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Looks good to me.
They were more or less breakeven last year if you ignore the derivative contracts. So revenue and margin improvements in the first four months this year should mean that they are profitable at the very least. To what degree, im not sure. The elimination of a large portion of their competition recently bodes well too.
I don’t mean to alarm anyone but Mark Brennan, Executive Chairman of Ascendant Resources, just said 'We’re hoping to be able to announce project funding in the near term’
Up to this point my entire investment case has been that I have no idea if a mine will happen or not but at sub 4m market cap we have an easy 50% profit just by way of the earn in agreement completing. I have stubbornly refused to get my hopes up about anything beyond that.
Can I get my hopes up now!?!?!?!?!
So there’s our million bucks https://www.ascendantresources.com/English/Investors/press-releases/press-release-details/2022/Ascendant-Closes-First-Tranche-of-C3.5-Million-Non-Brokered-Private-Placement/default.aspx
I feel like the market may be overlooking the significance of the forward guidance in today’s update. 12m of underlying operating profit for FY23, combined with the Cory brother’s sale and subsequent debt reduction will result in finance costs being reduced to almost nil over the coming years.
That will mean 12m operating profit is equal to PBT. That would represent a 7.5x PBT P/E ratio at today’s 90m market cap for a company that is committed to paying down its remaining debt.
The only caveat is that in the last two years Braemar have had tail winds that are unlikely to be repeated. Still, with today’s update, profits can drop significantly and it’s still good value.
I think that's a really good set of results under the circumstances.
A 10x PBT multiple combined with that kind of balance sheet seems like very good value to me.
The negative is that margins are likely to get worse in FY23 due to general market pressures and less favourable sales mix going forward as the weighting returns to stores from online. However, the balance sheet is easily strong enough to weather this storm as long as it lasts.
Whether we make a killing or not investing at these prices will be determined by how the European distribution centre performs in the coming years.
It definitely feels as though the risk reward is investors favour at this price.
Sher-lock.
I think that’s a reasonable position to take. In some instances, early investors do have the option to sell to incoming investors at each subsequent funding round. So it may well be that we do receive a legitimate offer for our stake in the series a round at the valuation alluded to in the proactive interview. Whether we take it or not is a different matter. So we might be about to get the `exit possibility’ you rightly mention.
A little more to it than listed vs unlisted but, admittedly, not much.
Agreed that non-brokered heavily implies that it’s a done deal.
If so that’s now 2.2m shares, 700k cash and an increased likelihood of another 1.8m in December.
Puts in a tangible floor of 2.9m without the December payment and 4.7m inclusive of that payment.
If you believe what JV said about the Ideon series a funding in September then you can add 1m to both of those numbers. As I’ve said before, the Ideon stake sits somewhere between tangible and intangible in my opinion but that’s up to interpretation.
For those that do consider it tangible, you will have a tangible floor of 3.9m-5.7m.
I ask myself what can go wrong investing at these prices before I ask what can go right. I keep seeing the chances for things to go wrong getting smaller and smaller.
That depends on whether you are talking about price or value.
If it’s improved the value but not the price, that’s opportunity.
Orchard announced a 0.81m post tax profit for the last 6 month financial period. Assuming nothing has changed then they are making 1.6m annually.
That’s a 15% return at today’s price.
That’s a great return whether interest rates are at 0% or 4%.
An absolute gift at today’s price.
I’ve just had a quick look at the earn in agreement summary that you’ll find at the bottom of multiple ascendant and MAFL news releases to try and add up how much money Ascendant need to raise to fulfil their obligations.
JV agreed that the $9m of project work (drilling etc) has all but been completed now. Just quibbling over a few invoices here and there.
They’ve also made $2.5m of direct payments to MAFL owned subsidiaries. So total spent so far is $11.5m.
That leaves the $3.5m of payments due by year end plus the cost of a definitive feasibility study.
Wikipedia suggests that a DFS usually comes in between 0.5% and 1.5% of the project.
If we use 1% then that’s $1.3m of the initial capital cost of the project of $130m. It could be $2.3m if you include the 100m of sustaining capital costs.
So in order to complete all their remaining obligations, we can reasonably estimate that the total amount required is between $4.8m and $5.8m.
That doesn’t sound like a huge amount to me.
To be fair to management their salaries are peanuts. They really do run it on a shoe string. JV has 20% of the company as well so there is no question his interests are aligned with shareholders.
I don’t see the wide discount as a negative to someone that is yet to buy in. Therein lies the opportunity. Illiquidity is frustrating, I agree. Hopefully that corrects as/when/if the market cap increases.
Also agree that there is some risk of Ascendant struggling with capital but it seems much more likely than not that they will be able to. They’ve committed the majority of their obligations to the product already, I think the last push should be fine but there are no guarantees.
The key point is how much do you lose even if they can’t?
The share portfolio is 2.2m, Ideon may well be worth 1.2m so if golden sun is worth 0.8m that’s today’s entire market cap.
You can probably buy for a 4m market cap right now. Either there is something horrific going on in the background of which the market is unaware or this is the biggest opportunity that we are ever likely to see in the market.
Far be it from me to recommend what other people should do with their money but hopefully someone finds a quick summary useful.
Just to recap: 2.2m of listed equities, 2.7m earn ins due by year end (majority of the total ascendant commitment has already gone into the project), CEO strongly intimated that the Ideon stake is being re-rerated from 270k to 1.2m by September, unquantifiable 5-8% stake in Costa Rican gold mine that is operationally breakeven, residual ownership of Mine in Portugal with current value anywhere from 0-30m
Short of an outright fraud it can’t envisage a scenario in which it’s worth less than 2m and it could be worth as much as 40m with a favourable rub of the green.
That’s on offer right now for 4m. Market madness in my humble opinion.
I agree. They haven’t had any problems raising capital to date and I would expect that those drilling results just made it easier not more difficult.
Very interesting comments regarding the Ideon stake.
so he just said that Ideon will likely get a valuation of 50-100m in the next round of funding.
He says it had a 6m valuation at 0.37
They invested at 0.37 and 1.00
So our blended average is probably in the 60s or a 12m valuation which was carried as £237k a year ago
I.e. If it gets valued at 60m (the lower end of the range stated) our 237k Ideon NAV will represent 1.2m NAV in the next set of accounts.
That is of course an unlisted and therefore illiquid holding but at least the valuation will have been verified by people actually putting their money where their mouth is as opposed to some obscure accounting protocol.
Fair enough but you have to marry that with the current value proposition. At 4.18m market cap, all you need is the 2.7m earn ins, the 2.2m equity portfolio and the combined value of Ideon/golden sun circa 1m to give you a 5.9m value approaching yesterday’s highs.
As long as you believe the earn ins will come, the proposition is completely de-risked for anyone buying in at these prices. The cash in the bank and equities alone will exceed the current market cap by year end. Any risk of producing, or failing to produce, a working mine will be Ascendant’s not MAFL’s.
‘the $3.5m is already included in the net asset value, just moving from receipts to real cash - if the amount is paid!’
Yes but it’s currently held at a discount so their will be a transfer from receipts to cash but there will also be a NAV increase as the cash received will be a higher figure than the current carry value that will be deducted from receipts.
`hopping around like a scalded cat’ is not something anyone has ever said about MAFL before today. In fact, the usual criticism is the exact opposite.
I agree Shaz. It sounds like the chance of a mine actually materialising has significantly increased in recent months.
We have a 2.2m share portfolio and 2.7m of earn ins due by year end. Even at 5% ownership and taking into account the chance the project might not happen you’ve got to think the increasing likelihood is now worth 2m of equity at least.
This share has to be worth 7m with the information currently available and a darn sight more if we ever see a zinc mine. Let alone a successful negotiation with the government.
I also noticed the lack of guidance which admittedly was a little disappointing.
Having said that, I think that a return to more normal trading conditions is to be expected, and more importantly, already priced in at these levels.
I think the dividend payment this year will cost them roughly £3.2m. Profits after tax will be about £8m. That means that we can afford to make 60% less next year and still fully cover a 6% dividend from operations without having to dip into the huge cash pile.
Tide turning?