Well what a surprise, Iluka Resources confirm a share based proposal. KMR are less specific about and refer to the matter as "on-going discussions." Following on from yesterday, its nice to have a high risk return almost "instantly" in market terms from yesterday's Morning Mumble: if one was knife catching KMR might just be worth a couple of extra pence, what say you at 17p. Speculative/High Risk punters need only apply. Don't get too excited with KMR, one would be wise to consider KMR's cash generation...this will clearly impact on any offer. If its too high, Iluka will be a nice short!
We'll leave it to a statement from Michael Carvill, Managing Director [to summarise]:
"During the quarter we have continued to focus on previously stated plans of conserving cash and controlling costs against a background of market conditions that have adversely impacted cash generation. The upgrade of the non-magnetic circuits in Q2 2014 helped contribute in Q3 2014 to a substantial increase in primary zircon, a significant part of our revenues."
Leni Oil & Gas (LGO) has become a true traders fiddler, all the way down and all the way back up...a pleasure really. Many thanks muppets, you're too predictable...
Quickly, the story of the day should be the recovery in base metals. Significant support in late trading and over in to Asia. One could read this two ways as knife catchers or people exiting shorts for short-term gains. I suspect a mix, but with the supply and current prices, there's more volatility to come. Gold was doing as it should!
Rolls Royce (RR.) on the tank, with their guidance and medium-term outlook looking more like a thunder storm. Expect some recovery when the pen pushers can jump on a fence to infer everything isn't as bad as the market suggests with "buying opportunities" blah blah...
Very busy this morning, but the bounce, post DJI opening came with little surprise yesterday, denial and resilience will be the measure of the day.
Atb Fraser
Fraser- Hi- Oilers all dead catting so a busy morning here too. I guess its an end of week profit take for some shorts in that sector.
ReplyDeleteRe KMR- a real curates egg here- no major ops issues (for the first time in their history possibly- they can organise a piss up in a brewery perhaps) and cash is starting to stabilise at $29.6m on 16/10/14 (from $37.3m 30/6/14), some positive thoughts about their markets and Iluka are still in early stage discussions.
But they have pushed back interest and debt repayments (to help re cash) so the debt mountain will be horrific now, they have run out of room to store product indoors (at least temporarily) and they need a lot of things to go right that are beyond their control re markets. The original all share offer from Iluka is now worth circa 15p- they would be lucky to get it repeated as Iluka hold most of the cards now. My fair value is below 10p with all that debt but I would guess that 12p is a fair compromise offer, albeit the Pru may not want Aussie stock. Perhaps the original Pru team have had their Bentleys replaced by Trabants after their earlier refusal :-))
I did add a few at 7p this am, but will adopt a strict stop loss as a takeover refusal could see them down to 5p or so. Lets see.
Cheers. The Leggie
Hi Fraser,
ReplyDeleteI noticed a comment you made about GNC last week, anything in particular catch your forensic eye ? I'm short it (and HFG), in expectation that they might be caught in the crossfire of the supermarket problems. Terrific runs in both, GNC chart an island in the sky? 200ema broken etc.
Peter
HFG (Hilton Food Group) Dividend coverage doesn't warrant the risk for any long, my estimates are a smidge over 4% and personally too much risk for that paltry return. I might be barking up the wrong tree, but the HFG short was from the day one of the directors sold all their options. I don’t care what justification they give for it, tax etc…who cares, what they’re saying by the sale is they want their cake and eat it (in my view). They want people to buy the stock, not hold it themselves and more so, think they should be rewarded without risking their own equity…perhaps I’m wrong with this view, but so far this has been a rarity. Please clarify this…I might have overlapped with another stock.
DeleteYou may be right in terms of the supermarket issues, Greencore Group (GNC) market cap/share price does not match my valuation of the stock, nor did it at £3, I've taken profits on shorts as I expect some defensive elements of play on the run up to results and significant short coverage (nothing compared to some stocks but GNC has had some). The key to declines will be food on the go, I expect Gregg's fluke results as I called them to be impacted by the supermarket prices as well. Food on the go is highly cash generative, but when supermarkets are forced into competition people (customers have to pay attention). Based on GRG's results being a fluke I went short post the news, with profit taking being advisable for the longs. This is likely to mirror my thinking for GNC…i.e. positions post the news. Guidance in my view is toppy
One thing that is being missed are the bumper crops, which although "margins" may be maintained the cost of everyday items will reduce, which will reduce profits (common-sense). So GNC are due to announce the 25th Nov (top of my head) and one expects market realisation of their value (negatively if one needs clarity) post any news euphoria.
One would be very wise to wait till Tesco's full update the response from "the big boys" before taking larger positions, unless of course you have conviction in your positions. That’s for you personally to decide, I have my views…and I’m not a paid for tipping service!
As a contra-view which has to be considered specifically with GNC, if costs are coming down with supermarkets, can one afford more food “on the go.” This specifically isn't a turning point, normally its an increase in finances (more so) that assists growth in this sector. Gregg's healthier options has changed a dynamic, for how long...if one studies Pizza Hut et al for the peak of trends one would be wise to consider that for Gregg's trending unless the management embrace the next change. Expect some acquisitions, I did wonder if you'd see them appear instead of Phones4U outlets in some areas...
Rumours abound about Mothercare in the retail section, I’d certainly not want to be holding long, what the price is doing at 163 is beyond me, perhaps its because it’s a better acquisition post balance sheet improvements…I’d disagree there, whomever turned the offer down needs a mirror and a chat!
What parties should look at are the drink industries, having been negative on the likes of Diageo, one cannot help but ignore the defensive nature and run its hard off a bottom…certainly value at these levels, or “better value.”
Atb Fraser
Brilliant week thank you. Edge of seat stuff & the you called it so accurately. Thanks it got me thinking hard about positions & lovely contrast to The Leggie going longer term. Which one out of the two Ronnie's are you 2! ha. You seen the twitter musings from Leni gas? Al
ReplyDeleteBrilliant Leggie! The markets are ironically starting to realise that their approach to market belief is unrealistic. Equate it to my views on China that is their growth just not akin to building the Great Wall each week. The first version of QE. in my view.
DeleteInteresting that most drink producers declined as I went on a detox!:-) Is there a direct correlation between my detox and their decline...one shall find out next weekend! I'm off to the stud of a well-known trainer in Sussex next weekend, so I'll have plenty of tips to lose you money on!
Have a good weekend, Fraser
Fraser- Hi- v good weekend here grinding to a halt and the bottle bank trip will test my back next week :-)) I have been watching Diageo recently, but they need quite a fall to get to my fair value for them. Perhaps you are right and the buy sign will be your colossal gin order next week, have Maersk been warned!!!
ReplyDeleteGood luck at the stud next week- I have never bet on horses apart from one lost afternoon at Newbury with a bank tent and the works... I did keep my shirt (just) but came with notes and left with coins, just like most good nights out.
Well said re QPP- not point getting involved there, more red flags than Putins tank divisions on the Ukraine border :-))
Cheers. The Leggie