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SKC fundamental positions

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CAJ released the full report today. Everything pretty much as per forecasted. NPAT $732K and positive operating cash flow of $2.9m. Full year PBT guidance of $2.25 may be exceeded by 3-4% (that's the smallest upgrade ever...).

Balance sheet probably a little bit weak. They invested a fair bit in plants/equipment and leases so cash balance is unchanged from last period at ~$850K.

Continue to hold, but it didn't have the boost to share price that I was looking for.
 
New Position

18/02/2011 Buy 5,000 CFE @ $0.645 = $3,225

Rationale

One of the odd companies on ASX, CFE is an investment house with many assets. They've had a pretty decent track record of buying up cheap assets and off-loading them after adding value etc.

Sum of parts valuation is ~$1, based on Patterson's research which I agree with. If they managed to sell their main asset at a reasonable price that will provide a strong catalyst for the share price.

The position however is kept small as recent price action has been a bit odd (hmm, may be that's technical analysis??). If it keeps falling on no news I will build this up to a full size position. If it shoots right back up then I guess I will live with a smaller profit.
 
End of week 15 summary



Portfolio value up 21.3%
XJO +4.04% (Last 4936.7, Starting value 4745)
XJOAI +3.9% (Last 36016.6, Starting value 34639.1)

Notes

A good week for the portfolio closing some 5% higher than last week. Big contributers included AAD, HFA, MFC and CAJ. But CAJ's gain really doesn't count because it was just a very low volume uptick on a pretty small thin stock.

2 more closed positions (PGA and SOO) after their profit results looked like good decisions so far.

Next week should see a few more reports, but I am mostly interested in MYE, VPG and ZGL - they will verify my reason for entry or otherwise.

NB: The figure for 'Today's Change' is completely incorrect due to the CSR 1-for-3 consolidation...The number of shares and purchase price has been adjusted to reflect this.
 
It is nice to see you getting onto CFE too SKC^^. I off loaded my stack in CFE at around 69c a few days ago, and is looking to reenter, given the fundamentals of the company. Been kicking myself for not queuing up a buy order as it dipped interday to 55c just yesterday though! (would have been the easiest 10-20% return EVER!). Oh wells. Keep up the good work

 

I am aware of CFE some 6 months ago but was too lazy to look at it in details (it had so many assets). Plus I was put off by how people are so enthusiastic about it (i.e. more likely to be over-valued). I am sure the value would have been obvious back at 40c...

Hopefully those who didn't do their research will sell now because they were riding on the company buy back (which should now be exhausted) so I can build this position up.

Having said that the bulk of the $1 per share valuation is derived from an unlisted asset - the price tag of $500m being thrown around, while not unrealistic, is certainly subjected to fluctuation in the mind of the market.
 

Position added

21/2/2011 Buy 5,000 CFE @ $0.615 = $3,075
 
Partial Position closed

21/6/2011 Sell 20,000 HFA @ $0.30 = $6,000.

Realised P&L = $2,191.

Rationale

HY report came out today. A mixed result overall. Reported revenue and EBITDA both down mostly due to negative currency effects from the strong $A. Underlying FUM/FUA went up 8%. AUM were up in the US but down in Australia. EBITDA on constant currency up slightly ~5%, but basically flat after FX effect.

I don't have a view on the FX but it's not nice to see all the gains evaporate due to the rising $A. Bear in mind that the avg rate for $A was 0.94 in that half so the second half will be much the same (avg rate would probably be ~1.0).

The stock still has upside but it feels prudent to bank some profit. It has gone to within 10% of my target afterall.
 
Position Closed

22/02/2011 Sell 2250 CSR @ $3.48 = $7,830.

Realised P&L = $342.17 (incl. dividend and capital return) plus $264 in franking credits.

Rationale

CSR has gone through the dividend, capital return and 3-for-1 consolidation. It was undervalued and I was looking for those events to be catalyst for closing the value gap against its peers.

But none of that happened so I am happy to just scratched the trade. They don't report until May so there is no immediate catalyst for share price change.

Cash on hand = ~$33K
 
Position Closed

23/2/2011 Sold 5,000 VPG @ $1.205 = $6,025.

Realised P&L = $163.

Report out today and the headline figures were all pretty poor, even though those were not why I took the position in the first place.

Underlying earnings of 3.1cps isn't exactly attractive (PE ~19), more writedowns in the development business amounting to $50m. NTA now $2.32 as opposed to $2.69 6 months ago.

The update on the MBO proposal was also disappointing. First time any number is revealed and it was GBP 52m. After paying back some debt ~GBP 26m will be available to the company (~$42m, or 23cps). So the offer is 1/5 of the share price for the 'crown jewel' in the business... discussion with other 3rd parties are ongoing but not sure where this will lead to. This position was a play on this event and it's not looking like it will work out the way I wanted, hence the exit.

With the world going a bit silly these days I don't mind holding more cash.

Cash on hand = $39K
 
Hi skc,

I like checking through your thread just to see how your doing even though majority of the stocks you've used haven't really came across my screen/investment list.

Just wondering what your thoughts are on MML fundamentally? I bought a week ago at $6.90 and thought today's announcement was really positive but it seems to have been hammered. Gold is back up around the $1,400 mark and their costs per ounce area minor $186 per ounce. Thats a massive margin and they are using the free cash flow to upgrade the site to produce 200,000 ounces a year instead of 100,000 currently. Will also use the free cash flow for exploration and expanding the resource.

I see massive potential for MML to head towards the $9 mark if they can maintain their first half EPS through the second half. Would be interested in your thoughts?

Cheers
 

Hi Froggy... sorry I don't have a view on MML. You may or may not have noticed that all positions on this thread are based on events (takeover, asset sale), market inefficiencies (price << NTA) and relative value.

I say relative because I've always looked to other similar companies to see if the stock is cheap or expensive compared to other listed stocks. PE of 7 is low if everyone else is trading at PE of 15. PE of 10 is high if others are at 6...

I don't have a view on the gold price (and if I did I would just trade the gold), or the relative value of MML's gold in the ground vs its peers... so can't help you there.
 

Not a problem, thanks for the reply anyway and keep up the good/interesting trades . Will continue to watch with interest. If you do by any chance happen to take a look at MML feel free to PM me, always looking for others to discuss fundamentals and investing for value.

Cheers, Ribbit.
 
End of Week 16



Portfolio value up 18.1%
XJO +1.93% (Last 4836.5, Starting value 4745)
XJOAI +1.58% (Last 35185.1, Starting value 34639.1)

Notes

Not the best week for equities, but a correction is long overdue. I purchased some protection for my portfolio last week and that is paying off. But I won't include those for the purpose of this thread. This account is ~30% cash which is probably right for the moment.

BAU - Sold down heavily after the EGM re the . Pretty much back to cash backing.

MYE - Good solid HY results that's basically at expectation with 16% yoy growth.

WHC - The auction is taking longer than I wanted but has cushioned a lot of the fall in the share price. Not sure what the new carbon tax means to the share but I suspect quite a few bidders will want to revise the bid price down.

ZGL - Good result and outlook for the full year. Share price responded well after the announcement.
 
New Position

4/3/2011 Buy 20,000 BSA @ $0.27 = $5,400.

Rationale

BSA is Building Services and Contracting company doing things like installing Foxtel cables, maintaining buildings etc. They recently reported a very solid HY result with 39% growth in revenue to $190m and 71% growth in NPAT to $4.3m (2c EPS).

Order book is strong (over $260m) with majority of H2 and FY12 revenue under contract, and outlook is very positive.

Current price is trading at a PE of just ~6.8, even thought the growth looks to be sustainable for the next few years. Other listed peers (SPT, PRG) are trading at PE 15 or higher, without this sort of growth prospects.

Preliminary target is a PE ~12-13, or ~50c. Will propbably adopt a trailing stop if we get there. I am wrong if the top and bottom line growth runs into trouble.
 
End of Week 18



Portfolio value up 14.6%
XJO -2.11% (Last 4644.8, Starting value 4745)
XJOAI -1.35% (Last 34170, Starting value 34639.1)

Notes

The portfolio matched the market's 4.5% loss for the week.

BAU - Released their HY accounts today. $47m cash = 20cps cash backing with a few $m to come in from their Chinese partner on repaying thier exploration costs. Good buying opportunity if they dip significantly below their cash backing.

BSA/MYE/ZGL - Despite going ex-div this week the share prices have held up very well.

CIF - Not showing any real imperative to move either way. If the market keeps falling this is one position I wouldn't mind scratching.

MFC - Guess I should have taken at least partial the profit at my oridinal target... It's main asset BSM shares has fallen quite sharply from 50c down to 38c today. It's still 'undervalued' compared to its assets, but I won't be around to wait for that gap to close if BSM keeps falling. I am putting a stop loss on MFC which will be triggered if BSM closes below 35c.

WHC - It's fallen a long way as do many coal stocks. But with quite few buyers lining up I would have thought the price will hold up better. Still happy to hold until the corporate transaction reaches its conclusion.
 
Phew... what a day!

Position Closed

15/3/2011 Sold 5000 HFADA @ $1.275 = $6,375.

Half position previously closed on 21/2/2011

Realised P&L (on full position) = $4,756.84

Rationale

HFA reached a peak of $1.48 not too long ago and 15% trailing stop triggered.
 
Position Closed

15/3/2011 Sold 100,000 MFC @ $0.125 = $12,500.

Realised P&L = $1,981.6

Rationale

Trailing stop placed on BSM share price triggered.

Cash on hand = ~$52.5K.
 
Hi Skc,

Very very impressed with thread. Was just wondering how I could learn about the rationale you are using. By this I mean how I can learn that if ABC happens within a company XYZ will happen to the SP or future earnings. Is this knowledge you have acquired from years of learning about economics?

Thanks alot!
 

Thanks Levin. I was a lot more impressed with myself 3 weeks ago!

As I said before you need some basic finance knowledge to read P/L and balance sheet, and you need a fair bit of market knowledge on what is considered 'average valuation' and what is considered 'cheap' for various industries/companies. Then you need a good methodology to identify these companies. Last but not least you need to develop a professional attitude towards position management - position sizing, timing on entry, conviction to hold, and ability to sell when things do/don't work out.
 
New position

21/3/2011 Buy 28,000 AMU @ $0.305 = $8,540.

Rationale

A takeover offer at 33c cash + 2c dividend implies a premium of ~15% at the entry price. If all goes well the transaction will be completed around end of June, so 15% return over 3 months is the potential reward for this position.

The risk is that the deal falls over. AMU has been in trading halt for the last month or so while the buyer did plenty of due diligence.. so the chance of a change of heart should be small. The acquirer is also still subjected to finance approval and that is expected to take a week or so. If and when that comes through the share price should trade close to the offer price. Then there's independent expert target statement, court approval and shareholder votes... most of these should be formalities.

If the deal falls over I expect AMU to fall a bit but not drop into a hole. They were trading close to their cash backing before the deal was announced and now demonstrated that the rest of the businesses are not worth nothing.
 
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