Morning Mumble: Just Limited (JE.)

Good Morning, 

In a celebration of the completion of the "Menulog" acquisition, Just Eat (JE.) holders have decided to celebrate by selling out. The market may have only just realised that JE. have paid circa 320 times earnings for MenuLog on Monday. That's one hell of an assumption (bet) on growth and ability to beat the competition.

With abstentions from a not insignificant amount of holders, its no wonder the stocks taking a kicking. One assumes those institutional investors in at 425 pence are content to sit on their holding for the longer-term. 

Being anti-most-tech companies especially where they do not improve the sales of a company over the longer-term but more so cannibalise your margins/profits.  Especially after a period of time, the businesses can utilise multiple e-commerce sites, or merely offer a small discount to pay direct in cash/debit card (circa 3-5%), then phase it out when the customers has fully returned to 'normal' transactions.  

So unless Just Eat realise the error of their woes, cut commission/fees and promote a sensible structure, companies are simply going to utilise them for the novelty period and then "just go." .

Although, cash generative for JE. at the moment, the question is, can this be maintained? If you're a business owner and its worthwhile considering the fact that if you don't have Just Eat you're likely to lose a lot less in revenue than what you'll pay in commission. Just Eat's Greedy Commissions Should be Taken Away, Say UK Restaurants. 

In contrast, the benefits are positive for the end-user,  with simplicity of ordering (resolved by the take-away website) and payment processing (resolvable same). Admittedly JE. offer a portal to manage the system and advertising and targetted emails. Nothing in Just Eat's model is unique or not workable by a savvy businesses wishing to avoid paying an unnecessary premium to conduct business online.  

Finally, as a thought, with "most people" using the same 3-4 take-aways often and varying their order infrequently, what purpose does the Just Eat offer? For around 30% of one months commission, menu's can be placed online with an online ordering portal.

Limited today! 

Atb Fraser

PM Bolt-On: Just Eat (JE.), is a 43+% abstention really a vote of confidence!?!? + Iron Ore (no) Investigation + the Chinese / Australian Volte-Face

Good Evening,

Something that was planned for tomorrow, but being time limited, it was to do it now or never. 

In just before the final bell today, Just Eat (JE.) complete the bookbuild at 425 pence, but the biggest issue being 43.67% of the stockholders have declined to take part. Namely JE.'s main three pre-IPO investors, The Sara Marron Discretionary Settlement, Index Ventures and Vitruvian Partners. So far all three have indicated they do not intend to take part in the placing or open offer. One certainly to watch, this vote of confidence is far from positive. 

The Australian Government walks away from an iron ore investigation that appears to have kicked up a storm (perhaps in a tea cup). Witch-hunt or common-sense? Australia may have just inadvertently kicked their currency in the proverbial. With wisdom, yet again closing out longs on GBP vs. AUD earlier than planned, as it approaches a key support level. In fact closing all GBP Vs, out on the basis of an unprecedented run which has little reason or substance.  

With Rio Tinto and BHP Billiton having their plans scuppered by the Chinese deal with Vale. It is a true and perfect bi-volte-face of deals. Not only taking the control away from Rio/BLT (read as also putting pressure on) but diversifying supply for China. Fortescue Metals (FMG) are likely to be under pressure as a result. More importantly China's about turn with Valemax suggests some very strategic deals are likely to be put in place, having previously been prohibited from ports.
Can Atlas Iron relist as a result? 

Atb Fraser

Apologies for grammar, a late one! 

Morning Mumble: The First Quantum (FQM) gloat (with humour), Bookers (BOK) Gem Diamonds, CAML's positives + The Start of where's Li from Hanergy.

Good Morning,

First Quantum (FQM) are passing the cap around for Cdn$1.25 billion (Circa £660M) to expand production whilst maintaining the same debt levels. We'll ignore the fact that FQM should have fund-raised when the Canadian Dollar was stronger, on the basis the share price has modestly improved albeit for no apparent reason. 

FQM, have been clever here, as they needed cash about 5 months ago based on the EMC view. This is contrary to one "Muppet" handsomely overpaid by a commodities firm. The EMC always loves a contrarian statement of "you simply do not know what you are talking about Fraser and should stick to those AIM tiddlers!" Well it would appear said muppet has not only been wrong about iron ore, copper, the impacts of Zambian taxation and Royalties, Lonmin and now FQM. All of course will be forgiven for a case or two of plonk and in good humour! 

FQM's Q1 results stated, the "Company remains compliant with all finance covenants under the Financing Agreements and expects to remain so in the future." What they FQM did not mention was thei the need for cash to fund expansion. The EMC's view is as always simple, investors including those muppet fund-managers and analysts, should have sold (EMC: Selling FQM). 

One of the best acquisitions by a company in a long-time, Bookers to acquire Londis and Budgens. Hat-tip to a certain savvy West-Country retailer broker whom in January spotted the crossover of Mike Baker being appointed as Budgens Brand Manager/Director. Will Mike Baker be overall Brand Director in the combined entity? With a lineage starting from Sainsbury’s, and some hard work, there aren't too many potential candidates. All the market needs now is Booker to acquire Iceland and the Big Food Group will be put back as a single entity, although Malcolm Walker might have a thing or two to say about that! 

Gem Diamonds (GEM) (See also: EMC: GEM Diamonds (February 15) seller of GEMD) give a sales and operational update. The update is now looking positive for GEMD, with prices near those of Q4 with a fractional improvement. The market has seen no further declines in pricing, with GEMD's average of US$ 2,146 per carat (first three tenders of 2015) compared to US$2,140 per carat in Q4 14. Ghaghoo is progressing well with recovery grades above resources averages (for now) and optimisation of recovery has improved recovery of all grades. 

GEMD has net cash of US$ 56.9 million at the date of this report, with financing in place, expect share price to gain some support on weakness with performance like to improve as a result of Ghaghoo. Over to GEMD to give the cautionary notes: 

Diamond Market - During the Period diamond traders continued the cautious approach they have adopted since Q3 2014. Increased liquidity constraints following the closure of the Antwerp Diamond Bank, together with tighter credit terms imposed by other diamond banks continued to put pressure on the rough diamond market. The Basel Watch and Jewellery Show which took place in March did not significantly improve sentiment in the polished market as traders wait for improved demand for polished diamonds. Notwithstanding this, prices achieved for Letšeng's high value, large rough diamond production remained resilient during the Period.

Overall it was rude not to have some on weakness, although small it may be the start of a positive headwind for the sector. Especially as some analysts have realised financial liquidity is important. 

Central Asian Mining (CAML) update on the Kounrad expansion, aiming for 13K/t's of copper for this year and 15K next, the share price movement is justified, perhaps as its got a little ahead of itself. 

Just Eat's tin is out for a modest £445 million, will give an indication of the confidence in this stock; wise to watch! With some humour, we are starting the "where is Li Hejun of Hanergy?" 

Of pertinence to Kenmare (KMR) is the update from Iluka Resources via their  AGM statement, "Needless to say, for the company to proceed to a binding offer, we need to have confidence around the financial merit and the value creation opportunity for our shareholders and our ability to manage Kenmare’s operation for the benefit of all stakeholders." 

Iluka are sounding more and more like they have KMR over a barrel. Maybe a revision in the offer? PRU? perhaps some wisdom this time? In Hindsight, the first offer from Iluka Resources was a prime example of why this companies company's SP is in the doldrums. Was it not near double the current indicated offer!?1 

Atb Fraser.