The Great Irish Share Valuation Project – 2014 Portfolio Performance (Part II)

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Aer Lingus Group, Aminex, Connemara Mining Company, Fastnet Oil & Gas, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, Kenmare Resources, NTR plc, portfolio performance, TGISVP, The Great Irish Share Valuation Project, Zamano

Continued from here.

My commentary & analysis of last year’s TGISVP losers & winners may have been meat & veg for some, but let’s kill the suspense & move on to dessert… How did 2014 performance stack up for the TGISVP Portfolios, vs. our ISEQ benchmark? Let’s take a look at the Beta Portfolios first:

[NB: Here’s a reminder of how they were constructed:

TGISVP – Beta Portfolio:  Assume an investor goes equally long all 27 stocks with positive Upside Potential (e.g. invests EUR 1 in each stock, for a total of EUR 27). The other 54 stocks, identified as neutral (2) or over-valued (52), are ignored. The portfolio return contribution from each stock is simply its Gain/(Loss)%/27.

TGISVP – Smart Beta Portfolio:  Stocks are chosen on the same basis as the Beta Portfolio, with one twist: All 27 stocks are divided into quartiles – assume EUR 4 is invested in each top quartile stock, 3 EUR in the next quartile stocks, down to EUR 1 in the bottom quartile stocks (for a total of EUR 70). This preserves diversification, but focuses the portfolio on stocks with the most Upside Potential.]

[NB: Again, see my last post – the appropriate benchmark return here is 4.7%, reflecting the ISEQ’s performance from March-30th ’til year-end. For reference, calendar year ISEQ performance was 15.1%].

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TGISVP – End-H1 2014 Snapshot

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Aer Lingus Group, Donegal Investment Group, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, Kentz Corp, Norish, Petroneft Resources, Prime Active Capital, TGISVP, The Great Irish Share Valuation Project, Zamano

I expect to publish a performance-related post or two, but timeliness dictates I first take a closer look at what’s hot or not in The Great Irish Share Valuation Project. This year’s valuation phase was a 10 post epic stretching from Feb to May – so end-H1 presents a good opportunity to update share prices (plus some underlying valuation-related variables, primarily FX rates), and re-rank all 80 Irish shares in terms of their current upside potential. Obviously, I haven’t updated my underlying intrinsic valuations on the fly – that was never the intention – so pay close attention to any subsequent results & news flow for shares that might interest you. [But I generally find intrinsic valuations change slowly/incrementally]. I do have two last minute exceptions though:

Company:   Kentz Corp

Prior Post(s):   2012 & 2013 & 2014

Ticker:  KENZ:LN

Price:   GBP 926p

Well, this update’s pretty simple: Just a week ago, Kentz announced a recommended cash offer by SNC-Lavalin Group (SNC:CN) at GBP 935p per share. This seems to have taken the market by surprise, but it’s only an 18% premium vs. the 792p price target I published 3 months ago – arguably, one would expect such an additional control premium. I’ve even heard some PI mutterings about other potential bids… Yes, that’s always a possibility, but it doesn’t seem very realistic in this instance: With two other suitors rejected last year, I’m sure management explored all other possibilities before dropping their drawers for SNC-Lavalin.

Despite that, ideally I’d like to re-assess my valuation to determine whether a higher bid could be justified. But there’s been no subsequent results, except for a 10% increase in the company’s backlog (to $4.5 billion, plus a further $125 million contract announced in June). Which is clearly encouraging, but not much of a tangible basis for increasing my price target significantly. At this point, the most likely & logical price target is the recommended cash offer itself…

Price Target:   GBP 935p

Upside/(Downside):   1%

[NB: There are two other pending takeover offers to consider: i) A recommended share offer for Fyffes (FFY:ID) by Chiquita Brands International (CQB:US) – I expect this to close & already incorporated it into my 2014 FFY price target, and ii) a rejected share offer for Kenmare Resources (KMR:LN) by Iluka Resources (ILU:AU). I suspect KMR management (& shareholders?!) would prefer to go straight to hell, rather than accept this offer – unfortunately, the company’s current operating, cash & debt trajectory all suggest hell is actually a distinct possibility. I haven’t re-considered my much lower 2014 KMR price target at this point.]

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2014 – The Great Irish Share Valuation Project (Final – Part X)

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Aer Lingus Group, Dalata Hotel Group, Donegal Investment Group, Escher Group Holdings, Irish Residential Properties REIT, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, Karelian Diamond Resources, Mainstay Medical International, TGISVP, The Great Irish Share Valuation Project, TVC Holdings, Zamano

Continued from here:

[NB: Worth revisiting Part I if you’re a new reader, or you’d like a refresher on TGISVP & my approach to the whole project.]

OK, it’s the final furlong..! This should be my last TGISVP post – that will make it a grand total of 80 Irish companies, all covered in very random order since February. Except this last post – I deliberately withheld DCP:ID & ZMNO:ID ’til I got around to posting separate write-ups for each, plus I’ve only just added another 3 (recent) Irish IPOs. I also debated including 3 other vaguely ‘Irish’ stocks, but decided (somewhat arbitrarily) against them in the end…

[FYI, my 3 rejections were:

– Kennady Diamonds (KDI:CN):   Dermot Desmond has long been involved here – he currently owns a 17.5% stake & the Chairman Jonathan Comerford’s actually an investment manager with IIU. However, the company has no other Irish connections, and I’ve never noticed any kind of Irish PI/institutional following for the stock.

– Kennedy Wilson Europe Real Estate (KWE:LN):   KWE’s a new fund launched by Kennedy-Wilson Holdings (KW:US), focused on investing primarily in real estate & real estate loans in the UK, Ireland & Spain. While the fund’s already completed a chunky Irish acquisition, one would expect Irish assets will ultimately be the smallest component of the portfolio (considering the relative size of the UK/Spanish economies & property markets).

– Metro Baltic Horizons (MET:LN):  MET’s another of those funds launched back in 2006 – focused on property development in the Baltic States & St. Petersburg, and targeting a minimum 25% IRR. Aaah, those were the days, eh..?! Garrett Kelleher & Dermot Desmond/IIU (again!) originally backed the company (with a 27% stake between them), and after some farcical/fraudulent events along the way, the board’s now comprised of a senior IIU executive & two other Irish directors. MET has become a cash/litigation shell & a suspension of its listing’s now imminent – but we should hopefully see some new proposals (inc. a continuation of MET’s listing) from the board shortly.]

So, without any further ado – let’s dive right in & finish up:

2013 – The Great Irish Share Valuation Project (Part VIII)

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Aer Lingus Group, Anton Bilton, distressed investing, equine DNA, Greencore Group, IMC Exploration Group, Irish shares, Irish value investing, ISEQ 20 ETF, iShares MSCI Ireland ETF, New Ireland Fund, Orogen Gold, Pension Deficit, Ryanair Holdings, Smurfit Kappa Group, TGISVP, The Great Irish Share Valuation Project, Uniq plc

Continued from here.

Company:   Greencore Group

Prior Post:   Here     (valuation, see here & here for commentary!)

Ticker:   GNC:LN

Price:   GBP 95.75p

Well, I guess my perspective on Greencore last year was horribly wrong..! I’ve long considered GNC a distressed company, but the market clearly disagrees. So much so, the share price rallied almost 70% in the past year – my price target (of GBP 32.5p) was certainly left choking in the dust! But if my distressed premise is correct – and, objectively, I can’t see how you’d disagree with me – this rally isn’t so surprising. What..?! But companies like this are always a binary proposition – they simply die, or they survive & maybe even thrive eventually. And if everybody still feels blithely happy about them, they present a temptingly cheap buy. Greencore’s also a nice scary reminder of how dangerous shorting can be – poor underlying fundamentals are often ignored far longer than you can take the pain…