Morning Mumble: Supergroup (SGP) the performance echo(or lack of in mini version due to time constraints), Zanaga Iron Ore (ZOIC) Project Feasibility Study Results.

Chaos this morning was greeted with my retail shorts for which they have performed remarkably well. 

Mothercare (MTC) unsurprisingly being kicked yet again and strangley analysts and the like are now suggesting it's bad times ahead. Well unsurprisingly its been bad for a long time, and will be for the forseeable future unless things change, the liabilities and performance (the rot) are becoming overwhelming. At their last update in January the guidance was revised and no further drops have been evidenced.

Mothercare the brand, is being devalued by a lack of investment in it. Forget the noise about the debt and the trading, as this is secondary to brand (company) value. For sometime now I have positioned myself as an amateur expert in footfall (getting Comet's collapse correct, Halford's increases, Curry's wonders and the Supermarkets "lack of expansion.") So without blowing smoke up my own proverbial, its with no surprise that Mothercare scare stories are doing the rounds (so belatedly its dire!). It was whilst having a drink that I realised Mothercare is what Jessops was, the place to test out the kit before buying online. The consumer will pay for this later, by their incessant belief and insistence that the price is the be all and end all; but we'll ignore that for now as consumers will be over a barrel in a few years. 

Mothercare's woes mean that the possibility of a premium take out are limited or perhaps the word is non existant. The stores have value, which as it stands are perhaps the only asset. There's got to be a cash call on the way or lights out, purely on the basis that shareholders are unlikely to ever see a return on the current model. The market should be looking for a change in its strategy to push the brand, how they will do this is limited by the lack of ability to take risks from a top down approach and innovate their customers. Their scale is not being utilised in their pricing nor is it of benefit to the financial structure either. For that reason, Mothercare needs to persuade a giant to take them on, refurb more than just the stores and close the underperforming, sadly for the longs this price cannot be justified at anything above 98 pence and that's excluding the potential rights issue for £35M needed sooner or later at 85pence if they get it away sooner rather than later. One shall await the 22nd May 2014 for MTC to enlighten the market...

SuperGroup’s results are strangely identical to May 2012 in terms of disappointment, I’m sure the analysts will see more positives than I. In light of ASOS’s moves and lack of target achievements it comes as no surprise SuperGroup’s Market expectations were clearly higher than the results!

Zanaga Iron Ore Project Feasibility Study Results (ZOIC) (as Leggie pointed out) has announced the Feasibility Results. 

The ZOIC have you believe that Glencore (GLEN) are going to take out Zanaga at NAV? Surely one would have included the NAV within the Feasibility Study in order to give the Shareholders some cheer? So ignoring the fact its in the Congo (for which I now know better having been shipping Pork Semi-Meaty Pork Ribblets to Matadi for some time (long-story).

A blended return between Stage one and two infers an Internal rate of return around 15%, or specific to stage one of 12.7%. To be honest, I can’t see GLEN getting excited about that, then again I could be proven wrong (but I doubt it!). So initially ZIOC was a $7.5 billion 30mtpa operation, that wasn’t that great either. However they’ve finally worked out that cashflow could fund a proportion of this, so it’s with NO SURPRISE whatsoever there’s a two stage development, and potentially three stages if one was to be picky. They’ve reduced the development costs to a ‘modest” $4.7 billion. The main benefit for ZOIC is the premium grade pellets its suggesting is achievable, although its only suggested 2mt’s have been identified as DSO, one will be left to wonder whether that’s per annum or one off…

With GLEN busy with Mauritania and looking for nearer term cashflows, one cannot help but wonder if a fresh (greenfield) development is likely. One could argue that GLEN could sit there for ever and a day and merely bide their time. A criticism for today is there’s no assumed tax rate, nor does the Internal Rate of Return go far enough to suggest whether its including tax, afterall they included Royalties so why not specify the taxation? When someone realises, even an Amateur likes me needs the basic yet significant detail of “taxation included in the announcement.”

GLEN’s deals in Mauritania with Société Nationale Industrielle et Minière (SMIN) are years away…2022 by my estimated (albeit a positive for pipeline). The poignant element is that life does not bode well for ZOIC when Ivan Glasenberg highlights GLEN wants to focus on Brownfield sites, something ZOIC’s Mine is not…shareholders in ZOIC may have to be patient for their deal with GLEN…how patient? Who gives first Mauritania Government on Taxation or ZIOC on NAV?

The final thought on ZOIC / GLEN goes to the agreement, someone remind me of the terms having not read them for awhile, but if I’m correct GLEN are only commited to funding ZOIC up to the Feasibility Study? However GLEN do need to trade commodities as well, perhaps a different angle to the Zanaga Project is to be able to trade the supply, after all, as a major would you sell GLEN stock to impact on the price?

BT Group (BT.A) Final Results come in nicely and money for old rope for us longs!

Morrisons (MRW) need a saviour, will that bottle of Gin be mine Leggie! Surely the management and a few family members haven’t had more meetings with a PE firm have they? It would be pure speculation to suggest MRW’s “time to be taken out is now or never.”  

Uranium: Woeful low, the long positions must now being torched as houses/banks dump stock to monetise ‘something’. One holder had no choice but to ditch or pay dearly, not that they haven’t already, why someone would assume such large positions at $40 a lb without considering the slow journey down and back up beggers belief. I suspect that trader is now relegated to sharpening pencils albeit on a guaranteed bonus! If parties remember my belief about not buying into Uranium producers with costs above $22/lb, you’ll now see why.

Sadly I haven’t got time for the Aluminium impact, Randgold’s positives but a sell nor a Goodbye to Eastern Platinum thankfully delisting which is delightfully entitled Miscellaneous high priority announcements. I would like to thank the Board and the holders for one of the most obvious short plays in the last year in the Platinum Sector. Perhaps this delisting will bode well for their future? One doubts it, but at least it’ll save a few quid a year.

Atb Fraser