MEL - Metgasco Limited

[Sean K]

This was identified as a potential breakout in the potential breakout thread, but it's probably not doing that till the upper resistance line is met around 60c.

It's been mentioned here that it's undervalued and I'm trying to get my head around the numbers. Not generally interested in oil and gas as it seems so hit and miss...

But anyway, in one of their presentations they presented this interesting chart below. I've got no idea but those numbers circled make this look very cheap.

 

[pan]

This was identified as a potential breakout in the potential breakout thread, but it's probably not doing that till the upper resistance line is met around 60c.

It's been mentioned here that it's undervalued and I'm trying to get my head around the numbers. Not generally interested in oil and gas as it seems so hit and miss...

But anyway, in one of their presentations they presented this interesting chart below. I've got no idea but those numbers circled make this look very cheap.

You purchased any yourself Kennas? I've being following myself for the last few months, along with some of the other csg plays. These number they bring up makes it seem very undervalued, but that is my opinion.

 

[Sean K]

You purchased any yourself Kennas?

Yes, just a handful. A chart trade, expecting a bounce off the lower up trend line. No idea about the fundamentals.

 

[pan]

Yes, just a handful. A chart trade, expecting a bounce off the lower up trend line. No idea about the fundamentals.

ok,

Where is the lower up trend line? around .48? hopefully it breaks .60 on the next leg up, need the volume to increase though.

 

[Sean K]

ok,

Where is the lower up trend line? around .48? hopefully it breaks .60 on the next leg up, need the volume to increase though.

Was mentioned by sagitar in the POTENTIAL breakout thread, but has been picked up by a few well known punters here on the fundamentals.

Pick a point on the blue line as the up trend line.

Obviously, if that breaks down significantly, the lower up trend line is no longer and the pattern fails.

Since I have bought some now, it's bound to fail.

Sorry holders.

 

[outback]

I hope your'e wrong, about making it fail cos you bought that is. Dipped my little toe in, up to my knee. I'll have to watch closely though.

 

[onshow]

Hi all after some reasearch on MEL and a great looking chart i have bought my first lot of shares today at .505 although it closed lower i am still very confident in the long term plan that this company has to bring maximum return to there share holders and the fact that the size of resources that this company has that is bigger and on par with other companys that have a much greater share price. This to me looks very under valued and a great buy. Good luck to all !!

 

[Largesse]

no one's concerned about the shares taken in the rights issue hitting market on Apr 30?
Could cream off a nice 25% profit selling at market....

i'm going to wait and see with this one, but i like the story so far.

 

[sagitar]

Hi Largesse - a valid and interesting point but honestly I'm not worried myself. Have to remember the rights issue was a 1:8 entitlement, so only a relatively small percentage of an individuals holdings were offered for sale at 40c. Technically-speaking the charts also indicate that accumulation has been occurring for a significant amount of time, so I'd make an educated guess by saying that many are probably medium to long term investors with a longer term time-frame in mind. Shorter term traders perhaps caught with their pants down during the TH may have found it to be a bonus getting a free slice at 40c, but whether they felt it worthwhile applying for their entitlement could be 50/50 given that most usually have small trade sizes to begin with.

This is only speculation on my part but logically I think most might like to see the story of MEL unfold before considering whether to sell or buy more. Those that do sell out will probably be purged out of the market in the first day or two after the new shares come into play.

The rights issue has possibly partly contributed to why MEL's share price has taken awhile to begin getting off it's feet. Note if you inspect the market cap of other similar CSG players, they are already miles ahead. So, MEL possibly has a lot of catching up to do...but that's just my humble opinion of course.

Interesting times ahead.

cheers and good luck,
Sagitar

 

[Largesse]

Hi Largesse - a valid and interesting point but honestly I'm not worried myself. Have to remember the rights issue was a 1:8 entitlement, so only a relatively small percentage of an individuals holdings were offered for sale at 40c. Technically-speaking the charts also indicate that accumulation has been occurring for a significant amount of time, so I'd make an educated guess by saying that many are probably medium to long term investors with a longer term time-frame in mind. Shorter term traders perhaps caught with their pants down during the TH may have found it to be a bonus getting a free slice at 40c, but whether they felt it worthwhile applying for their entitlement could be 50/50 given that most usually have small trade sizes to begin with.

This is only speculation on my part but logically I think most might like to see the story of MEL unfold before considering whether to sell or buy more. Those that do sell out will probably be purged out of the market in the first day or two after the new shares come into play.

The rights issue has possibly partly contributed to why MEL's share price has taken awhile to begin getting off it's feet. Note if you inspect the market cap of other similar CSG players, they are already miles ahead. So, MEL possibly has a lot of catching up to do...but that's just my humble opinion of course.

Interesting times ahead.

cheers and good luck,
Sagitar

oh mate, don't worry, if there was a MEL bandwagon, i'm definitely riding it, just not in a monetary sense yet.

i think this one will gain some serious value over the next 12 months as people pick up on relative underpricing of its reserves.

just going to wait a few more days to see if i can pick up a few(not many) cents cheaper if there is a bit of post-rights issue profit taking

 

[pan]

oh mate, don't worry, if there was a MEL bandwagon, i'm definitely riding it, just not in a monetary sense yet.

i think this one will gain some serious value over the next 12 months as people pick up on relative underpricing of its reserves.

just going to wait a few more days to see if i can pick up a few(not many) cents cheaper if there is a bit of post-rights issue profit taking

I totally agree, the only reason why I haven't purchase any yet is for the same reason. There is an opportunity from the rights issue to make a quick 20% or so. Will be interesting to see what happens on thursday and friday.

 

[Nero64]

Hi Kennas,

How old is that pdf? It may be a bit dated.

Mel has come out with 2.7PJ 1P certified.

No 2P contracts as yet. It doesn't have much cash either.

Compared to ESG which has 21PJ 1P and an expected 1300PJ 2P by 2010.

Its NSW rival ESG is a bigger fish. Less risky IMO.

Then again the whole CSG sector has some element of risk.

Now compare these two minnows to someone like AOE which has 10+ (Post BPT Tipton West acquisition) the 2P reserves and 150 times 1P reserves of MEL and well comparisons are odious.

You're better of playing an established company, but then again it may have some potential. Worth a punt.

 

[Sean K]

Hi Kennas,

How old is that pdf? It may be a bit dated.

Mel has come out with 2.7PJ 1P certified.

No 2P contracts as yet. It doesn't have much cash either.

They are currently raising about $8m in a rights issue.

This information below is from a presentation on 31 March, should be up to date.

I agree the others have some fantastic assets, hence why their market caps are a tad above this. It's a question of picking things that seem undervalued for me, not the just the best assets. Higher risk, but higher returns. I still know very little about CSM though, so I've probably bought a turkey. Cheers.

 

[Dangerous]

Hi Kennas,

How old is that pdf? It may be a bit dated.

Mel has come out with 2.7PJ 1P certified.

No 2P contracts as yet. It doesn't have much cash either.

Compared to ESG which has 21PJ 1P and an expected 1300PJ 2P by 2010.

Its NSW rival ESG is a bigger fish. Less risky IMO.

Then again the whole CSG sector has some element of risk.

Now compare these two minnows to someone like AOE which has 10+ (Post BPT Tipton West acquisition) the 2P reserves and 150 times 1P reserves of MEL and well comparisons are odious.

You're better of playing an established company, but then again it may have some potential. Worth a punt.

MEL reserves are as good as ESG (quantity wise)... Further to this MEL mkt cap is one-tenth that of ESG. AOE mkt close to $2B from memory, ESG $600M and MEL $50M.... I think you should have a closer look.

What i like about ESG and MEL is that CSG is proven as a domestic gas supply and NSW is facing power probs. CSG to LNG is unproven.

 

[YOUNG_TRADER]

Still accumulating MEL (have quite a few now)

To those that don't know MEL has 2P of 247 PJ and 3P of 1400 PJ and this is in one of its many permits (note MEL holds a 85% interest in this permit with CS Energy holding the balance 15% but the Gas reserves are NET to MEL

To understand what 2P if 247PJ's and 3P of 1400PJ's is worth look no further than MPO's sale of its NSW Gloucester PEL 285 for $370m to AGL

PEL 285 had 2P of 180 PJ and 3P of 360 PJ

Then recently Origin paid $660m for a permit which has no reserves yet but Origin expects to book 1150 PJ 3P

These 2 transactions only add to the long list of consolidations in the CSG space

I expect a value of $2 per 2P or 60c per 3P = for MEL $500m - $840m = $2.80-$4.80 in value

It may take another 6months maybe even 12months but I'm happy to accumulate and wait given the potential upside

 

[sagitar]

Nice work YT! Always enjoy reading your financial takes on companies. I'm primarily a chartist but having a bit of financial backbone to compliment the charts certainly helps to reaffirm one's view on a stock. Looking forward to see how this story unfolds.
cheers

 

[Nero64]

I think you should have a closer look

Yeah I did. Market caps are around 660 Mil, 74 Mil respectively. Don't worry about the market cap though. Worry about the cash on hand. ESG has 27Mil compared to MEL's 2 Mil.

MEL has 154Mill share outstanding compared to 853Mil ESG, so there is a bit of dilution there for ESG.

ESG has a larger asset base. On paper it has more than BOW, but it's not next door to AOE (Hence less of a take over target)

But yeah both have potential.

AOE still moving ahead daily though(Broke out above $3, now at $3.35), and the CEO is becoming a master at those timely press releases.

 

[Sean K]

Yeah I did. Market caps are around 660 Mil, 74 Mil respectively. Don't worry about the market cap though.

Don't worry about market caps? So, what do you think is the most important thing in assessing how undervalued a company is after it's asset base?

 

[Sean K]

Worry about the cash on hand. ESG has 27Mil compared to MEL's 2 Mil.

Actually ESG have more cash than that. They've done a capital raising and now have about $70m in the bank I think. Did you happen to read above that MEL have done a rights issue? Another factor to consider will be cash burn. Perhaps ESG needs more cash? Anyway, I'm sure you'll think of another way to make your choice of stock sound better. Good luck.

 

[Dangerous]

I expect a value of $2 per 2P or 60c per 3P = for MEL $500m - $840m = $2.80-$4.80 in value

It may take another 6months maybe even 12months but I'm happy to accumulate and wait given the potential upside

YT - I don't think you will see $2/GJ for 2P for these tenements for some time. Remember that the QLD tenements are close to existing pipelines (always consider how you get the gas to mkt) and current spot price for PRODUCERS is around $3/GJ. MEL are a long way off producing and it is unlikely their gas be used for LNG, which is the fundamental reason for QLD takeovers.

However!, if the mkt considers the recent power shortages in NSW and we see someone getting in there and building some gas-fired power stations, we could have a weiner young hot dog and perhaps your $2 call could be right.

In summary, until we some NSW takeovers (other than SGL) it is hard to ascertain a pric. Further to this CSG to domestic gas mkt is proven (sorry but this record is broken).

Keep posting mate. Good input