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Continued from here:

OK, we’re in the home straight now, at least within the original valuation stage of TGISVP. Eight companies left, mostly junior resource companies, so that should be fun..! I’ve booted Real Estate Opportunities (REO:LN), as trading was suspended in January. And please, let’s not bother talking about NAMA, court cases etc… For years now, REO’s had terrible corporate governance, far too much leverage, and pretty much promised to totally fuck investors... And so it has come to pass, and shareholders don’t even have a luxury Moroccan get-away to show for it…

I’ve no desire to short shares usually – a value mindset is far too dangerous an attribute to possess if you want to play that game. But watching REO fly far too close to the sun, and not even notice its wings were melting, I just got far too itchy… I really wasn’t worried what the price was – GBP 20p, 5p, 3p…who cares when it’s going to zero anyway. Unfortunately, I couldn’t find a spread-better who would deal in it – even Worldspreads (and their zero spreads…), if I recall..!? Perhaps I didn’t ring around/push hard enough? If anybody managed to do this successfully, I’d love to hear more details?

The Great Irish Share Valuation Project X     (xlsx file)

The Great Irish Share Valuation Project X     (xls file)

New Ireland Fund (IRL:US):   If I was interested in an Irish fund vehicle, this would be it! After the sad demise of Gartmore‘s Irish IT, this is the only closed-end Irish fund available to investors. Their portfolio doesn’t look much different than the two ETFs out there (which I’ve already covered) – that’s to be expected. Longer term, however, I’d hope an active manager can (hopefully!) avoid potential investment disasters far better than an ETF. Also, Kleinwort’s taken over as Investment Adviser from Bank of Ireland (BKIR:ID). So? Well, I haven’t checked (since it’s pretty irrelevant these days!), but I presume KB’s permitted to buy B/I shares – B/I wasn’t, to avoid any conflict of interest. This might prove useful at some point in the future.

The fund’s done a reasonably good job of ensuring the share price tracks NAV, but currently (not surprisingly) an attractive (and historically wide) 14% discount‘s opened up. This is tempting! Phillip Goldstein certainly seems to think so – I’ve mentioned his activist bent before – he steadily bought shares last year and is now biding his time with a 12.7% stake…

Norish (NSH:LN):   Well, let’s not blame John Teeling for this one (although he’s a 12% shareholder)..! I’m bemused by Norish. In fact, it almost seduced me with its cheapness when I was at my purest as a value investor (yes, ‘I used to be Snow White, but I drifted…‘). They’re in the cold storage business, with GBP 15.4 mio of property assets and GBP 8.0 mio of net equity. Profits keep falling, as does interest coverage, and net FCF’s been negative for the past couple of years… Return on equity, despite a hefty dose of leverage (a slightly threatening 58% of total assets), is a measly 4.8%.

Maybe there’s good news in the latest results? No, just like last year, they mostly yammer on about R22 HCFCs… What?! These muppets couldn’t manage their way out of a paper bag..! But they actually get paid more than shareholders! Jesus, just lease out all the warehouses to a decent operator, fire everybody, and shareholders would do far better..!

This is a classically cheap value investment on paper – not something I’m really satisfied with these days. There has to be some kind of growth story, or catalyst, attached. But the only sniff of something like that was Ray French‘s (of Strongbow Capital) purchase of a 12% stake five years ago. And he gave up, apparently in disgust, and sold out two years later! Some of the property assets were bought years back, however, so I suspect net equity is well supported. Despite that, I think this still only deserves a 0.6 Price/Book valuation – with this dunce, who the hell knows when value will be realized, or wasted away…

Orogen Gold (ORE:LN):   Despite the crappy price, I was shocked to see this little bauble has a GBP 16 mio market cap! Wow, eight times last cash reported! Orogen’s currently earning a stake in Deli Jovan, a deli chain mining permit & workings in Serbia which has been untouched for over 70 years. Oh, if by chance you’re an offended Galantas Gold (GAL:LN) shareholder, I bow to you, Galantas now seems like a mining giant after looking over Orogen…

I actually had to read their news releases a couple of times, I thought I was missing something? Nope, in the past year they’ve taken some soil samples…managed to gain full access to their mines, and even do a little mapping. Whoopty f**cking doo..! There’s no sign of discernible value here yet, except for cash. The only positive I see, in fact, are the rather surprising stakes held by Anton Bilton & Glyn Hirsch (of Raven Russia (RUS:LN) fame). But I guess this is just mad money for them here… Though, I’d think Anton already has plenty of excitement in his life, what with Russia and Lisa B..?! Anyway, ORE looks wildly over-valued based on current cash (and incorporating 1 year of cash burn).

Papua Mining (PML:LN):  A brand new gold & copper explorer from the ex-Glencar Mining folk (Hugh McCullough). Glencar was in Mali, this time they’re going into Papua New Guinea – they really like these black holes, don’t they?! And sure, foreign companies have had such a great history to date exploring and mining in PNG… Their IPO cash is budgeted to be exhausted within 2 years – meanwhile, PML looks vastly inflated on the usual blind hope of small investors…

About the only thing I like about PNG is this charming video – just give it a minute, and you’ll be absolutely hooked, the ‘story’ (and the music) are entrancing.

Petrel Resources (PET:LN):   Another John Teeling vehicle… Why on earth did anybody ever believe a small Irish company could harvest first mover advantage in post-occupation Iraq..?! The share price’s now down a whopping 95% in the past 5 years. Actually, Petrel’s been around for 30 years now, with little to show for it…some investors never give up, eh?! PET hasn’t quite admitted it yet, but they’ll probably give up on Iraq soon, finally. Petrel’s got about 2 years of cash on hand, and continues to look well over-valued. Meanwhile, we’ve a GBP 5.7 mio market cap company, with EUR 4.1 mio of cash, intently focused on opportunities in Iraq, Ghana and…Ireland!

What an absurd situation, and this kind of scatter-fire/over-reaching approach is shared by too many other junior resource companies. It’s always amusing, but expensive, to see these companies trip over themselves running one exciting hot spot/prospect to the next (definitely East & West Africa right now!). I think most small investors would do better if they thought of junior resource company execs. as bratty little infants (with shareholders for parents). They have short attention spans, constantly crave shiny new toys, completely ignore their parent’s wishes, need to be constantly fed (at the most inconvenient of times) and then, of course, they shit all over you…

Rathdowney Resources (RTH:CN):   Rathdowney’s a Canadian company focused on zinc/lead exploration in Ireland (and Poland). We’ll have to see if they can do a better job in Ireland than Minco (MIO:LN) did… Their low cash burn to date implies another 4 years of cash on hand, but nothing much has been achieved to date and market cap’s at the usual premium to cash. Companies like this are dime a dozen on the Canada market! OK, let’s move along…nothing to see here…

San Leon Energy (SLE:LN):  Shall I make this about Oisin Fanning..?! You know, Oisin wasn’t so bad in the late 80s/early 90s, pretty much your typical wide boy broker. Very much living up to the London stereotype – drinks and carousing at O’Donoghues, among other establishments, were legendary… Then things changed, just like with a lot of other people in Ireland. Actually, I should praise him, he was actually years ahead of the Celtic Tiger! When he bought Forenaghts, it was a small glimpse of the excesses to come. The idea of him prancing around the manor in jodphurs was a bit much to take for some..! Anyway, do your own research, but after MMI and Smart Telecom an investment in San Leon’s not for me…

But Fanning always tells a compelling story – so good he has Blackrock and George Soros/Quantum on board as shareholders with 12% and 19% stakes, respectively. I’m impressed! I always knew Soros was a lot smarter than me, ‘cos I don’t see what people are paying up for here..? Like a lot of these companies, San Leon has exploration going on in such far-flung places as Poland, Morocco, Albania and Ireland. They’ve plenty of licenses, drilling and potential resources – in fact, strategy seems to consist of throwing everything against the wall…and seeing what sticks.

So far…very little in terms of JORC reserves/resources, and the patchy drilling progress in Poland (where their largest shale prospects are located) appears at odds to date with management optimism. But I wouldn’t underestimate Fanning’s ability either to put together another deal/’drill for oil on the exchange’ – in the past couple of years, he’s acquired Realm Energy and Island Oil (another Irish explorer). As it stands though, San Leon looks vastly inflated on hope value (rather than hard asset value) and based on current estimated cash/burn rates they’ll be needing to raise more cash very soon…

Trinity Biotech (TRIB:US):   Please read here for my most recent write-up on TRIB. Since then, TRIB’s announced a CE Marking for its new point-of-care Uni-Gold Giardia test. The test will be launched immediately in Europe, and the company’s also expecting US FDA approval shortly, to be followed by launch of 5 more tests by the end of 2012.

TRIB also acquired Fiomi Diagnostics, a Swedish company at an advanced stage in developing a panel of point-of-care cardiac marker assays, particularly for Troponin I. $60 mio‘s already been spent on the technology, and it offers TRIB a slice of the $900 mio Cardiac POC diagnostics market, which is growing 14% pa. The upfront cost’s $5.6 mio of cash, plus issuance of 0.4 mio ADRs. This drops their cash & guaranteed receivables to $76.8 mio – with an expected 21.5 mio ADRs outstanding, that equates to $3.57 cash per share. While TRIB’s forecasting over $50 mio in annual cardiac revenues in 5 years time, meanwhile they’ll have a ramp-up of $8.5 mio in P&L expense (plus capex.), without revenues, until they reach product launch in 2014.

Presuming continued growth in sales, and maintenance/expansion of their 21.6% operating margin, it’s reasonable to assume this additional expense/share dilution can be absorbed. This bears close monitoring, of course, but means I’m comfortable sticking with a 15 P/E multiple based on latest qtrly ex-interest diluted EPS of $0.1603. Adding this to cash per share, my latest Fair Value per share is pretty much unchanged at $13.19, for an Upside Potential of 24%. My secondary price target eases back to a $16.59 Relative Fair Value per share.

I currently have a 7.6% stake in TRIB. The share price is now banging right up against medium term resistance at $10.75-90. A break here should get us to 5 year highs at $11.75. If the market reaches & breaches this key level, that would be a strong sign the share price can blow through Fair Value to hit my secondary price Relative Value price target.

OK, we’re done! 72 Irish companies down! I expect I’ll update valuations on certain Irish stocks throughout the year, so stay tuned in this regard. As I’ve said though, any decent valuation should remain a good guide to value for a year, or even two. Therefore, I’ll probably only revisit a valuation if it’s a stock I own or am particularly interested in. Feel free, of course, to use the Excel file above for your own analysis – nothing’s locked, so update share prices and/or revise to include your own valuations, as you see fit.

If you have any positive/negative comments, or suggestions, about this whole TGISVP series, now’s a great time to share – please don’t hesitate to comment, or email me.

Hopefully readers will also be interested in tracking future performance (based on my original valuations and share prices) on this Irish stock universe. I know I certainly look forward to it (I think..!?). I have a couple of portfolio performance analyses in mind, so I will get to them periodically – hopefully it proves to be an interesting exercise!

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