Member Info for LunaNera

Sirius

I keep repeating to you that this is not a discounted cash flow calculation that I did (or sometimes do) ;)

It does however, often feature in the bags of things I do in order to shine a light on a position's prospects. (BTW, If I were to do a DCF, then 20% risk premium for SA is about right).

Best

Ooooh, the rule of 72. Never thought anyone would post that here ;)

Coming from the other direction, if you want to work out the effect of compounding interest (or returns in our case), is a function of the principal times the interest rate to the power of the number of years.

or

s = p (i^y)

for eg, investing £5000 for 12 years at an average return of 5%

s = 5000 (1.05^12)
s = 5000 (1.796)
s = 8980

Modest returns, when compounded long enough, turn into rather formidable sums.

Let's assume we can run this investment at a 5% return for 20 years....

s = 5000 (1.05^20) = 13266

FYI - the 5YR CAGR of NET PROFITS for SLP is 89%.... let that sink in....

My calculations for the intrinsic value of SLP assumed a return of 3.75% annually... and I got a clear buy signal. Of course I jumped in heavily. It is still looking rather good btw ;)

Halleluiah

Looks like platinum remains an important catalyst for H2 cells and in it's production. Albeit in conjunction with other metal (oxides).

The side effects are rather promising

https://scitechdaily.com/double-duty-new-catalyst-generates-hydrogen-fuel-while-cleaning-up-wastewater/

stoodio

There are some red flags with SLP. Let's not ignore them. Don't get me wrong, it's an remarkably well run business. Eventually it's time to talk about the business expanding, and not just the basket prices (which may well drop at some unforseen time).

AAPL in 2005 (with 30% net profit growth quarter after quarter) was my memorable investment. Nobody expected the iPhone (2007) and general negativity/pessimism was rather high, even though their products were flying off the shelves and an impressive trajectory. Mr Market nearly 7 years from thereon to price the company correctly.

Maybe it's worth talking about how SLP plans to expand their very well run business and brand? I do like a lot what they do and how they operate. It's time to widen the scope.

That COVID would increase demand on the court system was to be expected (see some of my musings about a year ago --- someone actually called me a fraud when I pointed this out, a real gem).

BUR is the best of class to put a bet on a court outcome with a 30% margin. I like that idea and they keep demonstrating that this has legs.

There are other companies on the LSE who, for e.g. used similar accounting practices like BUR a while ago, accounting their potential value as value realised -- which is what MW (correctly) criticized. All of them deal with intellectual property monetization and the companies they account as asset realised aren't even public. So the same criticism would apply.

I wonder whether these would survive the scrutiny. Burford did. With flying colours, may I add....

However, as attractive as I find their proposition, I would not go as far as compare them to Berkshire Hathaway. That's an entirely different animal. But that's OK. Patience is an important trait for investors. Will it show now? Who knows? There are still a few edges to soften and a couple of things to work on. But the recent results are encouraging to say the least.

It's important to keep level headed and let the results speak.

Happy holding.

(I'm still long and not regretting it).

Hi Nimrod

The company has a very clear plan on how to use their funds. Latest reports explain rather well how they are deploying their funds to grow the business with mineral asset development and opecast mining projects.

Some of these are coming online in the not too distant future:

"Volspruit Platinum Opportunity

Detail design for the Permitting Applications has been completed. Specialist work for updating the EIA and Water Use License will commence during Q3 as part of the overall process to conclude the final project authorisations. "

Other capital projects invoke improved processing facilities to extract even more PGMs from tailings and various other process optimizations.

Looks like they have a very good idea of what they need to do with the cash.

People often think that shareprice = business performance and try to explain everything in those terms (efficient market theory). I am not I'm that camp. Markets are driven by people. And a species we are a lot less intelligent than we delude ourselves to believe to be. In fact, we are generally emotional, irrational, slow and unreliable. And so are markets. Some investors use this insight to their advantage ;)

Look at the income and cashflow statement. Tells you all you need to know.

Forward P/E of 1,040.5 (current is negative). P/B 12.85, ROIC -0.8%, ROE -9.0%, Op Margin -0.83%. Book value is 49p. Maybe you find someone that gives you a multiple of 5 for this business?

It needs results to convince me going long on this one.

The next Amazon? Dream on.

TBTT,

You are not the only one buying. Eventually, even my 'prayers' are answered ;) Discount to a fantastic business? Yes please!

"Archegos Capital, a private investment firm, was behind billions of dollars worth of share sales that captivated Wall Street on Friday"
------[Financial Times]

Ditto. Naturally, events like this can impact prices across all markets (higher supply). I'll ride it out.

JLP has quite a lot of red flags on their balance sheet. I agree with TBTT that itis rather poor value right now (although I would not touch it).

SLP and THS are far better investments -- and better run.

Prices of securities increase when demand outstrips supply, and the reverse. It sometimes has to do with business performance, but not necessarily.

Indeed, if someone wants the money, for whatever reason, and it's a big enough tranche, then the price will go lower. Fund managers have the problem all the time because they cannot simply deploy these vast sums in one go. So they have to gently ease in or out.

This discrepancy is effectively a market inefficiency.

This business is not broken. It is fully intact and very well run. I am not worried. In fact, I am rather happy about the opportunity events like these present.

Consider APPL in 2005. I noticed that they grew their net profits by 30% every quarter. Yet, it was off many people's radar and there was general negativity on the stock. I took a rather meaningful position, only to see it, at times, tank by 30%. The business was effectively thriving but the market had a lot of emotions around this company who went nearly bust. I took Charlie Munger's advice and ' just ride it out'. Ditto.

The rest is history. The cherry on top of the cake was the iPhone launch in 2007.

The lesson I learned is that as long as the business is intact, is not grossly overvalued and has quality management, then its rather safe to ride it out and keep holding. I was rather happy at the further discounts and increased the position further.

I don't see a demand for their product suddenly dwindle, but as the price of Rhodium shoots up, the risk of sudden downward movement increases. So that's something to consider. However, at current valuation levels the share price doesn't even reflect the Rhodium boom. It is also still extremely well managed and the board knows the business inside-out.

Want to flog me your holdings for 100.00p? Yes please!

Patience.

I love pullbacks and market-panics. I absolutely love them.

This doesn't work for every security though, it needs to have solid management and a balance sheet underlining thier competence. Not many companies have that. SLP does.

Just look at their capex since 2014. You see how well they managed their expenditures and managed the operations into profitability. Annual report by annual report. These guys know what they are doing. It's rather beautiful looking at their journey from loss making startup to profitability. And this was under much less favourable market conditions than today.

So when a stock like this becomes heavily discounted, I am always happy to ask for further helpings. They are going to rebound pretty strong, we just don't know when.

The way it looks, it may not be in the too distant future.

Enjoy the sale.

Everyone likes a shorcut from time to time... even greats such as Ben Graham. So how can one quickly evaluate which one of both purchases yields more value, SLP or THS?

Operating Margin + Divi / Price to Book.

THS: (21.59 + 3.31) / 1.53 = 24.9
SLP: (55.57 + 3.79) / 2.26 = 26.26

So SLP marginally more. But both can be considered equal for what it's worth.

I do prefer a company with a higher operating margin (an enviable 55% for SLP) and negative net gearing. And thus SLP it was for me. Not sure why one wants to play both... but each to their own.

Who doesn't like a discount to intrinsic value? Apparently, some are much happier when paying premium prices. It's a well documented fact of human psychology. Everyone can get caught up in that....

When researching the company and looking at the MW report, the conclusion was that the report had not as much substance as credited. And the company was certainly not "effectively solvent" nor was it a ponzi scheme like some proclaimed. However, it must be said that accounting unrealised assets as realised was a bit naughty (slap!). So there was some justified criticism from MW, agreed. But at 630p and falling, it was a good opportunity to start building a position then.

However, the business is not broken and the company is still on the path to become an incredibly strong brand in this space. This is a very compelling reason to invest, but it requires patience.

To everything that has been said, I would like to add that I noticed that their free cash flow has noticeably improved. The cash position noticeably improved and net debt decreased. The operating profit margin is still enviable. Let's see whether other ratios improve over time. Their returns are still not where they ought to be, but given that a lot of cases where effectively deferred due to the pandemic, it is not unreasonable to expect a nice bump to manifest itself over time. The fact that during this period their performance didn't tank speaks for itself.

This is a very good reason not to give up and continue to watch the story unfold. My position is that eventually the market will realise the value, but I have no clue as to when this will happen. I'm sure that eventually it will.

Looks like a whole group of new investors is of the same opition.

Hi Velo,

ITM has an operating margin of -3,031.62%. I'd rather top up SLP at 118. At least they have a business.

H2 powered fuel cells are certainly this years' buzzword. Unfortunately, this space is so immature that it is difficult to see where this is going or whether this is going to take off at all.

If it does however, then that would be a nice cherry on top of the cake.

Reminds me a bit of the investment I made in Apple in 2005....

Fuel cells have been around for a noticable amount of time (late Victorian). NASA is using them with great success since the 1980s. Previously, the high Platinum content made them not so practical to use in consumer-space, but recent developments by Siemens/Bosch led to designs that required substantially less Platinum than initially thought and made the proposition a viable alternative to EVS.
Arguably, they are amongst the leaders in that space

www.bosch.com/stories/fuel-cell-stack/
www.siemens-energy.com/uk/en/offerings-uk/hydrogen.html

Indeed, as these develop demand for Platinum would be expected to increase unless the solution for catalysts changes completely (rather unlikely in the near future).

It's not the reason why I'm in here though, but I would not mind that extra bump :)

The reason I started building a postions a few years ago is because I see a superbly run company at an incredibly low valuation. Situations like this don't come up too often.

CleverThoughts

Have a look at how well capex is managed over, say, the last 6 years.... It tells an interesting story and shows how well this company is run.

PGM prices weren't this high back then, and yet the Management still turned a handsome profit and growth.

Current valuation is ridiculously low, whichever way you look at it. For a company with an ROE of 30+% this screams undervalued.

Eventually the market will wake up to this.

abacus

I doubt they would accept an offer of £10.-

Also, some revenue from the Petersen case already materialized.

But there are far more pressing issues for Burford, namely what are their rather mediocre returns at present. Too early to call duev to the lumpy nature of the revenue stream. I'm prepared to give it a few years.

Thank you Mr Market, thank you!

I love pullbacks on great businesses. Love it when the finance sector throws a sale! Don't you?