Morning Mumble: Glencore, no hindsight 20/20 required here. Hargreaves Services (HSP), APR Energy (No Change in View), Lonmin, could it? Unlikely but its nearly ripe! + Zoopla's support line...plus beware amateur trader shirts!

Good Morning,

Another one of those days, with cheerleading type newsflow, selective reading is advised. Whether it's Chinese missiles, American interest rate policy or the oil price bouncing along with the traders, the market is acting like a flight of starlings. Is anyone capable of forming their own opinions? It would appear the murmation need to consider their own position, with limited open contrarian views in the short-to-mid-term, the market will lack decent direction

Glencore (GLEN) have elected to show their confidence with Director/Management share purchases. Some could have been perhaps timed better. Steve Kalmin aka Scotty (EMC) 1,000,000 Shares at a price of 172.88p (GBP 1.729) per Share, John Mack, 50,000 Shares at a price of 162.85p (GBP 1.629) per Share and yesterday, Paul Grauer, 118,000 Shares at a price of 134.5p (GBP1.345) per Share. 

Rather immaterial when the selling of William Macaulay (EMC) is considered, to quote, "What this signifies in respect of GLEN's key market and likely performance is another matter (EMC).” Bryce went with Glencore sinks on equity issuance fears (FT).

Then again, Glencore can merely pull their levers for this and that to trade their way out? I doubt it's that simple. Quite how the hedging works is a mystery, but the lack of FX exposure suggests that to unwind the RMI (Readily Marketable Inventory) it will require significant capital/work.

If there's any accountants reading, it would be a pleasure to be educated on the carrying costs of said hedging, as it would appear GLEN have made significant gains. These now perhaps need reversing? Some very good analysis here in the comments section (FTML) (Bias). 

Positively, Hargreaves Services (HSP), after the director change today. Having been short on this company because of the woes of "coal. Now having had chance to review HSP (briefly) there appears to be an opportunity, one suspects for some form of leveraged buyout. With limited (£1M) net debt on the balance sheet, and set to be cash generative (even) at these prices, one has a suspicions the wheels will be in motion. 

There's been a number of questions regarding APR Energy. Simply I've not had time to cover all the items mentioned in their preliminary results for the year ended 31 May 2015. Are GE Capital the sellers? With net debt of near $604M, there's a need for cash. This is after allowing for some form of "heck you owe us a lot banking syndicate, here have some more." No change in view...(EMC). 

With Lonmin laying off a few more chaps, one wonders if the entity is “nearly” clean enough for a take-out. If ever the time was ripe, it's nearing that point, event risk warning on those shorts. Likewise, I’m informed that technically speaking, Zoopla has to break 230 pence.

The finally thought goes to an acknowledgement, which was gratefully received after a minor differing of views on all FTSE miners near 3+ years ago. The "beware amateur trader" shirt, no doubt at vast expense, will be modelled when I'm lacking sobriety. However, the pictures of a certain “professional” wearing similar is noted!

Remember, today is a Holiday in China, so can expect some sideways / positive trading of a fashion.

Atb Fraser

PM Bolt-On (Par Deux): APR Energy (No Change), will they be able to keep the lights on! (Poor I know).

Good Evening,

There's 'gossip' of a calamity of a cash call for APR Energy (APR) going on at the moment. Somewhat valid after the trading updates and levels of debt. Whether this is based on the need for a huge discount being offered to achieve an underwritten rights issue or the lack of overall interest. The market will find out in due course.  

EMC: APR Energy time to press the button (6th March 2015) & EMC: APR no change 16th June 2015 No change in the view. APR should have raised sooner rather than later. Wiping out most of the equity for holders. GE contrary to earlier suggestions does not appear to be the wannabe White Knight. 

One to watch over the coming days.

Atb Fraser

PM Bolt-On: APR Energy (APR) & Majestic Wine (MJW)

Good Afternoon,

After significant emails/messages regarding APR Energy, there's nothing further to add...EMC: Time to Press the Button on APR Energy (March 2015). No change in viewpoint now the departure of Brian Rich and the trading update (profits warning) has been announced. Simply, APR should have raised funds sooner. 

Majestic Wine (MJW), full year results and bottom line were pretty much as expected, save for the revenue increase that was a surprise. They're operating in a tough market where their main competition is the non-bulk sellers (supermarkets) who are under pressure to beat on price more than any other time. With the shift online, could there be an argument for a complete rationalisation of their estate? 

With a 5.4% increase in active customers to 678,000 (from 643,000 (2014), where as revenue is up 2.3% to £284.5m (from £278.2m 20:14) suggests customers are ordering less often. This is creating a greater promotional environment. The market is not dead, but with a complete shift required in ordering and perception of Majestic Wine (and subsidiary offerings)perhaps the consumer needs re-educating with their offering on a national (or strategic regional) level.

Little time to cover it in-depth.

Atb Fraser

Morning Mumble: Dee Effe Esse, China's Steel Mills (No news), PMO Zebedee BOING! & APR Energy (the Fluke)

Good Morning,

Following on from the EMC February comments on DFS Furniture (DFS), today we are informed (with no surprise) the management and owners of DFS are running for the door selling around 25% of the company. Advent will still hold between 50-55.9% of the company, so those realists will be wise to remember the rules of illiquid stocks at least until the stabilisation facility has been finished!

With Li Keqiang (and as such the Chinese Government) acknowledging the downward pressure on the Chinese economy intensifying. China have finally utilised the over-capacity and pollution to justify the closure of the mills. It’s positive for the Chinese as they're openly stating iron ore demand is reducing and there is currently over-capacity in steel mills even with the closures. With the extended trading hours on the DCE (Dalian Commodity Exchange), the price reacted very positively (for the shorts), dropping 3%. 

We should initiate the Atlas Iron share price watch again, with those holders knowing full well the bounce at Christmas was the time to get out! Only 10% ish off its lows, the holders can fill mailboxes with the abuse despite knowing the realities. Of course it has nothing to do with cost of production and the supplied market. We'll ignore the facts of Russia exports being enticing for India on the back of their currency debacle. As Russia languishes in a mire of contemplation and ignorance, what better time for military exercises (FT). Often children find comfort in playing with their toys after being on the naughty step....

With both WTI and Brent sat on levels of support, one assumes the bulls will return with the ECB printing presses, at least on Brent, whilst WTI focuses on shipping America to Asia to meet demand. Later today I hope to catch up with a shipping chap about the current health of rates and demand. Will update in due course, the delay surely cannot be on the basis it’s his turn to pay (not that one is counting having paid for the last 4!)

Premier Oil (PMO) are getting busy with the drill bit, so the fanfare will no doubt be out for Rockhopper (RKH) over the next few weeks. Wasn't Zebedee a child's spring type character well before my time? RKH Zebedee announcement.

APR Energy, by sheer fluke being short on technicals alone, APR Energy aided EMC et al with a market update. Time to press that button on APR, with a trading update/market update not the best timing with discussions with their banking syndicate in full flow. Its pleasing to see a number of positions utilise yesterday's spike to sell near break-even, how prudent to sell positions. 

One would be wise to consider how much cash APR banking syndicates will expect shareholders to stump up. That alleged offer late last year isn’t looking so speculative and cheeky now is it! The EMC Christmas Card list is bordering on the who do we not send them to. 

Limited time to cover GLIF’ s investment, in Open Energy Group, and the dull performance of Inspired Capital (INSC) not to be confused for those fat fingers with Inspirit Energy (INSP). Both a longer-term hold since circa 2013/2014.

Atb Fraser

No comments required on Afren (AFR) due to the obvious there. The quote of the day goes to one fund manager with, "whoops." 

Morning Mumble: The Mammoth (Rio) attempts to please the market and support its own SP

Good Morning,

Rio's full year got shareholders salivating with the headline "Rio Tinto delivers underlying earnings of $9.3 billion and announces a 12 per cent increase in full year dividend and a $2.0 billion share buy-back." The Australian market action was perhaps the best response, flat. 

With a reduction in CAPEX and debt, plus $500m tender and share buyback $1.5 billion will all support the SP and get the analysts chomping at the bit. Rio have been saved by the aluminium improvements compared to last year, EBITDA up near 55% and earnings a respectively handsome 124%, with copper not performing too badly either EBITDA: 33% and underlying earnings, 11%. The recent commodity falls are predominantly outside of the majority of this periods reporting.   

A quick glance at the numbers, it’s wise to remember prices for iron ore have “nearly” halved in the reporting period and copper slipping significantly, with further dips predicted. Rio believe there's around 125 million tonnes of high cost production from China and non-traditional seaborne suppliers to exit the market in 2014, with further exits anticipated in 2015. This is assured as casualties unfold and give up the fight. China may however find a benefit in supporting native production to maintain the status quo of low prices and reduce monopoly.

With write-downs on foreign exchange debt, reducing CAPEX (likely impact on earnings post 2017) and impairments already in the bag, the underlying earnings were set to benefit. Next year may be a different story, with demand under pressure, aluminium and copper (likely to be under-pressure again soon). 

Indonesia's unprocessed export ban has benefited those operating elsewhere (namely Australia and Philippines) and has created an increased demand for alumina and bauxite (but for how long). China has suffered from a surprising lack of stock and turned to Rio et al to fill the void. Any change in Indonesian policy is likely to impact hardest on Rio. In summary, Rio is now the stimulus and dividend play of the market, putting Glencore's (GLEN's) update yesterday to shame. Over to the share buyback to support Rio's SP in the longer term, just like GLEN’s (sarcasm).

With the share buybacks continuing there's no reason for a realistic 3600 pence tp + some hope value, where perhaps the market should be revising the returns downward in light of the obvious happening within commodities. Before holders gets excited about reversal of impairments (write-backs) in Rio, at $1.049 billion (net of tax) of book value for aluminium and bauxite, its worth remembering they've already been written-down near $29-30 billion. A positive in significant cost improvements and high regional market and product premiums, aka Indonesia's loss is Rio's gain but nothing to shout about. 

BCN (Bacanora Minerals) takes the gloves off and announce EGM requisition with the proposal for David Lenigas to join the board. BCN outline the case simply with the search for a technically orientated CEO, which should be sufficient. REM (Rare Earth Minerals) already have representation on the board in the form of Kiran Morzaria, its wise to read the disclosures (and the respective companies’ performance) to consider the pros of any further REM volunteers and employees being strategically placed.

If REM wish to play hard ball with BCN both entities will only be doomed. BCN may wish to throw a spanner in the works and raise some cash and dilute REM. BCN would be wise to contact those valuing decent projects above any association with REM. Lithium is the way forward, but sometimes the assets have more attractions than the associated parties, see: LGO commentary and Victoria Oil & Gas. 

With Brent, WTI, Gold and Copper all taking a breather whilst everyone has a hug in the Ukraine, perhaps next week will bring more volatility. Its nice to see a stale bull in CPR APR Energy reducing his lithium intake as the stock has a change of direction in his fortunes with the Australian Pilbara announcement. Is the company is on the turn? With mutterings of some positive tendering and perhaps even a quick decision coming out of Libya. Over to Aggreko (AGK). 

SuperGroup (SGP) announce that Susanne Given, Chief Operating Officer, has stepped down from the Board as a director with immediate effect and will leave the business in order to explore other opportunities. We'll leave that one for another day...

Atb Fraser

Morning Mumble: Appliance Online (AO) what next? A short piece...and the week.

For those following the story of Appliance Online, it listed at a massive valuation compared to its profit from the previous year. Appliance Online do just that...white goods and small appliances only. Well my figures do not stack up on that valuation and it comes as no surprise, having modelled the company, that is the reason why I am short. 

The important part that needs to be considered is the expanding offerings from AO. AO, with the "marketing concept" and heavy push means they have to start offering other electrical items within 5 weeks to keep the psychology of the model moving forward. This needs to be continued, almost akin to "Shake and Vac" marketing, for those that know about that advertising benefits of that brand that had astronomical results when advertised at regular intervals...

Its likely within this new offering of TV's that Appliance Online will sell a unique brand as well; say from a company that already produces components and parts for larger and well known manufacturers such as Samsung and Panasonic. So I envisage AO offering a new line called HiSense or similar. They're already selling under that brand in the US and a limited degree in the UK, but I expect them to do some form of quality launch with exclusivity for AO.com leveraging off the back of manufacturing parts for other more well-known companies. 

Whatever appliance online do, in the short-to-mid-term it won't justify the stupid valuation it currently has. Profits are a must and it's not just "about cashflow", shareholders want more, or at least should. It will be interesting to see if the psychology of the AO model means the launch will happen within the 5 week window to keep "the news beat consistent" and maintain people's interest. Only time will tell, but due to the nature of the market, its my a risk I have to factor into the shorts. 

The concept, of warranties must underpin AO more so than any other brand. A dishwasher has a "lifetime warranty" for only £6.95 a month for Dishwashers... that's  £83.40 a year. It's a lifetime warranty so when you cancel you cannot renew it (fear) but more importantly with the average white goods costs being around 450 you're paying for a new one every five years ish. Interesting concept, buy one pay for two just in case on breaks down/has a fault. I won't debate the statutory rights a customer has under the Sale of Goods Act here, but you get the idea. So for now I remain short...but am wary of news so will be looking to close down at points prior to my five week deadline. 

To elaborate further on Friday's commentary, its rumoured there is going to be an APR Energy and Aggreko tie up (I'd give it the caveat of a significant BS Rating). Some, including myself, cannot see the benefits save for the additional savings in one set of group costs. Would the brands be able to hold their share as one entity? Hmmm...A lot of gossip at the moment but time will tell, the main difference could be that APR use gas and Aggreko's main set uses oil a positive when combined in terms of offerings. 

For the shorters than don't just focus myopically on one area it should have been a very good week, in fact exceptional and some stocks benefiting from parties buying back (closing their shorts). There's a renewed negativity in the market that for some strange reason a lot of funds have started to reduce their risks exposure on a very predictable format but as a herd; the outcome is obvious is it not? The question is, what took them so long to realise? Perhaps someone can enlighten me on the situation, but the situation does not look good for the longs, save for the rumblings of MRW being taken private. 

Atb Fraser