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
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