SRL - Straits Resources

[Sean K]

First close above $1.00 resistance, but it could be short lived. No outstanding breakout, but could be seeing the first signs of upward movement.

Haven't heard much on the Straights Asia sale for a while....

They really ought to be moving up in price considering the moves we are seeing elsewhere in the coal sector - unfortunately the diversified tag sees the coal interests heavily discounted.

I'm of two minds on the SARL sale. It would be nice for a quick profit that we/they could churn in to other opportunities but at the same time there is a nice story of a significant coal company emerging here. The Sebuku Western Leases scoping study was the latest good reading in that story. Could be a good hold.

Yes, could have done better during the dead cat, but still not bad if you picked the bottom and traded it.

Agree on the diversified comments, but perhaps even the copper jump aided a little.

All seems tied to the coal though imo.

$1.00 broken and looks to be forming as support after consolidation. I'm not sure what my next buy trigger is. Maybe bouncing off this $1.00 area, or breaking through $1.20 ish last high.

One of a few great opportunities the past 2 months.

 

[Lachlan6]

SRL is tarting to look a little weak in the short term. It is tracing out a smaller degree A, B, C corrective move. Larger picture the stock seems to have traced out 3 waves to the downside and looking at the sharp wave (2), the larger (4) should be a choppy affair. Another alternative to my count is a running triangle or running flat into the wave (4), but we will see how the stock traces out this corrective move and label it accordingly. Bottom line is once this (4) is eventually complete, the stock should thrust lower again in the wave (5).

 

[J.B.Nimble]

Agree on the diversified comments, but perhaps even the copper jump aided a little.

All seems tied to the coal though imo.

I think you could be right on the copper jump - the copper is almost irrelevant to their past profitability and was not a huge part of their forecast growth and yet it seems to weigh heavily on punters minds. I have been treating this as a pure coal play and if the rest turns out to have some value it's a bonus... I would love to see them resurrect the SARL ASX listing proposal, with a partial in specie distribution and just retain a few SARL shares to sell to cover near term working capital requirements.

 

[kam75]

This came up in my 30 day breakout scan yesterday. It may have closed a number of days consecutively above the 1.00 level but it's gonna have to show me more volume increase to get me interested. Once it clears 1.50, it should be up and away.

 

[Sean K]

Fallen back under 90c along with the market weakness which makes it start to look cheap on the numbers again.

234m on issue @ 90 = $210m mc.

They have $286m in the group piggy bank so their projects are valued at ...... minus $76m, LOL.

No news on the proposals put forward regarding Straits Asia. I wonder if selling it off is going to give the stock a boost, or what?

Any further weakness looks like further opportunity to me.

 

[enigmatic]

Hey Kennas was just wondering were your source was concerning the amount of cash they have and another question how much debt do they have

 

[Sean K]

Hey Kennas was just wondering were your source was concerning the amount of cash they have and another question how much debt do they have

Their last activity report. Pg 11

Cash
At the end of December 2008, the Straits Group cash resources totalled A$286 million. This comprised A$24 million for the Group s operations in Australia, A$244 million cash resources within the Straits Asia Group and A$18
million attributable to the Straits Group s other activities.

Debt
Straits is currently reviewing its long term debt financing requirements. In the interim the Company has rolled A$50 million of debt facilities (drawn to A$48 million at 30 December 2008) provided by the ANZ and Macquarie banks to a maturity date of 31 March 2009.

 

[enigmatic]

Considering there long term debt and there current account balance and with the mkt cap Undilluted at 194mil this is looking like one of those no brainers again, is there anything outstanding which would of caused the price to drop more then 90% in the last year. (other then the Financial crisis)

 

[Sean K]

The overall sell off could just be fear. $8.00 to 90c in a couple of months is a bit much. Or, market is right, and this is where the value of it's assets are going. Not sure on what price SARL is on the Singapore exchange, must check, but perhaps the value of Straights Asia has fallen through the floor. Check the previous page for some numbers that YT did some time ago on implied value from SARL. Seems too cheap to be true doesn't it.

 

[J.B.Nimble]

The overall sell off could just be fear. $8.00 to 90c in a couple of months is a bit much. Or, market is right, and this is where the value of it's assets are going. Not sure on what price SARL is on the Singapore exchange, must check, but perhaps the value of Straights Asia has fallen through the floor. Check the previous page for some numbers that YT did some time ago on implied value from SARL. Seems too cheap to be true doesn't it.

Too cheap to be true indeed...
SARL mc = 1.092bill shares x 0.765 SGD/share = 392mill SGD= 392 mill AUD...
Cash (excluding SARL) = 24mill + 18mill AUD, and debt = 48mill AUD. Nett debt = 6mill AUD

SRL = 233mill shares, so.... SARL+nett debt = 386mill = 1.66 /share. Compare this with today's 0.88/share.

And this is before we attribute some value to the 2 copper mines, one gold mine, one antimony/gold mine, coal exploration interests in Brunei and Madagascar, etc etc

Extraordinary... :shake:

 

[Sean K]

I wonder if Felix are one of the companies sniffing around Straights Asia?

Would seem to make some sence for them to bolt them on?

Felix Resources sizes up Asian coal assets
March 07, 2009
Article from: The Australian

FELIX Resources is eyeing energy coal assets in India and Indonesia after last month shelving talks on selling itself to another company.

"Indonesia and India are the two areas we are having a look at," managing director Brian Flannery said.

The Brisbane company, which exports to Korea and Japan, was talking to "large groups" in India that wanted to build new power stations, he said.

Indonesia is the biggest exporter of energy coal.

India is planning to build nine 4000MW power stations to double coal-fired electricity production by 2017, according to Australia's commodity forecaster. Prices for the fuel rose to a record last year because of demand from Asia, boosting Felix's profit threefold to $166 million and taking cash on hand to $340 million last month.

"If you take the bet that there is going to be a rapid increase in energy demand in India, which would be the case, India is your first choice to develop supply, with Indonesia probably a close second," ANZ senior commodity strategist Mark Pervan said.

 

[shag]

Its called thermal coal, not energy coal. can't reporters get the basics right. all coal is used for energy, just some are better for using as coking coal, ie less contaniments and they add some elements to the reaction.
i've never seen a coal that doesnt burnt and put out plenty of 'energy'.

 

[J.B.Nimble]

I wonder if Felix are one of the companies sniffing around Straights Asia?

Would seem to make some sence for them to bolt them on?

Not sure... FLX are in a nett cash position of just over 300mill. Current mc of SARL is around 800mill with SRL's 47% stake being just under 400mill. Could they grab SRL's stake without making a full take over offer? If they went for the lot what sort of takeover premium would they need to offer? Would they want to take on debt to take on the lot.

My guess is that FLX will be looking at something smaller, distressed, or in an earlier stage of development. in short, anything that doesn't require taking on debt...

 

[Sean K]

Not a breakout yet, probably, but definately potential breakout material. A bit more volume and EOD above 1.25 maybe the trick.

 

[Sean K]

SRL trading halt with the Strategic Review regarding Straits Asia to be released during the day. Interesting to say the least. I am guessing that they will say that they are keeping the asset, as I can't find any other trading halt for any other company that may be involved in a buy out. I was actually hoping for an offer that would put $200-300m in SRL's pocket which would put a different spin on the company, and hopefully make the market re-rate them. Fingers crossed the market likes whatever drops out!

 

[Sean K]

SRL trading halt with the Strategic Review regarding Straits Asia to be released during the day.

No idea what this really means...


The total cash consideration of up to US$335m (approximately A$500m, equivalent to approximately A$2.14 per SRL share) comprises an upfront completion payment of US$220m and a performance payment of up to US$115m payable post completion. The performance payment relates to certain matters in connection with reserve upgrades in relation to the mine located on Sebuku Island, South Kalimantan, Indonesia controlled and operated by SAR or as otherwise agreed between PTT and SRL. The performance payment is expected to be realised during 2009.

The Board of Directors of SRL is currently reviewing the funding requirements of SRL going forward and its strategy with respect to the use of the Transaction proceeds. Whilst it is expected that an appropriate level of cash will be retained to fund future growth opportunities and for general working capital purposes, it is envisaged that a portion of the Transaction proceeds will be returned to SRL shareholders. In the near term approximately one fifth of the total consideration received by SRL in relation to the Transaction will be returned to shareholders via two separate instalments. The Board of Directors will provide an update on any proposed return of capital to Shareholders at the appropriate time.


No record date that I could find, but assume before the halt.

Does it mean the sp should be $2.14 ish at this point?

Probably not considering the disconnect to date. This will probably be ignored.

 

[Sean K]

No idea what this really means...

Looks like it's going to open up around 1.28 ish, so still well under the implied value of just the sale of 60% of SARL.

Bamboozelling.

 

[Sainter]

That price might be that which was matched before the TH. It is possible all bids will be purged before it recommences trading, I'd say tomorrow. I'm betting an open above $1.50, poss closer to $2.
I hold a few SRL (have done so for years)

 

[Sean K]

That price might be that which was matched before the TH. It is possible all bids will be purged before it recommences trading, I'd say tomorrow. I'm betting an open above $1.50, poss closer to $2.
I hold a few SRL (have done so for years)

$2 would be nice, as I'm holding quite a few, but the depth doesn't look like it's a chance. Maybe will be purged. Whatever, the numbers they are receiving for 60% look pretty impressive and will allow punters to put a better figure on the company overall. Certainly NO value placed on any of their assets at the moment which has been confounding. Should be a bit of a stag profit on the open whatever the case, not sure if I'll hold everything or take the money to the bar...

 

[Sean K]

234 on issue at $1.15 mc is $270m ish.

They've just sold 60% of their Asia investment for $485m.

So, just on that cash settlement their sp could be $485 / 234 = $2.07.

That is only on the Asia sale value and does not include their remaining investment in Asia, plus all their cash in the bank, nor their other projects.

So, perhaps the $2 call isn't too outlandish.

In the media:


Straits Resources sits pretty on coal sale
March 24, 2009

STRAITS Resources says it is well-placed for acquisition opportunities.

It had just sold a stake in its coal assets to Thailand's PTT International Company for $US335 million ($485.79 million).

The transaction will give PTT International a 28.26 per cent interest in Straits' Singapore-listed coal subsidiary Straits Asia Resources, which operates two thermal coal mines in Indonesia.

The base and precious metals miner had been reviewing its 47.1 per cent holding in Straits Asia since receiving a number of unsolicited expressions of interest for the stake in late 2008.

Straits CEO Milan Jerkovic said yesterday the part-sale would provide the company with the funds to pursue potential acquisitions, particularly in precious metals, copper or bulk commodities.

"Straits will be well-placed to look at attractive acquisitions at a low point in the cycle," Mr Jerkovic told reporters on a conference call. "While we don't have anything specific in mind, copper and precious metals are probably the initial areas that we'll look at."

Mr Jerkovic said the company was looking at other uses for the funds, including a distribution to shareholders and the repayment of debt facilities.