PM Bolt On: Syrah Resources (SYR), Harvey Norman,

Good Evening,

We'll call this the Australian focus.

In my determination, I'm getting back into the 'blogging', albeit not as prolific as yesteryear, but also an Australian Theme, as that what interests me at the moment; save of course for my WPP thesis.

I'll start off with Syrah Resources (ASX:SYR), I've been short there for some considerable time, based on a my views below:

1)    A sub-tier asset, with certain questions over the viability of the development. A major element is, “how can you mix Graphite with unspecified levels of Uranium and still be viable?” Perhaps I'm missing something within the company agenda? Feel free to voice it if you think I am off the radar.

2)    Remember, first and foremost, Syrah's asset, Balama was only acquired after a number of attempts at proving up a substantial Uranium deposit. These attempts were disappointing to say the least. This doesn't mean it had no Uranium, more so the levels are/were uneconomic. I’ll maybe come back to what a battery specialist was educating me on recently.

3)    After the last Sales and Marketing Investor Session, there appears to be a lot of hope being put forward. For those unaware or perhaps not following, the Graphite Export Tax has been removed in China. Source: http://benchmarkminerals.com/china-begins-graphite-overhaul/

4)    The capacity in China should not be ignored and elsewhere in the world, perhaps some closer to home than Syrah give credit for, such as Triton; a quick refresher of the Triton Minerals presentation (2017). There's high grade in the region, predominantly reliant upon by the flame retardant industry and not the battery industry (my view again)

5)    Whatever happened to SYR’s promises of a US plant, not only is the balance sheet, in my view, incapable of accommodating such an expansion, SYR have switched to an Asia focus and,…in my view still needing capital. So, assuming I’m correct, the 'dreams' of being a Tesla ‘major’ supplier, are out the window too? I think so. The new CEO might have more abilities than the last, but only time will measure that.

6)    The price assumptions and cash flow of Syrah simply don't stack up either, I'd got as far to say totally unachievable, but being the 'amateur' here, what do I know. My estimates of the balance sheet is Syrah will need further cash towards the end of the plant development  in Mozambique (save for a prepayment deal). Admittedly for those in the last placing, at least they'll be able to average down. For those short, it at least improves the liquidity.

Nevermind, I’ll revisit after the next set of news. By my estimates its not far off…

On to Harvey Norman (HVN), apologies for the Australian focus, having been rather centered there recently, it cannot be avoided. My largest short for many a year is Harvey Norman, purely on the basis the rebate model and Franchise support is out the Window. 

For the HVN lawyers, this is my view, not determined just by company statements but importantly, investigating how the support model has shifted. The company has to consolidate the Franchisees’ account and importantly has to deal with an AISC enquiry relating to some ‘issues’. https://www.channelnews.com.au/asic-investigating-failed-harvey-norman-franchisee-operations/

Then again what do I know? More to come...

Atb Fraser

Morning Mumble: Bowleven, a little Lonmin, the Caterpillar & WPP (Belatedly)

Good Afternoon,  Good Evening, its been so long I forgot to click publish.

Some tiddler octane both in the board room and stocks volatility, the occasional police raid, with Global Advertising expectations easing.

Bowleven, at around the current price (c.34) there's potential, sadly the management appears to have done very little to progress things for stockholders in my view. It’s bizarre that statements appear in the FT from the likes of New Age's Steve Lowden, "who he can’t actually remember the last time he even had contact with Bowleven." See: Bowleven, the former exploration and production company. Perhaps someone should ask BLVN board about their progressive and dynamic approach to its assets, seeing as Steve Lowden's comments raise a serious question.

The management's lack of ability to monetize the project for shareholders is very difficult to measure, especially if you base the share price in comparison to the remuneration of Directors, I'd go as far to say its appalling. The board appears to have commissioned supposed independent reports, enthusiastically recommending all the resolutions are voted against. Perhaps these reports should also disclose if and what fee the company has paid them. The cost of this defence, including promoted Tweets on Twitter, is appalling and lacks the substance even smaller companies are able to achieve. A quick glance at Ascent Resources (AST) and Victoria Oil & Gas, proves this, albeit I have zero interest in the latter having taken decent profits.

Those holding for some time will be aware of the glossy promotion that has come through the door. Additional items include Institutional Shareholder Services, Inc. (ISS), the leading corporate governance and proxy advisory firm, and Pensions & Investment Research Consultants Ltd (PIRC), and further waffle from, Glass Lewis. Save for the PIRC throwing Philip Tracy under the bus for some reason or other, it's vote against every resolution.

The board had ample time to do something, with a lot of activity happening around the Etinde license, and the potential of funds getting more actively involved in the neighbourhood, to me the board are lacking any credible defence.

Simply, Crown Ocean Capital P1 Ltd (unfortunately abbreviated) are right, perhaps the cash return needs to be reconsidered, but there's potential with a new Board to establish and progress things. There may even be a few more changes post a successful change in the company!

Lonmin, (having traded it a few times) where according to the gossip out in South Africa is contradictory to the share price movements. Admittedly they have a few staff 'communication' and cost issues, but the M&A in South Africa for large projects is far from finished. Sibanye decided to acquire stillwater mining company for $2.2 billion, instead of LMI.  

Will Sibanye be back at the table having been so close? One suspects so. Plenty discussed in various papers about this and the recent public walk away by Sibanye to complete on Stillwater Mining. Perhaps they'll be back, however with a fairly decent platinum price ($990/oz.), and costs controls being worked on with a simpler mining structure, it's not for the faint hearted or impatient, at these prices, some see further downside, but likewise, orphans and fainted-hearted shouldn't apply. It shall be interesting, all the same. Tightly held at times, it is very volatile.

Not so amusing for Caterpillar, yesterday I’d decided to go short on Caterpillar (CAT), the US construction figures were off and missed even the most conservative expectation. Caterpillar has a long way to go to benefit from the ‘Trump-Tastic’ and now with serious issues relating to a raid by US federal agents as part of a tax probe, it’s a welcome benefit to the short...

In France, populism is growing behind Le Pen, could this become the start of things to come. Most certainly in Spain, discontent is growing. One shouldn't discount those that are disenfranchised or feel trapped in a proverbial corner, they just may be forced/motivated to vote a la Brexit.

The global advertising landscape is shifting, I've been doing some work looking at the real advert figures vs the unaware audience, which despite not even noticing the advert, are considered to be a viewer of the advert; in measured terms, what is the organic reach of the advertising platforms of today compared to the success of yester-year. Too much reliance put on what people perceive as value and reach, when the results are now not materialising despite the alleged success and brand awareness. If there isn't a significant change in the measured reach of an advert and acceptance of smaller targeted campaigns, there will be a reversion in trends.

WPP, are the barometer of expectation in the advertising sector and are not overly positive for 2017, preliminary results. Its not looking so rosy for the eternal acquirer WPP. Is there a goliath out there that will be impacted more by this, I think so! 

Atb Fraser

Please remember the views are my own, etc...it pays to do your own due diligence. Common-Sense Rules apply!

Morning Mumble: Its been awhile...

Good Morning,

It's been a considerable amount of time since I last posted, with commodities going through the cycle and various other issues such as Brexit, Trump and finally Le Pen coming to a head.

The market even has the likes of PurpleBrick's on Steroid's, who would have thought it!

Whatever next? A pertinent question...

Atb Fraser