HGO - Hillgrove Resources

[Binxx]

Sleeping giant this one I reckon.

Wait till this gets on the radars and see it shoot up.

I think this should be seriously looked at.

Could the chartists / predictors / astrologers and the gurus on this site care to opine

 

[cheeyeen]

I've just been reading through HGO's last quarterly report, and I see different figures.

Please correct me, if I am misinterpreting anything.

As of 30 April 2009, there are 378,693,978 ordinary shares.

The market value of Hillgrove's investment portfolio as at 30 April 2009 was approximately $135.4 million.

Cash on hand as at 30 April 2009 was $8.1 million.

Investments + Cash (ie; 135.4 + 8.1) = $143.5 million.

Also, after the quarter closed, on 18 May 2009 an additional share placement of 34,333,333 shares was finalised, raising an additional $5.15 million.

So, by my reckoning, that's;
$143.5 million + $5.15 million = $148.65 million

And, 378,693,978 + 34,333,333 = 413,027,311 ordinary shares. ($0.36/share)

Add the $171,986,050 cash from STO, and that would be: $148.65m + $171.986m = $320.6million ($0.78/share)

Am I missing something here?
I haven't factored in a cash burn for the three months since (MAY/JUN/JUL) of around $2 million (assuming similar to previous quarter). It doesn't make much difference anyway.

I am trying to understand why the market is ignoring the intrinsic value of this company.

You are double counting the "investment portfolio". The money from Santos is for the ESG shares that HGO holds in the "investment portfolio".

 

[Sean K]

Sleeping giant this one I reckon.

Wait till this gets on the radars and see it shoot up.

Maybe you could tell us why you think this.

If it sounds good, I might have a look at it.

Cheers,
kennas

 

[skc]

I've just been reading through HGO's last quarterly report, and I see different figures.

Please correct me, if I am misinterpreting anything.

As of 30 April 2009, there are 378,693,978 ordinary shares.

The market value of Hillgrove's investment portfolio as at 30 April 2009 was approximately $135.4 million.

Cash on hand as at 30 April 2009 was $8.1 million.

Investments + Cash (ie; 135.4 + 8.1) = $143.5 million.

Also, after the quarter closed, on 18 May 2009 an additional share placement of 34,333,333 shares was finalised, raising an additional $5.15 million.

So, by my reckoning, that's;
$143.5 million + $5.15 million = $148.65 million

And, 378,693,978 + 34,333,333 = 413,027,311 ordinary shares. ($0.36/share)

Add the $171,986,050 cash from STO, and that would be: $148.65m + $171.986m = $320.6million ($0.78/share)

Am I missing something here?
I haven't factored in a cash burn for the three months since (MAY/JUN/JUL) of around $2 million (assuming similar to previous quarter). It doesn't make much difference anyway.

I am trying to understand why the market is ignoring the intrinsic value of this company.

You also ignored the debt which is a convertible bond that is highly dilutive.

The true intrinsic value is around $0.3 / share when you ignore any of the companies assets. No idea what their assets are worth, but probably $0.05 if you take a big discount on the book value.

 

[DVEOUS]

You are double counting the "investment portfolio". The money from Santos is for the ESG shares that HGO holds in the "investment portfolio".

Yes, this occurred to me whilst laying in bed last night thinking about it.

You can't just add the $172million from Santos, without removing their ESG equity component of their investment portfolio. On the quarterly report this was valued at $131.9 million, based on $0.77 ESG share.

 

[Binxx]

Maybe you could tell us why you think this.

If it sounds good, I might have a look at it.

Cheers,
kennas

There are plenty of posts here stating that the shares should now be valued at 30c+ and if current price is 25%+ less than that then from a newbie’s perspective that's gold

Hence my request for the guru's to post their thoughts

 

[Sean K]

There are plenty of posts here stating that the shares should now be valued at 30c+ and if current price is 25%+ less than that then from a newbie’s perspective that's gold

Hence my request for the guru's to post their thoughts

Binxx, YOU stated that YOU thought this was going to take off, or something.

So YOU think that because some other internet avatar posted up some numbers?

You are new to this forum, and perhaps to investing, so I suggest you take some time to check the stats others have posted, check the chart, go to the company's website and read their past quarterlies and presentations and then post up your own thoughts.

I'm just trying to point you in the right direction, and that is away from relying on some internet avatar to give to financial advice.

Cheers.

 

[DVEOUS]

You also ignored the debt which is a convertible bond that is highly dilutive.

The true intrinsic value is around $0.3 / share when you ignore any of the companies assets. No idea what their assets are worth, but probably $0.05 if you take a big discount on the book value.

I don't fully understand how options work, but out of the 48.25 million options that exist, less than 5.2 million of them have an exercise price of $0.26 or lower (of these, only 2.6 million expire later this year), and another 16.5 million at $0.26-$0.30, with the balance $0.34 and well above.
Excuse my ignorance, but how is this "highly" dilutive?

One thing that is for sure, the STO payment is based on ESG ~$1.00/share, and ESG is currently trading around $0.83.
HGO hold 173,882,627 shares in ESG.
(Premium = 173,882,627 x $0.17 / 413m HGO shares)
= ~$0.07 premium.

 

[Binxx]

Binxx, YOU stated that YOU thought this was going to take off, or something. - Yes

So YOU think that because some other internet avatar posted up some numbers? - Yes

You are new to this forum, and perhaps to investing - yes again - , so I suggest you take some time to check the stats others have posted, check the chart, go to the company's website and read their past quarterlies and presentations and then post up your own thoughts.

I'm just trying to point you in the right direction, and that is away from relying on some internet avatar to give to financial advice. -

Cheers.

If new guys cannot rely on advice from people with over 1000 posts on this forum and may I add the thoughts of whom do match with the general consensus, then who else could a new comer turn to?

Correct me again if I'm wrong but maybe this is not a right approach at all?

And yes, I do appreciate your suggestion and will do as you state

 

[Sean K]

If new guys cannot rely on advice from people with over 1000 posts on this forum and may I add the thoughts of whom do match with the general consensus, then who else could a new comer turn to?

Correct me again if I'm wrong but maybe this is not a right approach at all?

And yes, I do appreciate your suggestion and will do as you state

Binxx, I have over 1K posts and I don't know a thing!

You must make your own evaluations.

When a poster says a stock has X number of shares on issue and they have XYZ Petajoules in the bag and have a JV with BG, then you must check these facts. If you make an investment decision, or judgement, based on anything but the facts (as best as they can be) then you'll just get yourself in the poo.

Research, research, research....

Study the sector you are wanting to invest in, understand the market, research a company's results and management, check the charts, and put it all together. It's not easy, but it's money on the line.

 

[skc]

I don't fully understand how options work, but out of the 48.25 million options that exist, less than 5.2 million of them have an exercise price of $0.26 or lower (of these, only 2.6 million expire later this year), and another 16.5 million at $0.26-$0.30, with the balance $0.34 and well above.
Excuse my ignorance, but how is this "highly" dilutive?

One thing that is for sure, the STO payment is based on ESG ~$1.00/share, and ESG is currently trading around $0.83.
HGO hold 173,882,627 shares in ESG.
(Premium = 173,882,627 x $0.17 / 413m HGO shares)
= ~$0.07 premium.

Options are not debt.

As you pointed out, with ~5m or so in the money, the options are only slightly dilutive.

The convertible bonds, on the other hand, is $US30m convertible at $0.19c per share. That is $30m / $0.19 / 0.945 (the contract exchange rate) = 167m shares. Hence highly dilutive, but only when they are converted.

Note HGO may be able to buy back the bonds rather than let the bond holders convert, but the net effect on value per share is similar. i.e. Less money over same amount of shares or same money over more shares.

 

[DVEOUS]

Options are not debt.

As you pointed out, with ~5m or so in the money, the options are only slightly dilutive.

The convertible bonds, on the other hand, is $US30m convertible at $0.19c per share. That is $30m / $0.19 / 0.945 (the contract exchange rate) = 167m shares. Hence highly dilutive, but only when they are converted.

Note HGO may be able to buy back the bonds rather than let the bond holders convert, but the net effect on value per share is similar. i.e. Less money over same amount of shares or same money over more shares.

skc, thanks for the clarification, I appreciate it.
I missed the 4% convertible bonds due 2011, right there in the last quarterly.
I have actually learnt quite a bit from this exercise in the last 24 hours.

Assuming the bonds were converted, then the extra 167m shares would dilute the HGO SP down to ~$0.30.

I wonder what the deciding factor would be for the bond holders to convert?

Assuming the entire bonds weren't converted by Tuesday next week, I calculate HGO would still have an intrinsic value of approx $0.44/share immediate after the STO payment. In this I have included a $2m cash burn since 30 April, but not included any options being cashed in.

I was looking at HGO as a short-term play anyway, a few weeks max, just something to play with.

 

[skc]

skc, thanks for the clarification, I appreciate it.
I missed the 4% convertible bonds due 2011, right there in the last quarterly.
I have actually learnt quite a bit from this exercise in the last 24 hours.

Assuming the bonds were converted, then the extra 167m shares would dilute the HGO SP down to ~$0.30.

I wonder what the deciding factor would be for the bond holders to convert?

Assuming the entire bonds weren't converted by Tuesday next week, I calculate HGO would still have an intrinsic value of approx $0.44/share immediate after the STO payment. In this I have included a $2m cash burn since 30 April, but not included any options being cashed in.


I was looking at HGO as a short-term play anyway, a few weeks max, just something to play with.

The maths is actually very basic. Take santos cash coming in, less the debt and divide by shares outstanding you get ~$0.33. This assumes the rest of the company worthless.

The market actually thinks the rest of the company is worth -$0.09. This is testiment to the respect they have for the board and management.

Do ask yourself the question though... you have done some maths and decided that, with a reasonably high certainty, the company is worth more than the market value. You decided to trade base on that knowledge. How do you manage the risk and trade according to this knowledge? Is a short term play the right way to go? I don't know the answer, but just make sure your action is congruent to your analysis.

 

[DVEOUS]

Looks like the STO payment to HGO was completed before next Monday... and came and went, without much fanfare at all.

HGO get a positive write-up on minesite.com today;
http://www.minesite.com/nc/aus/minews/singlenews/article/hillgrove-now-has-a-king-sized-cashpile-to-support-its-hunt-for-golden-elephants-in-indonesia/1.html

I think this might be a good one to sit on for much longer than I first anticipated. After reading that minesite article, there appears to be a lot of upside with this cashed-up cow.

 

[skc]

Looks like the STO payment to HGO was completed before next Monday... and came and went, without much fanfare at all.

HGO get a positive write-up on minesite.com today;
http://www.minesite.com/nc/aus/minews/singlenews/article/hillgrove-now-has-a-king-sized-cashpile-to-support-its-hunt-for-golden-elephants-in-indonesia/1.html

I think this might be a good one to sit on for much longer than I first anticipated. After reading that minesite article, there appears to be a lot of upside with this cashed-up cow.

Thanks for the link.

There are 2 reasons why a situation like HGO can exist.

1. The market simply doesn't know it has all the cash. To me this is unlikely, as all of HGO's announcements are shared by ESG and STO, which have substantial following. Someone reading those bound to check the HGO share price while they are at it.

This leaves the second reason.

2. The market thinks HGO management will just pi$$ the money up the wall and not deliver value with it. That's exactly the market reaction yesterday and today. HGO said they had no real plans for the cash. Their share fell 8% when the market rallied 5% over the 2 days.

They should just give the cash out as a special dividend. $0.2 per share will do, leaving them with enough cash to do whatever it is that they do.

 

[Datsun Disguise]

They should just give the cash out as a special dividend. $0.2 per share will do, leaving them with enough cash to do whatever it is that they do.

Crikey - what would that leave the SP looking like!! I reckon they'll sink a decent potion into birdshead - they'll need to fund their private army to protect their staff after all...

 

[DVEOUS]

Looks like Copulos Group are accumulating more HGO again.
They did this less than 2 weeks ago, and again back in May.

Copulos Group now have just under 10% voting power of Hillgrove.

From what I have Googled on them, Copulos seem to invest in quite a few small miners.

What do they know, that the rest of us should know? !!!
What is their track record like?

 

[Binxx]

This went up 8.7% this morning.

Is this a delayed impact of the actions by the Copulos group?

 

[DVEOUS]

No, probably because of what appeared in Alan Kohler's subscription-based "Eureka Report" yesterday?


The Speculator
By David Haselhurst
July 29, 2009

"Our punt this week is not yet in production but it is selling under its cash backing and its Kanmantoo copper-gold project, 60 kilometres from Adelaide, is likely to be up and running in early 2011.

Adelaide-based Hillgrove Resources Ltd (HGO) rose from a 12-month low of 7.2 ¢ a share to a recent high of 28 ¢ on the back of its 19.9% interest in Eastern Star Gas (ESG), the coal seam gas (CSG) explorer..."

blah blah blah.
Nothing we already know.

This journalist has added 20,000 HGO to his portfolio.

There's no point providing the URL to the article, because you have to be a subscriber anyway.

 

[kenny]

Speculator picks have a usual spike then a drift down in the following weeks as the enthusiasm over the article wanes and those that believe get set and wait.

As Dveous said, nothing new revealed except that Haselhurst is keen enough to add to his notional portfolio.

Cheers,

Kenny