The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
Crazy that the market is willing to sell you £16m of tangible assets for £11m right now. Not to mention £2m of profits a year to compensate you for as long as you hold on to them.
I will accept that those profits may take a short term hit in the current interest rate environment but I’d be shocked if anything happened to the tangible asset value. The cost of living crisis would have to get unfathomably bad for people to stop paying their car insurance. That’s going to be the last thing to go.
20m operating profit, even better than I’d hoped for.
I think this is too cheap now. They were in a real sweet spot of government help combined with COVID related sector tailwinds. This was always likely to give them impossible YoY comparables.
However, they are still profitable and the strength of the balance sheet makes it very unlikely that they will need to dilute shareholders anytime soon. Indeed net cash underpins about 80% of the market cap right now.
Considering these factors the risk/reward here looks good over the medium term IMO.
Results announced along with ‘exceptionally strong trading in the current financial year'
They could be on to make as much as 15m this year I reckon.
So we are now trading below the value of cash - debt + working capital.
That makes us very cheap if you believe two things…
1. The net value of the two operations is more than zero.
2. The cash in the bank will be used to make a value accretive acquisition.
Personally I believe both of those things to be true and will be adding when money becomes available.
Anyone see that Finsbury Food update yesterday? Apparently they are looking to make acquisitions.
How about we offer them Shire at a decent price if they promise to take Indulgence with them!?
Thanks Nom.
The bit he says about funding within a month or so makes a lot of sense with Friday’s RNS IMO.
It may well be that he has an agreement with a lender/partner but the only thing holding it up was the possibility that Ascendant might have ended up with 68% of the project under the old agreement. Ironing out that crease, which Friday’s amendment achieved, may have been the final piece in the puzzle.
Let’s hope so
So in summary.
At the beginning of all this MAFL made a deal with Ascendant to earn in to 80% of the project by acquiring 80% of Redcorp which, at the time, everybody believed was the same thing because Redcorp acquiring the 15% government stake seemed a formality.
As the situation with the government dragged on Ascendant essentially said 'We’ve honoured our commitments up to now to earn in to 50% of Redcorp if you want us to continue to 80% which you told us was akin to 80% of the project, then we need to know that the government stake is your problem and not ours'
MAFL have now said 'ok fair enough that is what we said, give us a bit more time but if we get to production and the government still wants their 15% then we’ll change the ownership structure of Redcorp so that Ascendant’s ownership of Redcorp represents 80% of the project, the government 15% and MAFL 5%'
This is obviously speculation but I think the broad strokes are correct.
This might be cause for concern if we were coming from a 20m market cap but at 3.5m I see this is a really positive step.
Once we get the 2.5m dollar payment in December we’ll have about 4.5m of cash and listed shares. If Ascendant had any concerns about their ability to make that payment, you would think that this would have been an opportunity to amend that too.
Once we have that payment in the bank, MAFL is practically a risk free investment from these prices in my opinion. I feel more confident that we will get that payment now than I was before yesterday’s RNS. We already knew the 5% ownership situation as it was noted in the full year results so nothing has changed in that regard.
I’m really pleased. I was concerned that the 2.5m dollar payment would also be delayed but that is apparently not the case. If we get 2.5m dollars plus 5% of a mine that has government backing, we’re all gonna make a lot of money.
Maybe, it’s very confusing isn’t it!
Probably but in the scheme of things that’s nothing. Assuming you take them on face value, it’s a good reason for the delay too, they keep finding more mineralisation than they expected so the feasibility is bigger in scope and taking longer as a result.
It’s also the first mention of the government potentially holding onto their stake too. Again that could be looked at two ways but personally I’d much rather own 5% of a mine that has government vested interest than 20% of one that doesn’t.
Deal origination up, arrears down all bodes very well for next year’s profits.
Always have to be careful with adjusted profit measures but in this instance I think it’s all above board. Certainly 1m non cash goodwill impairment can be added back. 0.3m loss in a discontinued operation and 0.7m redundancies from that division, although genuine cash costs, are not going to repeat.
Future looks steady, price looks cheap.
So it now looks certain that we will end this year with 2m of listed equities and 2.5m of cash (assuming no more investments are made).
So even if you believe that Portuguese Zince mines, Canadian space x-rays and Costa Rican gold mines are the stuff of fairytales… You’re still being offered a 50% discount to tangible equity right now.
Yet again I’m stunned by the price/value anomaly here. If you’d have told me when we were at 18p that in three weeks time Ascendant are gonna pay up 1m bucks a month early and then five weeks later we’ll be back to 8.8p…. I would have thought you were a very silly sausage indeed.
Braemar look very cheap to me. If you take the guidance from their latest trading update that operating profit will be 12m for FY23, you only have to take off finance costs to get pretax profits, these will be significantly reduced due to Cory brothers sale and subsequent debt repayment. That gives you a pre tax profit of maybe 11.5m minus exceptional items.
That’s a 7x pre tax p/e for a low debt company with a recently strengthened balance sheet.
That’s the bull case, who’s got the bear?
The proposed Tern holding and loan book (assuming no defaults since September 29 report) are worth about 8.6m right now.
Is the cash generated from the interest on those loans worth anything? Is the Smartech or Pluto holding worth anything?
If so RGO is very undervalued right now.
Haha. I don’t agree with Wizard. I was saying that I used to agree but not since JV clarified the position in note 6 of the FY results. The key sentence being….
'M&FI has granted Ascendant conditional options that would enable Ascendant to have a net 80% interest in the Project if the company is unsuccessful in re-acquiring EDM's interest'
JV is saying here that no matter what, Ascendant will own 80% of the LS project. That means we end up with 5% if we are unsuccessful in negotiating the EDM stake and 20% if we are successful.
It is now that simple.
But it didn’t used to be.
Hi Wizard,
This is what I had thought to be the case for a while too. In my opinion the confusion came about as the earn in agreement has been stated many times using 'the project' and 'redcorp' interchangeably.
This was cleared up in note 6 of the most recent FY results which read…
'Redcorp currently owns 85% of the Lagoa Salgada project and signed an agreement in June 2017 with Empresa Desenvolvimento Mineiro SA (EDM), a Portuguese State-owned company to re-purchase the remaining 15% of the project resulting in a 100% ownership of the project. The 2017 agreement was subject to the Portuguese Secretary of State's approval which has not yet been received. Redcorp and Mineral & Financial continue to explore ways and means to complete the purchase. M&FI has granted Ascendant conditional options that would enable Ascendant to have a net 80% interest in the Project if the company is unsuccessful in re-acquiring EDM's interest within a still to be determined period after the completion of the Feasibility Study.'
This clears up any confusion definitively. JV has stated that whatever happens with the government stake, Ascendant will own 80% of the LS project. The government’s stake is our problem to resolve and not a shared one.
This may be disappointing to some but our market cap is cheap without any residual ownership of LS. We will either own 5% or 20% of LS. At these prices, I’d be delighted with either.
Ha, yes, quite happy indeed!