NCM - Newcrest Mining

[Uncle Festivus]

From an daytrading perspective, the bid side has improved substantially today.

 

[McLovin]

Most business textbooks will tell you how major M&A have a much higher chance of value destruction than value creation. And to me the problem is simply inherent in human nature - you need a lot of positive thinking to put on a big deal, and you need a lot of persuation to get it across the line. And that's the danger time when everybody simply think upside and not downside.

Plus there's a whole industry built around getting deals done. Most CEO's and boards do not spend their days trying to value companies, instead they get external advise from people who are incentivised to get deals done. Asymetrical knowledge and incentive is a dangerous thing.

 

[Ves]

At what point do you say Im wrong.
1 yr/5/or more.
Doesnt it become a point of Damn Im not going to realise the loss so Ill just keep it and get the dividends.
The fall may occur in the first year and remain there for years.

Patterns play out even tea leaves.
You can clearly see your wrong.

The most simple and general fundamental analysis answer to this question is the same as the most simple and general technical analysis answer: you are wrong when your assumptions have turned out to be wrong. In the case of F/A you need to make various assumptions in order to come up with a valuation. If it ever appears that there are irreconcilable differences between your initial (arbitary) assumptions and on-going reality then you should SELL. It's the same concept: you enter into the investment or trade with a plan and if the plan does not come to fruition you cut your losses.

I will add one other thing: patterns play out in the financial status of a company exactly like they do in the tea leaves. Often you get an inkling of something starting to play out before it is confirmed.

History doesn't repeat itself, but it often rhymes.

PS: I would never buy something like NCM. It's way outside my circle of competence.

 

[Bushman]

There's going to be ramifications from this - insider trading? That is, if ASIC is not asleep at the wheel, again!

Just had a read of the Citi 'downgrade' reports. Mgt has been hinting at a revised strategy looking to 'maximize free cashflow' at recent presentations inc the recent BoAMerrils Global Metals Conference (Barcelona, mid May).

Interesting that unlike BHP, NCM mgt did not release this to the ASX? But hardly a case of insider trading given it was said at an investor/analyst day. maybe they went further in the analyst Q&As or 'one-on-one' sessions.

If mgt said 'maximize free cash', I would expect this to mean -
1. exit non-core assets;
2. scale back capex/exploration;
3. slash opex;
4. look at the debt profile/hedge book;
5. non-core asset sales;
6. cut the div etc.

This is also why some pay for full service broking (I don't by I am not typically a ASX50 investor).

 

[skc]

There's a guy over at Hotcopper called Camden, a very experienced Fundamental Analyst, who has what he calls the "5-4-1 rule" for acquistions. He believes that roughly 5 acquisitions destroy value, 4 are roughly value neutral in the long term (ie. they don't really add anything) and 1 actually adds value.

That's a 1 in 10 chance. Sounds about right, doesn't it?

I've heard this rule from a venture capitalist and how their portfolio companies perform.

For them they only need 1 start out of 10 to make it worthwhile. I guess if that star is Google or something like that, then you wouldn't need too many of them!

Back NCM.

 

[skc]

For once I agree... 3 analyst downgrades and 2 days later a massive writedown. Did NCM management read the analyst reports and realise they need to announce something? Or did the analyst get tipped off?

Anyhow, Macquarie actually reaffirmed their outperform buy today so that a case of bad timing for sure (and no insiders there!).

Charlie Aitken's rant:

Managing director of Bell Potter Wholesale Charlie Aitken has called on the Australian Securities and Investments Commission to investigate Newcrest Mining and the timing of its downgrades.

In a note to clients on Friday morning, Aitken said the Newcrest downgrades had caught his eye this week and thought it was unusual five different broking analysts would change their view on Newcrest at the same time.

http://www.afr.com/Blogs/Opinion_Street Talk#1a32ebde-cf08-11e2-bea9-b00b99973b53

 

[Bushman]

Charlie Aitken's rant:





http://www.afr.com/Blogs/Opinion_Street Talk#1a32ebde-cf08-11e2-bea9-b00b99973b53

or maybe he should get some better sell side analysts ... lol .

whenever I see his name I think of him having that buy on the falling knife called AWC. he rode that puppy all the way down below $1.00

 

[Uncle Festivus]

Good to see NCM directors buying more of their own shares.

Vince Gauci bought 6000 shares at $14.74
Greg Robinson bought 8000 shares at $14.51

Apparently everyone was left in the dark? You can't get more insider than that, so WT?

 

[Bintang]

Apparently everyone was left in the dark? You can't get more insider than that, so WT?

Greg Robinson also bought 8580 shares on 9May at $17.50
Don Mercer bought 4454 shares on 10May at $17.40

Are they just dumb or deviously clever?

I don't know the answer but it looks like they have an incentive to turn things around.

The one thing they haven't downgraded is their reserves. That still looks good to me.

 

[Uncle Festivus]

Bought by Greg Robinsons' retirement fund - looks like he won't be retiring any time soon then

 

[skyQuake]

For once I agree... 3 analyst downgrades and 2 days later a massive writedown. Did NCM management read the analyst reports and realise they need to announce something? Or did the analyst get tipped off?

HA!

ASIC is now talking of investigating those clever analysts

 

[RottenValue]

At the risk of being pedantic, it would be more correct to say it would have lost 50% of its price rather than value.

This stock has low ROE, low EPS growth and therefore little reason to justify even its current PE of 17 - a value of $12 would be more appropriate. The price fall over the past 5 years reflects PE contraction as the EPS has stagnated.

I would back the shorters on this one!

I thought I had posted this! Was early January, the price was in the low $20s and some posters expected it to bounce because it used to be $40. Good to see the fundamentals finally taking over from the irrational exuberance - if a company cant grow earnings per share, it will eventually be worth very little.

 

[sreeve]

NCM chart: The share price went through $12 support level on Friday but bounced to close above. Share price staying above the $12 level is critical... and it now needs to bounce or trend sideways to strengthen this support area.

 

[McLovin]

Charlie Aitken's rant:





http://www.afr.com/Blogs/Opinion_Street Talk#1a32ebde-cf08-11e2-bea9-b00b99973b53

The old perma-bull was probably waxing lyrical about it on Thursday.

 

[Uncle Festivus]

Someone has some faith?



ASIC looking into Newcrest share downgrades

Investors blast Newcrest as controversial writedown raises disclosure issues

 

[pixel]

Someone has some faith?

JPM and RBC have (re)rated NCM to "Overweight/ Outperform".
From current Lows, that's probably not ureasonable.

 

[skyQuake]

JPM and RBC have (re)rated NCM to "Overweight/ Outperform".
From current Lows, that's probably not ureasonable.

Its messier than that:

So over the wkend we have:

- Moody's reviews NCM's ratings for downgrade
- BofAML cuts it to Neutral on Cap raising risks
- RBC raise to outperform
- JPM cuts pricetarget by 11%, but keeps outperform

 

[faddishworm]

Don't forget closing the Brisbane office, cutting expenses and capital expenditure... To me I think it should have happened a few months ago and that if anything cutting costs are good.

I think if NCM can weather the storm of these gold prices then it will come out again in 8-12 months as a solid performer.

Physical market indicators are a falling dollar (which is good for export) and increased US money producing, which should cause a hike in gold and since gold is used as a hedge against inflation then it should force prices up.

Am i reading too far into this? I have only been on the stock market since NCM was at 16.4 ha ha.

 

[Sean K]

Whilst OPEX is a significant issue, I feel it's the prospects of POG that is the major issue. The market, while emotional, is factoring in large price decreases in POG. Seemingly due to a healthier economic outlook. Is this just a lull before the storm?

 

[Uncle Festivus]

Whilst OPEX is a significant issue, I feel it's the prospects of POG that is the major issue. The market, while emotional, is factoring in large price decreases in POG. Seemingly due to a healthier economic outlook. Is this just a lull before the storm?

There's a squeeze going on & the ultimate direction may surprise? The battle of longs v shorts. You will be hearing more of JPM?