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Toby Shute's  Instablog

Toby Shute
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I wrote over 1,000 articles for The Motley Fool (fool.com) from March 2007 to February 2011, primarily covering the Energy sector. I was also an analyst on Motley Fool Special Ops, a special situations-focused newsletter and real-money portfolio service. After leaving the Fool, I consulted for a... More
My blog:
Article Archive at Fool.com
My book:
The Hidden Cleantech Revolution: Five Priorities for Securing America’s Energy Future Without Breaking the Bank
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  • A Stock Trading For 20% Of NCAV

    If I told you there is a stock trading for roughly 20% of the value of its net current asset value, or current assets net of total liabilities, would you be interested?

    Sure would! If the stock would simply trade up to NCAV, I'd net a return of over 400%.

    Sounds good, right?

    Sure does!

    Even if this is a nanocap stock traded on the pink sheets?

    No big deal.

    A pink sheets tracking stock for an Australian-listed company?

    Sure, if that's the easiest way to buy the stock.

    A pink sheets tracker for an Australian-listed company in the mining sector?

    Yeah, that's fine. They do a lot of that Down Under.

    A pink sheets tracker for an Australian-listed mining company, which trades for less than a nickel per share?

    Not a dealbreaker when we're talking multibagger upside to NCAV, mate.

    A pink sheets tracker for an Australian-listed mining penny stock whose largest owner is a private Chinese firm with a controlling 53.82% stake?

    Alright.

    A pink sheets tracker for a Chinese-controlled, Australian-listed mining penny stock with no ongoing business and whose shares are suspended from quotation on the ASX? (The company sold its only mining operations in 2013, and its lack of ongoing operations has put it out of compliance with Chapter 12 of the ASX Listing Rules. There is only one full-time employee.)

    I guess that's fine, if it's just a technicality. It's a cash shell. I get it.

    A pink sheets tracker for an Australian-listed cash shell whose shares are suspended from quotation on the ASX, and whose controlling shareholder was executed by the Chinese government a few months ago for running a mafia-style crime syndicate in Sichuan province?

    Uhh, what!?

    Yeah, it's unclear whether the assets of his business empire have been frozen or repossessed, as rumored in the Chinese press at various times over the past two years. His firm's representatives hold three of the Australian company's six board seats, including the Chairmanship.

    That's really sketchy. What are they planning to do with the company's cash?

    The Board state that they're committed to M&A and have reviewed over 30 projects. A successful transaction would enable the company to resume trading on the ASX.

    How can I trust these guys?

    You probably can't. Several of the company's executives were ensnared in Australia's biggest-ever insider trading investigation after front-running some of the company's announced takeover bids that were never consummated. Two of them went to jail, while charges were never brought against the current Chairman on account of insufficient evidence.

    This is crazy. There's a fine line between deep value and degeneracy, and I'm afraid you may be crossing it here.

    Maybe you're right. Forget I even brought it up.

    400% upside though...

    Yeah, I bought a smidge. Couldn't help myself.

    Jun 16 12:23 PM | Link | 5 Comments
  • Last Year Was A Long Time Ago

    I think this year-on-year comparison of reports from the Africa Opportunity Fund (OTC:AROFF), a tiny London-listed closed-end fund whose holdings include African equity, debt, and unlisted assets including a Zimbabwean property portfolio, speaks volumes about risk appetite and the broader opportunity set in today's equity markets.

    Fund Performance (as of 31 March 2013)

    NAV per share: $1.079

    Total Net Assets: $46.0 mm

    Share price as at 31 Mar 13: $0.896

    Market Capitalisation: $38.2 mm

    Premium/Discount to NAV: -16.95%

    Shares outstanding: 42.6 mm

    Current Quarterly Dividend: $0.002

    Portfolio Appraisal Value:

    As of March 31st, the Manager's appraisal of the economic value of the portfolio was $1.31. The market price of $0.8963 at March 31st represents a 32% discount. Note the Appraisal Value is intended to provide a measure of the Manager's long-term view of the attractiveness of AOF's portfolio. It is a subjective estimate, and does not tell when that value will be realized, nor does it guarantee that any security will reach its Appraisal Value.

    Outlook:

    We believe that AOF's portfolio possesses undervalued companies. Its top 10 holdings combined offer a weighted average dividend yield of 5.7%, a P/E ratio of 7.5X, a return on assets of 13% and a return on equity of 27%. We are excited by these attractive valuation metrics and remain optimistic about AOF's prospects.

    http://www.africaopportunityfund.com/files/AOF%2031%20March%202013%20Newsletter.pdf

    Fund Performance (as of 31 March 2014)

    NAV per share: $1.235

    Total Net Assets: $52.6 mm

    Share price as at 31 Mar 14: $1.315

    Market Capitalisation: $56.1 mm

    Premium/Discount to NAV: 6.48%

    Shares outstanding: 42.6 mm

    Current Quarterly Dividend: $0.018

    Portfolio Appraisal Value:

    As of March 31st, the Manager's appraisal of the economic value of the portfolio was $1.48. The market price of $1.32 at March 31st represents a 11% discount. Note the Appraisal Value is intended to provide a measure of the Manager's long-term view of the attractiveness of AOF's portfolio. It is a subjective estimate, and does not tell when that value will be realized, nor does it guarantee that any security will reach its Appraisal Value.

    Outlook:

    We believe that AOF's portfolio possesses undervalued companies. Its top 10 holdings combined offer a weighted average dividend yield of 3.6%, a P/E ratio of 15.1X, a return on assets of 8.1% and a return on equity of 13.8%. We are excited by these attractive valuation metrics and remain optimistic about AOF's prospects.

    C Share Issue:

    Subsequent to the quarter end, AOF closed a share placing which raised $29.2 million in the form of C shares (listed on the SFM under the ticker "AOFC LN"). This new capital will be invested separately. The C shares will be converted into ordinary AOF shares at a future date. We are excited about this development and will provide details in our next report. The placing agreement and related documents can be found on our website.

    http://www.africaopportunityfund.com/files/AOF%2031%20March%202014%20Newsletter%20Final.pdf

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jun 11 3:49 PM | Link | Comment!
  • $ESV Rig Status
    ENSCO 8501 disposition as of Nov 22, according to the NGA: "Rig Removed"
    msi.nga.mil/NGAPortal/msi/query_results....

    Rig also not listed in the BOEMRE's list of deepwater activity as of Monday:
    www.gomr.boemre.gov/homepg/offshore/deep...
     
    Had been working for NBL/NXY in GoM, most recently at NBL's Isabela prospect. Is this a temporary demob between jobs, or has it run out of permitted activities? We'll probably have to wait for the Dec fleet status report to find out.

    Update:
    Looking at the NOAA, I see that the rig has been moved to Green Canyon 512, the site of Nexen's Knotty Head discovery.
    sdf.ndbc.noaa.gov/stations.shtml
    Looks like the 8501 has more work in hand. This is good.

    Update 2:
    Looking at other rig dispositions on the NOAA site, I notice that this data is at least several months out of date. The Ocean Endeavor, for example, left the GoM for Egypt over the summer, yet is listed as being at Walker Ridge 278 at the above link. If I do a search for that rig, I get this:
    www.ndbc.noaa.gov/station_page.php?stati...
    This puts the Endeavor at Keathley Canyon 919. That's possibly even more stale. The Endeavor had finished up there as of March 2010, and had moved to the Mississippi Canyon area by the time of the Macondo incident.

    In conclusion, the NOAA site is useless, and I'm left wondering whether the ENSCO 8501 still has work.
    Tags: ESV, CEO, NBL
    Dec 03 10:44 AM | Link | Comment!
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