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Posted this AM by tinware over on ADVFN...... so dyor.... From IC 2014 Bargain Shares "Fortune Oil is a company well worth investigating because there is obvious value here to exploit. In fact, I would be very surprised if it is still listed in a year's time unless the shares are rerated significantly. To understand why it's necessary to unravel a series of complex transactions that has resulted in Fortune Oil owning outright 184m shares in Hong Kong listed China Gas Holdings (HK:384), or 3.69 per cent of its share capital, and a beneficial interest in 732m shares of China Gas Holdings through a joint venture China Gas Group Limited. Perhaps it's the complexity of these transactions that has made it difficult for investors to unravel the true worth of Fortune Oil. However, by the time the company reports its full-year results in April, it will become obvious for all to see that Fortune Oil is sitting on an investment worth several times its own market value. Having seen its share price surge by half since the middle of last year, China Gas Holdings now has a market value of HK$52.5bn, or £4.1bn at current exchange rates, based on 4.98bn shares in issue and a stock price of HK10.80. This means that Fortune Oil’s direct investment in the company is worth HK1.93bn, or £150m. In other words, with Fortune Oil capitalised at only £234m this stake alone covers almost two thirds of its own market value. In addition, Fortune Oil in effect owns another 366m China Gas Holdings shares worth £300m through the aforementioned joint venture. Or put it another way if Fortune Oil was to sell all of its China Gas Holdings shares at market value, then it would realise the equivalent of 17p per Fortune share, or almost double its own share price. And because Fortune Oil will be marking its assets to market value when the company reports full-year accounts in April, the HK$2.50 a share rise in China Gas Holdings share price since the company’s half-year end will lead to a huge uplift in its own net asset value. In fact, I reckon it will add HK$1.38bn, or £107m to Fortune Oil's book value and means that the company’s net asset value is now at least £434m, or the equivalent to 16.7p a share. Apart from these strategic stakes, Fortune Oil owns a natural gas business which generated operating profits of £8.9m on revenues of £49m in the first half of last year. The company is also a shareholder in a joint venture aviation fuel business, Bluesky, which reported net profits of £21.3m on £1.1bn of revenues in the same period. Ultimately though it will be the massive fair value mark up in Fortune Oil's holding in China Gas Holdings which will catch the attention in a few months time. And it's not as if the shareholding isn't a solid investment as China Gas Holdings continues to expand its share of the domestic piped gas market and now has over 7m connected piped gas users and assets wor
FTO has been tipped as a 2014 share bargin.... also reading ADFN IC have provided a write-up ... nice to see NAV gets a mention... been harping on about NAV for ages...... I will do some pasting..... next post
Thanks Del44 for the newsflow. I am hopeful (you have to be positive to hold these as long as I have) that come end Feb FTO will have provided an update that should help the PI in understanding the direction of travel. Associate status advise and CP intentions (Ha!). Interested in what the NAV will be now as well. We might also get a curved ball .... say offer tabled for Bluesky or the locals of Hazadan have clubbed together and taken the Armenia asset off FTO's hands... On a serious note perhaps the monies required for Mamoning upgrade and direction of travel of the business.
From the 7/8 RNS "If shareholders approve the Rule 9 Waiver, following completion of the SPA and the Loan Settlement, the members of the Concert Party will, subject always to the provisions of the Code, have the freedom to increase their interests in the issued share capital of the Company. Whilst this would inevitably reduce the free-float in the Ordinary Shares, it is expected that these developments will provide additional sources of demand for and improve the marketability of the Ordinary Shares. " I wonder if the Concert Party have any plans to make a purchase, perhaps due to news soon this is not possible. Still we should hear within a month on how 2013 faired.
See that China Gas Holdings has breached 12 and continues its rise. I wonder how high it needs to go before the FTO SP reacts ?....
Hi chris211 tks for your comment , and Del44 for your reponse to my dividend query. Perhaps we will have some news soon ..... I was hoping prior to end of Feb. Maoming should be next in line. One day the value in FTO will be recognised I am sure. I was reassured that Ms Li Ching holds quite a few.
http://www.hkexnews.hk/listedco/listconews/sehk/2014/0110/LTN20140110582.pdf Some more information on Ms Li, 0.89% holder........... just a few more than me. Still nice to see things bumbling along in FTO land. One question that I have been pondering is when the divi will be paid out this year ?.....
Itsonlyanopinion, I would hope for mid to high teens which is about where the NAV sits at the moment. If the CP were to buy and wanted them cheap then they will buy prior to any 'value enhancing' RNS. On the other hand if Daniel waited for an RNS that could initiate a rise he could accumulate at this point. Either way the CP intentions are published and we should see some movement upwards soon....... I will plump for a conservative 15p / share (a tad below NAV)
Hello Philip, welcome to (at the moment) a friendly board. I see that CGH is now @ 11.8 HKD , if only FTO was an investment trust (Alan over on ADFN suggested this) then we might see a healthy rise with the SP matching the worth of the sum of the parts. Daniel must be as I type this be arranging for funds to be available for CP purchases given the low price. Still we have a decent news flow to look forward to what with Mamoing and other businesses flurishing. I admit to adding when I can as the bottom side on FTO is negligent (imo) with the top side way way above current levels.....
Aye, you might be right there. I note that CGH is up again to around 11.4. Must have added another tens of millions to FTO's worth. The problem being that the market is not translating worth into the SP at the moment. I am a believer that in the end the pendulum will swing. Overall I am very happy with 2013 progress on all fronts apart from one, that is the SP. Even not sad to see Mr Tee depart after the dissapointing performance back in the June AGM , specifically his answers to a question from the floor (Alan I believe) on the SP and the boards responsibility in that area. Like you say lets hope that 2014 is the year.
Well peeping @ CGH I see that it is trading @ 10.86 HKD, adding many more millions to FTO's value overnight. The unlocking of the CGH value and other business towers is key to the share holders worth over the next year. I do expect that the Concert Party will enter the market any time soon which should help the SP. The nominees for the CGH board are also expected soon as well as the construct to the Mamoing investment (should be very large). I expect EPS of 1p / share providing a 0.2p divi mid year. On balance I remain a believer (holder) as I expect more topside than bottomside though prepared for a surprise or two. All the best to all the long termers and living in hope that my estate will be enhanced as I might be pushing up the daisy's by the time FTO comes good.... Onwards and upwards and a Happy New Year to all.
A bit like buses at the moment the newflow from FTO. Hopeful that the FTO CGH holding is as stated though think this may be incorrect, always thought 11% was the mark not 18%+......... The Mamoing news is positive and earnings from the old arrangement (expired in Feb) should now be recognised in the accounts. Bought a few more on the back of this, though it looks as if they are not showing up at the mo....
The Directors resolved the payment of HK2.2 cents per share as interim dividend (six months ended 30 September 2012: HK2.2 cents per share). The interim dividend will be paid on or about 30 January 2014, Thursday to shareholders whose names appear on the register of members of the Company on the date of 22 January 2014, Wednesday......... Also quick observation Quady, the number of CGH shares now in issue have increased ......http://www.chinagasholdings.com.hk/uploadfiles/20131126114510310.pdf
http://www.investopedia.com/terms/e/equityaccounting.asp................... I am no Accountant, but Mr Tee did seem genuinely positive about this back in Feb @ Broadgate. Suspect we will only see this point crystalyse once the full year Accounts are published. Unless anyone can add anything else specific to this question ?.. tia GDT
Quady, one small matter noted in the recent Interim Mgt Statement ............."As a result of the completion of the FGIH transaction, CGH is treated as an associate to the Group and equity accounting has therefore been adopted."....... Now, this is a biggi. You see what this means (I think) is that CGG (and FTO as 50% holder) can reflect the CGH EPS as a % of the CGG holding in CGH............ Mr Tee reported back in Feb this was with the auditors, I can only assume this is approved now announced. I suppose we will only find out once the 2013 results are published ..... This alone gives me confidence going forward. To add to this the scheduled CGH earnings report next week will I am sure be positive to FTO. So all in all FTO is not in a bad a place at the mo.
By my simple maths that is well in excess of 10Mil added overnight to the FTO (divi reflected in FTO accounts)circa 11% CGH holding. CGH results (sell on news) might bring this down but I do think that FTO has played a blinder on this one. Only hope that us small PI's see the fruits of what has been a very smart move on CGH. Well below NAV (circa 17p by my finger in the air). The Concert Party will I reckon enter the market in Jan. What with Mamoing in the bag (awaiting approval........ I reckon qtr 1 2014, Bluesky doing great and many others .... EPS for 2013 must be in excess of 1p / share what with all the business done. All we need is for FTO to replicate CGH on the divi (30%) rule and we should build into double figures soon........ Well that is what I am telling the other half ... failing to mention Armenia of course <:-)
I do not expect the SP to drop the full 2.36p and expect buying to push this over 11p at the point of the XD date. So my bet is is for the SP to end the XD day of trading at over 9p. Not long to wait to see how the crystal ball is functioning. The company has been pretty direct in flagging up that the Concert Party will see fit to purchase share should the SP trail their valuation. So my estimate is 15p + by Christmas is my take on this one. One of the catalysts is the RNS (due any time... me thinks October) on the Mamoming investment (significant) and the potential gains from this initative. A lot of PI's I am aware have large holdings and have opted for DRIP (save the tax charge) so post payment (end Oct) there will be a surge in demand for limited FTO stock. My strategy is to buy post XD (settle down) and prior to DRIP settlemen. It's only the kids inherentance so worth a punt now my colours are nailed to the mast of the good ship FTO........... dyor GDT
As this is a special divi I wonder how payment will be reported, when payment made and perhaps tomorrow FTO will enlighten us all. See that IC might have caused some premature selling , or the finger was on the pulse. Either way we should be in for an interesting time ahead as FTO now is debt free with cash in the bank. Now once the concert party start to enter the market that should tighten up supply and if the market works correctly the SP will rise. I appreciate lots of small PI's will provide liquidity as the SP rises (aligned with DRIP purchases and part re-investment of the divi) but in the end the SP will hop all over the place (day traders will be on this like a rash) I see a sustained rise on the cards.
Tks Del.......can't be bad, still things starting to creak with the body now. I do see that we have a buyer of size in the market at the mo 100K here ... 125K there.... So all in all perking up .... I am unable to make it to Broadgate as the train fare is prohibative, so if your good self or any other poster is going then please could you post what happened...... tia ...... btw One word of warning for anyone attending, the offices are near the top and if you do not like hights then just look at anything other than the wall to celing glass (gulp)....