TGISVP – An Updated Snapshot

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Donegal Investment Group, Fyffes, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, NTR, Petroneft Resources, Prime Active Capital, TGISVP, The Great Irish Share Valuation Project, Zamano

Unfortunately, after starting with such promise, the months of September & October now appear to be living up to their more usual fearsome reputation. At this point, we’re forced to commiserate over a 10% correction (in round numbers) for the ISEQ from its most recent (early-Sep) high, including a 6.3% fall last week. And the fact the index is down almost 14% from its (end-Feb) 2014 high just compounds the misery. But corrections also present a good opportunity to re-evaluate battle plans… Now, I’ll obviously be reviewing The Great Irish Valuation Project in greater detail at year-end, so I’m going to strictly limit my comments here.

Updated snapshots of this year’s top winners & losers might prove instructive… [NB: Each stock’s gain/loss is simply measured from its TGISVP evaluation date (i.e. Feb-May, except for NTR), so actual YTD performance rankings of stocks might look a little different]. First we have the Sewer Shit:

Maybe it’s worth picking through the rubble for a couple of bargains? Hmm, perhaps not – with a couple of notable exceptions, all I see here really are bombs that may still explode in one’s face. As for ‘investors’ who already own some of these stocks, what can I say…if they’re stupid enough to buy ’em in the first place, I’m surely not the person who’s going to persuade them to finally cut their losses & run!

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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 (Part II)

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Circle Oil, Dalradian Resources, IFG Group, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, Merrion Pharmaceuticals, Ovoca Gold, portfolio performance, Prime Active Capital, REACT Energy, TGISVP, The Great Irish Share Valuation Project, UTV Media

Continued from here. As usual, I encourage you also click on the 2012 & 2013 links for each company, to add some valuable colour/background. Now, let’s jump right in:

Company:   Circle Oil

Prior Post(s):   2012 & 2013

Ticker:   COP:LN

Price:   GBP 20.625p

Look at Circle Oil’s latest interims, what’s not to like? Revenue up 20%, EBITDA up 34%, and cash generated from operations (after working capital changes) up 69%. And if you annualize net profit, Circle’s trading on a 6.6 P/E! But it’s not as simple as that… Focusing on a P/E ratio’s a rather pointless (& misleading) exercise when it comes to junior resource companies. [Well, most don’t have any ‘E’ anyway!] Even if they’re fortunate enough to be producers, they’re often melting ice-cubes – i.e. they’re exploiting a (sometimes rapidly) depleting reserve base. Basically, they haven’t diversified enough, spent enough, and/or mastered the art of reserve replacement. That’s how the majors play the game, of course – but for the juniors, it’s much more of a lucky (& lumpy) game. This is one of the main issues Circle faces right now.

[Well, two other big issues: i) About 27% of its shareholder base remains a potential stock over-hang – Libya Oil Holdings owns 18%, while Kaupthing Bank owns 9% – not surprisingly, both stakes are essentially ‘frozen’! And: ii) Investors are still leery of the fact a majority of Circle’s production is in Egypt. Maybe a little unfairly, as the company doesn’t appear to have suffered any disruption/interference to date. But it does suffer from another long-standing Egyptian problem…getting paid! Fortunately, the situation’s stabilized somewhat, but Circle continues to have more than 6 mths of trade receivables outstanding].

At the current production rate, Circle’s only got about 6-7 yrs of reserves left. That’s not something you can tag with a P/E ratio! And despite a $42 M pa exploration/capex spend, it hasn’t managed to put new reserves on the board recently. OK, I’m probably being a little harsh here – despite this spend, the company’s actually generating positive free cash flow. Far better than most junior resource companies out there…OK, we all know 9 out of 10 juniors are rubbish anyway! Because of this reserve depletion, and COP’s current (relatively small) market cap, I’ll continue to value it on an asset basis.

As of mid-2013, net 2P reserves were down to 16.3 M boe. No allocation between proved & probable is provided, so let’s assume a 50:50 split & my usual $10 & $5 per boe (respective) in-the-ground valuations. There’s $30.6 M of cash on hand, and let’s include net trade receivables of 20.2 M. [That’s being kind – Egyptian receivables will likely remain a semi-permanent & illiquid asset]. We then offset 11.6 M of bank debt, and a 30 M convertible loan. [This may ultimately become equity, but the share price continues to trade below the loan’s conversion prices]. That gives us:

TGISVP – 2013 Portfolio Performance

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Alpha Portfolio, Beta Portfolio, Great Western Mining Corp, Independent News & Media, Irish shares, Irish value investing, ISEQ, Karelian Diamond Resources, Papua Mining, portfolio allocation, portfolio performance, Prime Active Capital, Smart Alpha Portfolio, Smart Beta Portfolio, TGISVP, The Great Irish Share Valuation Project, US Oil & Gas

OK, a second year of The Great Irish Share Valuation Project is now complete – for reference, here’s my mid-year review, now it’s time for the real post-mortem!  Let’s take care of a little housekeeping first:

– Between Jan & May last year, I published individual reviews/valuations for 73 different Irish companies, and kept a file recording each share price (at time of evaluation) & price target to properly assess performance.

– Post mid-year, in Aug-Sep 2013, I published (& recorded) some additional reviews/valuations for 3 new Irish IPOs:  Green REIT (GRN:ID), Keywords Studios (KWS:LN), and Ardmore Shipping (ASC:US).

– Since mid-year, I’ve made no other changes to my TGISVP file, except: i) Donegal Creameries (DCP:ID) changed its name to Donegal Investment Group (DCP:ID), while United Drug (UDG:LN) became UDG Healthcare (UDG:LN), ii) Kedco (KED:LN) changed its name to REACT Energy (REAC:LN), and also consolidated its shares on a 1-for-50 basis, iii) Grafton Group (GFTU:LN) migrated to a London-only listing, iv) Elan Corp (ELN:US) was acquired by Perrigo Co (PRGO:US), and finally v) TVC Holdings (TVCH:ID) paid its shareholders a EUR 0.495 special dividend.

– Since the (major) review/valuation phase was spread over 4 1/2 mths, my benchmark (the ISEQ) needs to be adjusted accordingly. I’m going to reference the mid-point (in terms of companies valued) of this phase – i.e. Feb-25th – as the most appropriate start date for the index.

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

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Allied Irish Banks, Bank of Ireland, Biogen Idec, Dalradian Resources, Datalex, Elan Corp, ELG Scheme, Fastnet Oil & Gas, FBD Holdings, IIU, Irish shares, Irish value investing, Pageant Holdings, Permanent TSB Group Holdings, Prime Active Capital, Royalty Pharma, TGISVP, The Great Irish Share Valuation Project, US Oil & Gas

Continued from here. [If you’re new to the series, I recommend you re-visit my first 2013 TGISVP post].

Company:   Elan Corp

Prior Post:   Here

Ticker:   ELN:US

Price:   $11.61

Last year, I had Elan pegged for a significant fall – which definitely appeared to be on the cards with the share price falling 25%+ to sub-$10 levels in Dec & Feb. In the past 2 months, however, they’ve certainly pulled a rabbit from the hat with their recent Biogen Idec (BIIB:US) deal. This hands full control of Tysabri back to Biogen, but in return Elan receives $3.25 billion of cash, and a 12-25% royalty on future global net sales. Post-restructuring, Elan was almost entirely dependent on Tysabri – so this deal transforms the company into a highly attractive pot of cash, and a low cost/high margin royalty stream.

Unfortunately, management didn’t quite grasp this was shareholder’s money – they acted like all their bloody Xmases had come at once! They’ve promised a share buyback, but their main plan is to use the majority of the proceeds & royalties to acquire a brand new portfolio & pipeline. This is coupled with a projected reduction in annual operating expenses to (only?) $180 million per year! This has lured Royalty Pharma out of shadows, to offer shareholders an interesting alternative: An $11.00 per share bid.

TGISVP, Q3 2012 YTD Performance (I)

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Aer Lingus, Alpha Portfolio, Beta Portfolio, Cove Energy, CPL Resources, Datalex, Fastnet Oil & Gas, FBD Holdings, garbage stocks, junior resource stocks, performance appraisal, Petroneft Resources, portfolio performance, Prime Active Capital, Providence Resources, Siteserv, TGISVP, US Oil & Gas, Worldspreads

Now Q3 2012 is over, it’s time to revisit The Great Irish Share Valuation Project. Here’s my H1 2012 performance post, for reference.

First, note there’s been 1 de-listing – we already had the heads-up on it last quarter: Cove Energy (COV:LN) was taken out for GBP 240p in cash per share by PTTEP (PTTEP:TB). A marvelous result for most shareholders, except for a few over-enthusiastic latecomers that bid the shares up to GBP 270p+ in the dying days of a Royal Dutch Shell (RDSB:LN) vs. PTTEP tussle. [I’ll continue to include Cove – at its final GBP 240p value – for performance purposes for the rest of the year].

Note: Q3 2012 YTD performance for each stock is TGISVP specific – that is, performance is measured from the specific date (in Q1) I set a target price for each stock. [Apologies if you’d prefer to see actual YTD performance for all stocks – but I suspect there’d be a high degree of overlap in the winners & losers, anyway].

TGISVP – What’s Interesting, What’s Not..?

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Bank of Ireland, bubbles, dividend yield, DYOR, intrinsic value, ISEQ, natural resource stocks, Ovoca Gold, Permanent TSB, Petroneft Resources, Ponzi, portfolio allocation, portfolio performance, Prime Active Capital, REIT/MLP sector, stock screener, TGISVP, Total Produce

In my last post, I was pleased to see TGISVP continue to deliver significant out-performance vs. the ISEQ benchmark. Early days yet: This could be blind luck, but hopefully it’s derived from a robust analytical process that clearly identifies over/under-valued shares. Which naturally demands a bit of a refresh…

I haven’t actually felt compelled to perform any Irish share revaluations since my TGISVP X post, even for stocks I hold. Personally, I’m pleased with this – I’m v comfortable with my Irish holdings, I believe my valuations are robust, and there’s been no unexpected news-flow. In light of my current Irish portfolio allocation (16%), and actual stocks I hold, I’d be reluctant to add another Irish share. This doesn’t mean forgetting the rest, of course! It does mean I can just watch out for interesting price drops, rather than agonize over constantly refreshing valuations.

TGISVP – H1 2012 Performance – Firing On all Cylinders!

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Aer Lingus, AGI Therapeutics, Alpha Portfolio, Beta Portfolio, Botswana Diamonds, Cove Energy, Datalex, ISEQ, Karelian Diamond Resources, market-neutral, natural resource stocks, Ovoca Gold, Petroneft Resources, portfolio performance, Prime Active Capital, Providence Resources, Readymix, Risk Arbitrage, Siteser, Smart Alpha Portfolio, Smart Beta Portfolio, TGISVP, Worldspreads

Now H1 2012 is over, it’s time to revisit The Great Irish Share Valuation Project. Here’s my Q1 2012 performance post – well worth revisiting as background, but I’ll recap some important points below.

Let’s first look at individual stocks. I count 4 de-listings (which I’ll continue to include for performance purposes, at their final values): AGI Therapeutics (AGI:ID/LN) was a profitable Event-Driven investment for me, and inspiration for some detailed Risk Arb. posts. Siteserv (SSV:ID/LN) & Worldspreads (WSPR:LN/ID) both exited amid scandal – possibly criminal in the case of the latter, with alleged charges now including share price manipulation, in addition to accounting/actual fraud. Finally, Readymix (RYX:ID) succumbed to a Cemex (CX:US) bid, illustrating that the right investment thesis (an eventual takeout by the controlling shareholder) is not enough. Timing & the price you pay are equally important – despite the bid premium, RYX’s multi-year operational & price decline meant v few long term shareholders made any profit. Looking ahead, Cove Energy (COV:LN) seems set to follow the de-listers, but promises to provide some final drama!

7.7% Q1 2012 Outperformance! – TGISVP XI

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AGI Therapeutics, Alpha Portfolio, Beta Portfolio, Conroy Gold, hedge funds, ISEQ, junior resource stocks, market-neutral, portfolio performance, Prime Active Capital, Siteserv, Smart Alpha Portfolio, Smart Beta Portfolio, TGISVP, Worldspreads

It’s early days yet but, rather serendipitously, I managed to complete the valuation stage of The Great Irish Share Valuation Project by quarter-end. That deserves a performance review, I guess..?!

Let’s first take a look at individual stock performance. btw I mentioned I’ve completed 72 Irish stock valuations, but I’ll continue to include AGI Therapeutics (which was taken over) as a 73rd stock for performance purposes. And remember, Gainers/Losers are based on quarter-end prices vs. the original market prices I noted (as I worked my way through each stock’s valuation in Jan-March). Therefore, this is a TGISVP specific performance snapshot, I’m not attempting a full Q1 stock performance ranking here (though I’d expect they would be pretty similar):

TGISVP VIII – ISEQ Recap

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Allied Irish Banks, FBD Holdings, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, Petroneft Resources, Prime Active Capital, Russia, TGISVP, Total Produce, Tullow Oil, Zamano

Continued from here. I highlighted we’ve another 20 or so stock valuations to work through, but we’re now finished with all the ISEQ-listed Irish stocks. Whenever you consider Irish stock performance or are investing in some type of Ireland focused fund/product, it’s only these ISEQ stocks that will (likely) be relevant. We’re therefore at a good point to pause and provide some interesting stats & comments. I’ll use the TGISVP V Excel file from this post, but I’ve updated it here with current market prices as of March 7th (and included my TOT & FBD valuation updates):

TGISVP V (Mkt Prices Updated Mar 7th)     (xlsx file)

TGISVP V (Mkt Prices Updated Mar 7th)     (xls file)