympic dam which has found some copper deposits. Some small ones they are trying to offload for a profit share to smaller operators and Xstrata has farmed in earning 75% for 10m worth of exploration about a 1/3 of that has been spent to date, no hits that are that exciting at present. Previously they were more interested in this when the copper price was higher and zircon price much lower.

Cash is minimal about 2m but so is cash burn, they have basically been in a holding pattern for a year waiting for someone to fund the project with a promote and not take a large equity position in the company. Minimal amount of options on issue all at higher strike prices.

Probably needs to go 21c to look better technically.


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## suhm (9 January 2012)

Exited DRX in at .115 out at 0.091.

DRXO looks like a better bet than DRX at current price. Timeline is slipping with PFS not yet completed and with exposure to GUN as well now have a fairly heavy weighting towards mineral sands.

Themes for 2012.

Had previously thought that energy would be the place to be given onset of peak oil but with tight gas and coal seam gas coming onstream and increasing efficency energy constraints might not be that great. I also have a shocking record in my oil and gas industry investments and probably should stay well away. I will look to unload positions in the future and new investments will have a much higher barrier to entry.

Junior mineral sand plays and zircon replacement. Illuka was a strong performer and there is little new zircon and associated mineral sand deposits coming on stream, I like the economics of this field and is reflected in the stocks I currently hold.

Biotech- This is an area of competence for me and probably where I have had the greatest success other than obvious low pe, high roe, high sustainable growth companies but they have been few and far between. There has been a decade long biotech slump and with australian biotech companies typically floated early in their development they are only starting to reach their value inflection points. I.e. bringing products to market.


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## skc (9 January 2012)

suhm said:


> Biotech- *This is an area of competence for me *and probably where I have had the greatest success other than obvious low pe, high roe, high sustainable growth companies but they have been few and far between. There has been a decade long biotech slump and with australian biotech companies typically floated early in their development they are only starting to reach their value inflection points. I.e. bringing products to market.




Have u looked at QRX and its recent deal?


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## suhm (9 January 2012)

I have looked at it previously but decided against it. Seems like a pretty large market cap for what it has. It is pretty close to market and got a pretty good licensing deal from actavis. The product itself i'm not to sure about. Practice might be different in the EU and US but in Australia we generally don't give combination opiods. Morphine and oxycodone are different molecules but both are opiod derivatives.

It would require a change of practice for clinicians to prescribe the moxduo and since they can do this currently and don't it seemed like a poor proposition. 

Again the US and EU markets are bigger so it is their clinical practice which is more important than what happens in Australia.

Their pricing.
Initial price: $112 based on 4 doses per day and 14 days of therapy

(its morphine and oxycodone and oxycodone is off patent I think) (PBS cost $42 + $46 = $88 so is definitely more expensive for equivalent seperate pills) This isn't even the cost of it to the government should be less and a person shouldn't be taking regular breakthrough analgesia you should increase their background analgesia to adjust for the amount of breakthrough analgesia they take.

Oxycontin isn't off patent until 2013 after which QRX wants to do a CR version of the tablet.

I also get stuff in biotech wrong, with acrux i thought it wouldn't get up because the market for testorone replacement would be to small and with mesoblast I thought the treatments would be to expensive to be a commercial proposition in hindsight being expensive was probably a good thing not a bad thing.

So in a nutshell it all depends on whether they can get clinicians to prescribe this stuff. I doubt it as 1) we don't do it now, 2) If we did do it we can do it cheaper by ordering the pills seperately.

There are a lot of combination pills available but usually it combines a patented medication with a non-patented medication so that the convience factor causes you to choose the patented medication over a variation of the patented medication. I.e. anti hypertensives with the ace inhibitors and arbs all combined with HCT.


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## skc (9 January 2012)

suhm said:


> I have looked at it previously but decided against it.




Thanks. Way too technical / medical for my puny brain, however. Having no knowledge in biotechs I tend to just trade the charts. And QRX needs a decisive move above $1.60-$1.70 before it reaches some clear skies imo.


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## reeftip (9 January 2012)

Yes I agree with Skc. I have trouble understanding what is going on with the technical / medical side with Biotech Companies.

I like the story being told, but as an investment - alot of them still seem like they are years away from making money.

There has been one stock that has grabbed my attention lately and thats Avita Medical Ltd (AVH).
Seems like they have been getting some air play in the USA and UK, and are finally now starting to make money.
Could I get your opinion on this one if you know anything about it.


Thanks


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## suhm (9 January 2012)

avh and its previous reincarnations always get good air play because its founder has got a good public profile but has burnt through millions of investors money.

The problem with aussie biotech is that they are listed to early and undercapitalised


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## suhm (9 January 2012)

FYI its Dr Fiona Wood  for AVH who was Australian of the year but no one seems to want to use the tech, it has also been around for quite awhile now and approved for marketing, they are trying it now for chronic ulcers and anything that helps to heal those quicker would be great as they are very costly to manage. So again it needs to sell

Biotech companies I will back if I think their product is good and will sell and a close to a point where value will increase. Others I will buy if they are selling well and and are undervalued. The second type of biotech share are few and far between and the only specialised knowledge you need for that type is to know when patent ends.

To add to the disclosure about my errors in biotech is BTA which at a point was my largest position by a country mile with the net result that the price halved, and I offloaded most of my position on the way down.


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## reeftip (9 January 2012)

Thanks for your reply.
I too have learnt a few expensive lessons in the past by getting sold on the story and not doing enough research on the financials.


> The problem with aussie biotech is that they are listed to early and undercapitalised



 - Could not agree more.


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## skc (9 January 2012)

suhm said:


> To add to the disclosure about my errors in biotech is BTA which at a point was my largest position by a country mile with the net result that the price halved, and I offloaded most of my position on the way down.




Well I have the honour of buying ACL and printing its 12-month high last year. Luckily I had a price stop so not a lot of harm done, and I kept a small parcel to make it back in the recent SPP.

Re: AVH. Not sure I can add a great deal apart from saying that the increasing sales is a positive sign while decent cash at bank alleviates capital raising risks to some extent (real genious I know )... really don't know much about the product or the market, however.


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## suhm (11 January 2012)

Tried to get a position in a biotech share but spitting chips as was in meetings and the stock got bid up taking out the meagre amount of volume available and there is very little sell depth left and is also out of my buy zone now. Had been contemplating bidding it up more but with the lack of volume on offer I would cause it to gap up more than it already has.

New position AZG in at 0.145, new contract win worth 10m pa approx 1/3 of what their previous revenue was. Management confident of their forecasts and recently purchased the remaining half of a subsidiary for an NPAT of just over 1 issuing shares at 0.20.

The accounts for them are all a bit strange. There is a deferred bonus pool which I am not sure how they are going to account for starting FY2013. Cashflow is abysmmal but they have extra funding for the moment and were forecasting NPAT of 16.5m before the acquisition, not bad for a current market cap of 38m.

NPAT should go down in further financial years as the bonus pool kicks in 6-10m pa for npat of 9.5m-15.5m respectively and as $7.8m of stock is issued as a delayed earn out for an acquisition.

Incidentally got offered stock in WRG at 6c by my broker, looks like pump and dump detritus to me though and they aren't raising enough money to get rid of their cashflow woes.


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## skc (11 January 2012)

suhm said:


> Tried to get a position in a biotech share but spitting chips as was in meetings and the stock got bid up taking out the meagre amount of volume available and there is very little sell depth left and is also out of my buy zone now. Had been contemplating bidding it up more but with the lack of volume on offer I would cause it to gap up more than it already has.
> 
> New position AZG in at 0.145, new contract win worth 10m pa approx 1/3 of what their previous revenue was. Management confident of their forecasts and recently purchased the remaining half of a subsidiary for an NPAT of just over 1 issuing shares at 0.20.
> 
> ...




Reasonably sure that the massive bonus pool will be paid as shares via 5day VWAP to close of the financial year. The problem with NPAT target is obvious... management can just go and acquire business at a high price without due regards to EPS. Although this doesn't seem to be happening based on past acquisitions.

On back of envelop calcs and my interpretation of this bonus pool issue...(current shares outstanding ~276.3m)
At NPAT $9.5m bonus pool is $17.8m. They can issue 89m shares @ ~20c, bring total shares to 365m. If you take PE 8x on $9.5m you get market cap of $76m, which is ~20.5cps.

At NPAT $15.5m bonus pool is $30.8m (which truely sounds ridiculus for a company with market cap ~$38m). This needs ~102.7m shares @ ~30c. Total shares will be ~379m. PE 8x on $15.5 = ~33c. 

So the dilution is pretty significant, but the share price should still rise from current levels if those forecasts are hit.

Note that those bonus shares are in fact dished out over 3 years so there's a bit of time value benefit to the above calcs that I've ignored.


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## suhm (17 January 2012)

Out of HOG completely, techinically looks poor and from a TA standpoint should have exited long ago. In at 0.30 out at 0.176

Still think it is cheap on the basis of it SOR-1 well but has needed to keep increasing the choke size to maintain flow rates which means pressure would be decreasing. SOR 2 will also only reach TD in a 6 months or so.

Report out today looked to me like the chets drill is a duster, b20 zone was water logged and b24/25 from the commentary didn't seem like it would be particularly productive. Basing this solely on this 'Wireline logging operations commenced on 14th January with the gamma ray, sonic and electric log suite. Logging should be complete within the week, and a decision on testing will be taken following analysis and interpretation of the entire suite.'

Release on Monday Aug 23, 2010 when SOR-1 hit the pay zone August 21, 2010 on a saturday was that gas had been encountered and that they would commence flow testing later that week, they then released that they were flow testing Aug 24, 2010.

I will feel stupid for having waited this long if I am wrong though and will not be able to rectify it as I have already redeployed the capital.

Increased position BTA in at 0.825. East Hill seems to have taken out most of the people who want to sell. Chart now trending upwards. Cochrane review out during Thursday market reviewing the use of neurominadase inhibitors in flu.

There have been resistance and side effect issues with Tamiflu and the previous Cochrane review questioned the efficacy of Tamiflu but there was a vigorous response from Roche.

THe report could question the use of all current neurominadase inhibitors so could hit sales of relenza but biota hasn't been getting much in the way of royalites from that recently anyway and would incrase the value of LANI its second generation flu treatment.

BTA 798 results, biota's treatment for rhinoviruses half the causes of the common cold are also due out in the next few months so I am mostly set again with my position in biota. Previous molecules had efficacy but toxicity issues, this molecule is more active and has not had toxicity issues so should bode well for a good clinical result. Hopefully they would be able to get a good licensing deal for this as a few biotechs have achieved recently.


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## suhm (17 January 2012)

note the market seems to disagree with me about the release from HOG, volume was light and hence why I am questioning whether my interpretation of the release was correct.


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## suhm (8 February 2012)

Exited dra in at 0.98 out at 1.16 announced a cap raise of 15m to fund exploration of their kuuasamo deposit. I had expected to fund this from operational cashflow and cash at bank. Diasappointed again.
BTA 0.815 more bought as they have finished their p2b trial for the common cold. I expect them to license this out and have a positive result. They spent 20m for the trial plus previous expenditure. They would need a big pharma partner who could get doctors to prescribe this off label as they are testing this on asthmatics as it would bankrupt the health system if it was funded for everyone. It is currently a 12bn market for all the various alternative therapy and symptom controllers so should have the potential to be a blockbuster drug and is a lot more common then the flu. Lani also seems to have a 50% market share in Japan atm not sure if other antivirals are coming out of the stockpile instead with sales of relenza slow as usual. Backing the science and chairman here sold vision systems to the Americans for nearly 6 times what the Australian market was valuing it at prior to his liquidation processs and has said that biota future is outside Australia as well. They have engaged piper jaffray for a year now analyzing this on a fee for service basis so am expecting news flow soon


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## suhm (23 February 2012)

Mid reporting season update.

MXI in at 0.39 out at .47 decent results but not a preferred sector for me.

BSA in at 0.20 out at .255 again a decent results but not a preferred sector, didn't see it as a long term hold may re enter on weakness

DTQ in at 0.135 out at 0.139 I still hold, poor results out today at the 4month mark unaudited results showed NPBT of 2.5m this became 1.7m at the half year due to a bad 'six weeks' according to management. Didn't seem to effect BLY or ASL but will take management at their word. Have kept it in the portfolio as annualised PE is <7 they have bought new rigs for the coal seam gas which are being delivered soon which should add further revenue.

DRXO in at 0.03 out at 0.0155. Timelines are getting pushed out further and further and I see the deal with Baoti now probably only going to fund the DFS rather than taking a large equity chunk of the project or company so an option on future production rather than full fledge co-operation.

EXS in at 0.70 out at 0.20. This includes a 28cent fully franked dividend and 10c capital return. Drill results have not been that great thus far and generally do not like exploratoin plays. White dam ore has run out and are now moving to the vertigo deposit. EV is quite low though as they have about 16c cash, a gold mine and a copper royalty so including NPV of these the EV is probably 0.


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## skc (23 February 2012)

suhm said:


> DTQ in at 0.135 out at 0.139 I still hold, poor results out today at the 4month mark unaudited results showed NPBT of 2.5m this became 1.7m at the half year due to a bad 'six weeks' according to management. Didn't seem to effect BLY or ASL but will take management at their word. Have kept it in the portfolio as annualised PE is <7 they have bought new rigs for the coal seam gas which are being delivered soon which should add further revenue.




Yes very disappointing esp after ASL and BLY's report + the positive price movement earlier in the day. I took the guidance and extrapolated full year EPS to be ~4-4.5c, putting them some where like PE ~3-3.5 at 13.5c. Instead I can now only assume conservatively a full year EPS of ~2c which is still cheap, as you said, but not the sort of upside I was hoping for.

Still a good reward / risk considering the facts available until today. If they hit the guidance they could easily shoot up 30-40% in a day.


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## suhm (23 February 2012)

Yeah disappointed by DTQ management seemed pretty honest so thought they were sandbagging the results especially since it was a recent IPO. The increase in receipts must have been improved cashflow management rather than increased revenue.

Will proably keep the rest at this time until a better opportunity comes along, not enough liquidity today to offload it all without selling it off at a silly price. There is probably plenty of time to get on board if they are able to hire more ppl to man the rigs and would probaly need to wait until the half yearly for improved results unless they get their CSG rigs drilling very soon. I assume they would need to inspect them and ensure they function properly prior to moblising them so there is probably going to be a delay before they start earning revenue.

Small grace was that I resisted temptation to increase my position when I saw the uptick today.


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## skc (24 February 2012)

suhm said:


> Yeah disappointed by *DTQ management seemed pretty honest *so thought they were sandbagging the results especially since it was a recent IPO. The increase in receipts must have been improved cashflow management rather than increased revenue.
> 
> Will proably keep the rest at this time until a better opportunity comes along, not enough liquidity today to offload it all without selling it off at a silly price. There is probably plenty of time to get on board if they are able to hire more ppl to man the rigs and would probaly need to wait until the half yearly for improved results unless they get their CSG rigs drilling very soon. I assume they would need to inspect them and ensure they function properly prior to moblising them so there is probably going to be a delay before they start earning revenue.
> 
> Small grace was that I resisted temptation to increase my position when I saw the uptick today.




You rarely see a profit announcement that highlights the negatives before the positives. The tone was somewhat weird but I think they needed to pre-empt the market's question on what happened between AGM and end of half year.

My position was small as I was pretty comfortable that I could still enter at a reasonable price after confirmation. Will probably hold for now and wiggle out of this only if there's substantial weakness in the market.


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## suhm (3 March 2012)

Rest of DTQ sold at .155 bought at 0.14, not the largest % gain but pe of 7.5 is higher than I wish to pay for the stock will probably do well in the future though but will buy back later.

Partially out of AZG in at 0.145 out at 0.20 results were confusing, I don't see how the company can sail so close to the wind financially. It probably will come good in the end and the numbers are getting better but its all a bit hard to understand for me.


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## suhm (3 March 2012)

Post reporting season and a where are they now snapshot of previous trades.

FGE-  Out low 2s and mid 4s now 5.92. Forge group, mining services company with a good track record of delivering projects profitably but has tailed off this year. If they can integrate their new acquistion well it should get them to the next level of profitably. I am yet to understand how they have benefited from their partnership with CLO.
Probably one I should have held onto longer term given the amount of capital gains I had on it, picked up most of my shares in the low 1s but comes with the territory of having to recycle capital.

TBR - Out at mid 2s. Now 1.50. Gold producer I originally picked up due to the increase in the gold price and solid production history and close to - EV. In a solid down trend and what i feel is dodgy management but may be at -ve EV again. Wouldn't touch it until it breaks 1 and an upswing has started.

CKK -Out at 0.165 and 0.11 now 0.017. I have a tendancy to like game changing technology and liked the mining services area. I still lost a fair whack and now warren strange is suing the company to get the drill rig back. Good exit all in all.

IPX - Out at .14. Taken over at 30c. Op cashflow was going up but had a poor quarter so sold out. Again an area which I liked with the above game changing technology. Probably a bit before its time with people not realising how much it could decrease the capital intensity of their business and fixed expenses. It is one that I would have probably entered again if they had showed some improvement in the next quarter but again was recycling my capital.
Still think it was a good exit as you can't always anticipate takeovers and it was a bit out of left field when it occured.

COE- Out at .385 now 0.52. I was just frustrated with it. At the time it was nearly cash backed at that level for an oil and gas company but didn't seem to find any oil or gas except in the cooper basin which was a depleting field.

CCV- out at low 80s now 0.615. This tanked much further when more legislation suggested that a major part of their business would need to be restrucctured, it also had a partial takeover offer at 0.91 which was then abandoned.

MMS - out at high 8s now 9.97. Like FGE a good company which I sold to recycle capital. Subject to legislative risk but it'll be a few years before they go back to FBT rules but no longer on a low pe and had a poor report.

MAD - Out at .20 now .73. Nothing much actually changed in the time from when I sold until now. It always had massive reserves and poor cashflow. I thought there would be a rerating when they released a reserves report hence my original purchase which did not arrive. The next time they released a reserve upgrade have a look at the chart and it went paraboli. My conclusion is I don't understand energy stocks.

PBT - Out at .361 now .155. This must be my best timed exit ever. I still like the product but they are selling shares to fund their trials and results aren't out until at least the end of the year so plenty of time to get on before they are released.

HOG - Out at low 40s and mid 10s. Now 0.20. Overall this was a loss for me. THey drilled a hole and found gas and then management went all funny regarding timing of building a gas plant and how much it would cost. They must also be the slowest to reach TD on the ASX. Its like 6months for them. The old guard (management) has come back and sparked a huge rally and technicals looking better. I don't think I will re-enter this one. The shale gas revolution has me thinking that energy is no longer the bees knees for the future.

TXN - Out at 0.815 now 0.615. Good exit for me as stated previously the energy sector confuses me.

ARDO - Out at an average of mid 4c now -0.033 if converted. Lost all my profit part way through the trade because they did a cap raising, the silver price started to tank as I entered my trade and had begun to dump my position because I couldn't afford to convert the oppies which were a 2c discount to the heads at the time but still ended up as quite a big win because of a newsletter pumping and dumping. Not my typical sort of trade and not one I would replicate soon.

ZGL- Out at .585 now .21. Profit downgrades hurt hard in small cap land but I think this has potential in the future but a lot of punters will feel burnt from RM's spruiking.

ROS - Not out but will be worthless. Lesson to self to not listen to hype.

FAR- Out at 0.046 now 0.049. Good exit went down much further and was the straw that broke the camels back for me in terms of the energy sector. I am happy to leave the money to be made there to ppl with more expertise than me. MAD still makes me angry though as the release that made the sp go up was why I held the stock.

STS- OUt at .675 now 0.91. Cigarette butt mining services company, probably better around but low PE has always attracted me. FOr some reason or another have never held this for long.

DRX - Out at 0.091 now 0.074. Timetable for this keeps slipping and by the time they come into production i think the party will be over. GUN seemed to be closer to the mark.

DRXO - Out at 0.014 now 0.013. As above I think it'll prove to be a good exit. 

For the rest it is probably to early to tell.


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## suhm (19 March 2012)

Looking for some new stock ideas if you could post here or pm me stocks that would be appreciated.


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## mr. jeff (20 March 2012)

suhm said:


> Looking for some new stock ideas if you could post here or pm me stocks that would be appreciated.




Have gone through the new admission list and this what I can suggest:

HGO
NXT
BCI
GCS
MYE

would also consider:

ALK
NDO

Check out OBL and MEO but both have run hard to date.

Hope this helps make you $$


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## danbradster (20 April 2012)

KCN: Gold production is likely to almost double this quarter since the processing plant has 20% higher throughput than last quarter, and they will be mining higher grade ore.  The SP is low and I am very confident, so I have an abnormally large position of about 28% of my portfolio.  I am expecting a SP move at the end of the month after a very positive quarterly report.

Plant throughput will be 6.0-6.2mtpa versus 5.1mtpa last quarter.  Grade was 0.8g/t last quarter due to mining limitations due to flooding and government, both of those issues have been solved allowing the grade to probably move towards the mine average of 1.1g/t AUeq.

They will be moving down the cost curve nearing the lower quartile, I think.


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## danbradster (11 May 2012)

danbradster said:


> KCN: Gold production is likely to almost double this quarter since the processing plant has 20% higher throughput than last quarter, and they will be mining higher grade ore.  The SP is low and I am very confident, so I have an abnormally large position of about 28% of my portfolio.  I am expecting a SP move at the end of the month after a very positive quarterly report.
> 
> Plant throughput will be 6.0-6.2mtpa versus 5.1mtpa last quarter.  Grade was 0.8g/t last quarter due to mining limitations due to flooding and government, both of those issues have been solved allowing the grade to probably move towards the mine average of 1.1g/t AUeq.
> 
> They will be moving down the cost curve nearing the lower quartile, I think.




I over-estimated.  Chatree production increased by 50%.  I'm still happy with that, but the SP is down urgh.

I got a couple of nice trades in this week though luckily.  That makes up some of the losses from last week.


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## suhm (15 May 2012)

Well i've been a bit busy at work so unable to spend as much time on shares as I should. Most ideas have gone wrong as you can see from my track record so think I should sit out of the market for awhile and concentrate on my day job, hasn't been the easiest market for me to make money in for > 1 year and the volatility looks set to increase.

BTA and IDM are the only positions I hold of any consequence being stronger conviction buys. 

Currently hold

BTA, made what I think is a lousy deal to get listed on the nasdaq. Essentially a reverse takeover by NABI a cashbox post its failed phase 3 trial. Good news is that there will be new management and hopefully it gets taken out before the vote on the merger. The deal puts biota in play and a takeover offer with a scrip and cash option woud placate most holders. Will hold to NASDAQ if the merger goes through.

IDM topped up with the cap raise and sold of options. Sales are a bit slower than I expected but with illuka reducing production to keep zircon prices stable, spherichrome should have a future as a zircon replacement or could be just used as normal chromite for an ok margin. Means they lose the cream though.

GUN still hold a small amount

UOS don't really see a point in selling, lots of cash and property and not a very large position either.

AZG missed a profit target but still looks cheap, revenue is very hard to predict though.

ROS but worthless

Sold TAP at 0.775 post disappointing WA-351 drill results for a reasonable loss in around .9

Tried for a swing trade on SRX based on newsletter spruiking in at 6.3 out at 6.14.

Forced to sell a bit of BTA as moving to the NASDAQ as had to cover the equity when margin rates changed as a result of it being possibly delisted in the future. In at 0.925 out at 0.815

Sold most of GUN as illuka is producing less zircon to maintain prices and there was a delay in the POSCO deal. The NPV still looks good but useless without project finance.
In at 0.187 out at 0.167


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## skc (15 May 2012)

suhm said:


> IDM topped up with the cap raise and sold of options. Sales are a bit slower than I expected but with illuka reducing production to keep zircon prices stable, spherichrome should have a future as a zircon replacement or could be just used as normal chromite for an ok margin. Means they lose the cream though.




Have you looked at MZI in this space?


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## suhm (16 May 2012)

Only briefly didn't like the small scale of the project and how they were going to fund expansion projects but looks like they may have found a partner so it may have some legs.


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## skc (16 May 2012)

suhm said:


> Only briefly didn't like the small scale of the project and how they were going to fund expansion projects but looks like they may have found a partner so it may have some legs.




I thought the annonucement was a very big positive but the market is not seeing it that way (not yet anyway). Nothing wrong with waiting to buying in this market.


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