LST - Lion Selection

[56gsa]

LSG has merged with AUS and they are now Lion Selection Limited (LST)

190.7m shares
6.1m options (ex @ 1.51 April 09)

unaudited NTA is $2.12 @ 16 April

there are some tax issues they are sorting out - but not sure what this means for SH

 

[56gsa]

Re: LST - Lion Selection Limited

qtrly report is worth a read - not least to get an overview of some worthwhile investments LST has made (IRN, HAV, AGM, ALB, PPN etc) - has a fairly good track record, and with cashed in the bank and no PDF structure to limit its investments will be interesting to see what it next puts its money into.

NTA after tax at end of April is $2.12, and IRN (LST's biggest investment) has gone up 25% since then, and HAV (of which LST owns 19%) has announced a return to SH of its substantial investments in CUY and GHT.

Also interesting is the split of commodities LST holds - I think it is perceived as a gold investor (to some extent tracks the PoG) but by market value its got just as much exposure to copper and nickel.

Currently at 20% discount to after tax NTA makes it worth a look IMO .. DYOR

 

[56gsa]

Re: LST - Lion Selection Limited

... anyone been to africa lately?!

SHAREHOLDER PHOTOGRAPHY COMPETITION – 2007 ANNUAL REPORT
Shareholders are invited to submit photographs of lions for the cover of the 2007 Annual Report. Images can be submitted as high quality photographic prints or computer files (Photoshop TIF file 300dpi or Illustrator EPS file 800dpi). Photos must be taken by the shareholder and will be returned at the close of the competition – 28 September 2007.

The winning entry will be selected by the Lion team and the photographer will receive a framed copy of the report cover and acknowledgment in the Annual Report. Send entries to (with return contact details and details of where photo was taken):

Jane Rose
Lion Selection Limited
Level 4, 15 Queen Street
Melbourne VIC 3000
Ph 9614 8008 Fax 9614 8009
Email: jrose@lsg.com.au

 

[prawn_86]

Hi all, this co was raised in a thread in the beginners lounge by Mark70920.

All his statements were correct and here is a very brief analysis.

they invest in small cap resource stocks, so is a fair bit of risk there. but their management seem to have experience and their latest quaterly shows what stocks they are holding.

the kicker however is this:
NTA - 215cps ($2.15)
current price - $1.54

the only reason i can think of is that the market is factoring in a fall in the shares they hold. however, for this much of a gap to come true their holdings would need to lose over 25% across the board because they hold $40mill cash and have that gold mine.

i'll do some more research but they are definetly going on my watchlist.

opinions very welcome.

 

[Dutchy3]

Hi Prawn

This one will be making its move soon and I suspect it could be up .... waiting for a signal.

 

[DionM]

Ignore this post ... I was asking about dividends when I see plainly they have paid them in the past when they were LSG ...

 

[prawn_86]

the kicker however is this:
NTA - 215cps ($2.15)
current price - $1.54

Why do i always put stocks on my watchlist that seem to head up, and buy the ones that go sideways

If only i knew...

 

[BlingBling]

Why do i always put stocks on my watchlist that seem to head up, and buy the ones that go sideways

If only i knew...

Sounds like I'm in the same boat as you!
I have no idea why that's the case, but if you find the answer, please let me know!

 

[56gsa]

This seems to have been harshly dealt with due to collapse of VRE and LAF - together these represented $24m of investment from LST (or 12 cents / share). The revised NTA of $1.77 after writing off VRE & LAF (and 3c dividend) is still well above current sp of $1.30. Since Nov07 ASX down 20%, LST NTA down 10% but LST sp down 25% ??

Cracow sale looks to be going ahead with LST planning to exercise its right to purchase the other 70% from NCM. This is currently producing over 100koz of gold per year (unhedged), which would make LST one of the mid-tier Aussie gold miners. This is from ABN research:

In our assessment, the Cracow acquisition would confirm that Lion Selection is on the path to becoming a conventional mining company, with the value of production assets approaching the value of investments. We would expect that the market would move to value LST as such, rather than trading at a discount to NTA.​

At current production/cost rates 100% of Cracow would be about annual EPS of 19. So at PER of 10, this puts LST at $1.90. Mine life is an issue - this is from the NCM report:

The life-of-mine plan is regularly reviewed and, with the inclusion of the Sovereign, the current mine planning inventory is 1.6 million tonnes containing approximately 446,000 ounces of gold. The remaining mine life is approximately five years. However, assessment of other shoots is expected to further extend mine life.​

... but they would still have their investments of approx $170m as well (85 cps) - so even if you discount the PER to 5 on Cracow earnings you get $0.90 + invests $0.85 = $1.75

Will be watching this to see if they proceed with Cracow purchase and for subsequent re-rating.....

 

[56gsa]

Forgot to mention they also had this in their quarterly... a bit of a tease perhaps but if LST does get Cracow and is still rating below NTA there's no reason an SBM or other mid-tier wouldn't see this as an opportunity for takeover, cash out their investments and gain some unhedged Ozs of gold...

A recent search of Lion’s share registry has indicated a holding of approximately 5% of which Lion has concerns regarding the beneficial owner and correct disclosure. This has been noted to the ASX and ASIC in early January.​

shareholding is lots of 'nominee' companies - with Mark Creasy having bit over 5%

 

[AnDy62]

I'm pretty sure LST has been in trouble due to management concerns and exposure to non-performing juniors, view resources etc I believe. Though, the NTA does indeed exceed the price- have a look at the LPT sector, same story. It's simply a reflection of very bearish sentiment. This said Lion, unlike LPTs though can benefit from the likely increases in gold. Maybe a contrarian bet, but personally I'd want to see some sp proof sentiment has changed

 

[56gsa]

I'm pretty sure LST has been in trouble due to management concerns and exposure to non-performing juniors, view resources etc I believe. Though, the NTA does indeed exceed the price- have a look at the LPT sector, same story. It's simply a reflection of very bearish sentiment. This said Lion, unlike LPTs though can benefit from the likely increases in gold. Maybe a contrarian bet, but personally I'd want to see some sp proof sentiment has changed

Hi AnDy... agree this needs to be watch - but right time to consider may be if/when they decide to purchase Cracow... because of re-rating as minign company, and takeover prospects

while all stocks are under suspicion, difficult to comapre LST with an LPT :
- obviously its investing in gold/copper which has a different outlook than property
- its got no debt - while the companies it invests in may be geared, LST's risk is spread over a number of companies (I think over 10?), and each one is not a major investment (apart from Cracow, largest are IRN $22m and WEX $14m ... total assets $341m).
- its got an income stream from Cracow (half of which its paying out as a dividend - just paid 3 cents div)

anyway - there for others to research and consider...

 

[AnDy62]

Yeah I agree completely. But I was just pointing out that NTA by itself is not a reason to rush in. Definitely one to think about...

 

[AnDy62]

I've done a bit of research on this share lately and I think it could be a worthwhile investment. Very nearly bought in today but thought the better of it... will wait for evidence of a turn around. Any LST holders here just out of interest?

 

[Sean K]

Very nearly bought in today but thought the better of it... will wait for evidence of a turn around. Any LST holders here just out of interest?

Not a long term holder but have followed it closely.

I agree with waiting for a turnaround. The knife could still well be falling, however todays candle looks promising. On low volume however, so not confirming in my mind. Resistance on the way back up as indicated.

IMO, It needs to clear at least 2 of those hurdles before I'd start calling it a change of direction.

 

[AnDy62]

Buyers stacking up and on brink of breaking resistance, currently $1.35. Candle looks encouraging. Lion might be ready to pounce, ahahah couldn't resist. Anyway, I'm on the sidelines for this one at the moment but might get in soon if the technicals stay good. Happy Days

 

[56gsa]

well gents.. there it is... TAKEOVER! by IRN (Lion's largest investment)

at a minimum of 2.5 IRN for every 1 LST (approx 1.65) or up to 2.7 IRN to every LST (1.78) if they get over 90%

This is a steal with LST's NTA at 1.77 - and looks like IRN is keen to seel everything - even Cracow! Nice cashcow

Will someone else come in and take the bait... ??

Indophil targeting Lion Selection
Wednesday March 19, 2008, 7:45 pm

The former major shareholder of takeover target Allegiance Mining NL has itself become corporate prey for an industry predator.

Indophil Resources NL has launched a two-tiered scrip takeover offer for Lion Selection Ltd, which values the target as much as $340 million.

Lion Selection, an investment firm focused on junior miners and a former shareholder in Allegiance Mining NL, holds a 30 per cent stake in Newcrest Mining Ltd's Cracow gold mine in Queensland.

Lion Selection has a pre-emptive right over Cracow, which enables it to match any accepted offer made for Newcrest's 70 per cent interest.

In a statement last week, Lion Selection said its vision was to transform from an investment company into a mining company.

Lion Selection sold its 5.01 per cent stake in the now Zinifex Ltd-controlled Allegiance last week, pocketing $48.5 million from the sale and giving it about $110 million cash in the bank after tax.

Melbourne-headquartered Indophil is focused on developing its 34 per cent-held Tampakan copper-gold project in the southern Philippines.

The base consideration of Indophil's offer is 2.5 of its shares for each Lion Selection share if the offer becomes, or is declared, unconditional.

The higher consideration is 2.7 Indophil shares for each Lion Selection share if the offer becomes or is declared unconditional, if Indophil acquires 90 per cent or more of its target and the Lion board unanimously recommends the offer and accepts it in respect of all Lion Selection shares owned by it and its associates.

Indophil's offer is conditional on a 50.1 per cent minimum acceptance level.

In a statement issued after the market closed on Wednesday, Indophil said there was "strong financial and strategic logic for combining the two companies, with potential for superior value creation for all shareholders through synergies focused on optimised project development".

"For some time, Indophil and Lion Selection have been exploring options for combining Lion's resources portfolio with Indophil's assets to build a significant mining company ... nothing concrete eventuated."

Shares in Indophil closed steady at 66 cents, while Lion Selection's shares finished 1.5 cents higher at $1.35.

 

[56gsa]

Not surprisingly the LST has rejected the IRN takeover (cash grab)... Are others going to be interested in LST?? For IRN there is the added benefit of cancelling the 25% stake that LST has in IRN - but perhaps this becomes attractive to other mid-tier gold producers wanting to diversify - they get IRN stake plus Cracow potentially (news should be out this month on NCM sale process)...

 

[56gsa]

crunching some numbers on this and what it means for LST shareholders ... any others out there ? any comments on analysis below....

At present:

LST mkt cap $292.23m (191m shares x $1.53)
IRN mkt cap $271.73m (377.4m shares x $0.72)
Combined mkt cap $563.96m

If IRN get 50% to 90% of LST they pay 2.5 IRN shares for each LST
Say IRN get 70% of LST then the picture would be

IRN shares (377.4m)
+ 2.5 IRN per 70% of LST shares (334.25m)
less 25% IRN cancelled (current LST holding -94.35m)
=> 617.3m shares,
implied mkt cap of $476.29m (IRN mkt cap + 70% LST mkt cap above)
implied share price of $0.77


If IRN get >90% (say 100%)
IRN shares 377.4m
+ 2.7 IRN per 100% LST shares 515.7m
less 25% IRN cancelled -94.35m
=> 798.8m shares,
implied mkt cap of $563.96m (IRN mkt cap + 100% LST mkt cap above)
implied share price of $0.71

So....
if you buy LST today 1000@1.53 $1,530.00
in 70% scenario 2500@0.77 $1,925.00
in 100% scenario 2700@0.71 $1,918.89

article below suggests both LST and IRN are (grossly) undervalued, the combined group would have $350m in liquid assets (remember LST has $250m in cash+investments, IRN has $110m cash) and combined $1.4m in debt!! not to mention up to 37.5% of the worlds 7th largest undeveloped copper resource...!!

downside...? for LST holders the takeover doesn't go thru - but I think we will see increase in LST before then and the takeover premium will ensure it remains closer to the NTA

thoughts?

Good on Indophil
Barry FitzGerald
March 24, 2008

Indophil

GOOD on Indophil Resources (IRN) for serving up a takeover bid for its 25.7% shareholder, Lion Selection (LST).

As analyst Chris Brown at ABN Amro Morgans observed, it is a case of the grossly undervalued (Indophil) bidding for the undervalued (Lion).

"I hope you own one or both of them, but I have no idea which one will perform better from here," Brown said in a note to clients last week. He was right.

Garimpeiro's interest is in the grossly undervalued Indophil. It closed at 61 ¢ a share last Thursday, giving it $230 million market capitalisation.

That's for a company holding $100 million cash and with a 37.5% stake in Tampakan, one of the world's biggest undeveloped copper/gold deposits. At last count, Indophil's share of the undeveloped $US115 billion ($A127.5 billion) resource - yep, that's right - was $US43 billion.

The Tampakan interest is at the heart of Indophil's hostile bid for Lion. Fearing that Lion could look to cash in its Indophil stake to fund its own ambition to switch from resources investor to miner, Indophil has set out to ensure it remains hitched to Tampakan, a joint venture with Xstrata. The prize of a Tampakan development is too big to let go.

Ever acquisitive Xstrata is working at having Tampakan in production by 2012 and if the Lion stake in Indophil were to shake loose, it would be sure to pounce. But should Indophil's bid for Lion succeed, Lion's shareholding in Indophil would be cancelled, allowing Indophil to slam the back door on a low-ball bid from Xstrata.

Just as important would be the additional $105 million that the Lion acquisition would tip into Indophil's coffers. Xstrata will be setting a cracking pace in the multibillion-dollar development of Tampakan, and Indophil will need to keep pace.

 

[56gsa]

any thoughts on numbers above???

announcement today re NCM's bid induced valuation on Cracow... just means more (another $22m) in the kitty should IRN want to sell if they are successful....

Lion Selection Limited (Lion) has received notification that Newcrest Mining Limited (Newcrest) has signed a conditional agreement to sell its 70% interest in the Cracow Gold Mine for A$200 million plus a cash royalty.
• Lion owns 30% of Cracow. The bid implies a value for Lion’s 30% interest of A$86 million or approximately 12cps above the value attributed to Cracow in Lion’s Net Tangible Assets (NTA). Lion’s most recently released NTA (as at 29 February 2008) was $1.82 per share. If the value implied by the bid were used to value Cracow, the NTA would have been $1.94 per share.
• Lion has a valuable pre‐emptive right to acquire Newcrest’s interest. Lion has 50 business days to make a decision once the pre‐emptive period starts. Lion is reviewing the terms and conditions of the purchase and sale agreement delivered by Newcrest today and will formulate its plans in respect of this high quality, low cost gold asset.