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John Polomny
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John Polomny is an individual investor and speculator seeking unique, overlooked, and well researched opportunities and speculations from all over the world.
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  • Mongolian Cement Company Poised For Liftoff 13 comments
    Mar 17, 2012 5:31 PM

    If you are a follower of my writing on investing in Mongolia you may find this of intrest. A recent decision by the Mongolian Parliament to subsidize citizens apartment mortgages bodes well for UB based Remicon JSC. From the Frontier Securities website.

    According to Government of Mongolia on February 21,2012 Government resolved the issue of making a reality for citizens 6 per cent soft financing for residential purchases. Government has resolved for Development Bank of Mongolia to issue securities up to 200 billion MNT(149 million USD using Bank of Mongolia's today's reference rate). Finance Minister is to issue a Government guarantee for payments for principal and interests of the securities.

    Until funding from issuance of securities of Development Bank of Mongolia will come in, commercial banks are issue soft loans to citizens from their own capital. Finance Minister, Minister of Roads, Tranportation, Construction and Urban Development and Mayor of city of Ulaanbaatar have approved on February 21,2012 procedures to issue soft loans up to 50 million MNT( 37 thousand USD) with 6 per cent interest and duration of 20 years to citizens with low and medium income.

    • The apartments must be enrolled in 100 thousand apartments program which includes 75 thousand apartments in Ulaanbaatar
    • Borrowers should be able to make 10% down payment
    • The apartments will be a collateral and borrowers can pay off loan ahead of schedule
    • Apartments will be built in locations such as Yarmag, Zuun ail, Televiz and 13th subcommittee and state will be responsible for financing required for infrastructure. Also ger substandard housing district will be moved and apartments built. In this way cost of the apartment will be reduced
    • At the moment 79,486 families have been selected from 159 thousand applications into 100 thousand apartments program
    • 28,300 apartments from total apartments in the program will be ready within 18 months and 6,341 apartment have area of 50 sq. meters
    • Government increased area to 55 sq. meters, therefore it has become possible for citizens now to purchase 9,017 apartments
    • For a start, possibility is created for first time buyer families with 1 to 4 family members of 1-18 age to purchase apartments
    • Government aims to fully implement 100 thousand apartment program by 2016.
    Remicon JSC (RMC) is a UB based ready mix cement provider that trades on the Mongolian Stock Exchange. From the information I have been able to gather Remicon's sales in 2011 were up 2.6 times over 2010 and earnings were up nearly 200%. This is what happens in an economy growing 17% per year. The shares are currently trading at around eight times earnings which is cheap for a compnay growing 100%+ per year. Remicon was already doing a ton of business just based on the massive growth and construction that is occuring in Mongolia. The fact that 100,000 apartments, 75,000 in UB, are going to built between now and 2016 is only going to supercharge the business, and hopefully the shares, of Remicon. Full disclosure I own shares in Remicon and I am looking to buy more.
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Comments (13)
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  • Jon Springer
    , contributor
    Comments (4073) | Send Message
     
    Hi John,

     

    I've heard Eurasia Capital is handling, or helping with, a new round of the secondary offering financing for Remicon while I know Frontier Securities was among the leaders of this financing in the first round.

     

    Local concrete and cement has a significant cost competitive advantage over concrete and cement imported from elsewhere (I believe a 17% import tax was cited in a recent conference call but don't have those notes handy; additionally rail transportation into Mongolia is already at full capacity and can't be pushed higher until rail infrastructure increases which is years away; et cetera).
    17 Mar 2012, 05:38 PM Reply Like
  • John Polomny
    , contributor
    Comments (609) | Send Message
     
    Author’s reply » Yes there is a secondary offering coming as the company is building a new facility in Dornogobi from what I understand. I have seen that Eurasia, Frontier, and Rescap are all pretty positive on Remicon.
    17 Mar 2012, 06:27 PM Reply Like
  • sharfich
    , contributor
    Comments (7) | Send Message
     
    Also Monet is positive on this company. Almost too many positive opinions...
    20 Mar 2012, 01:58 PM Reply Like
  • Jon Springer
    , contributor
    Comments (4073) | Send Message
     
    a) I believe Monet was co-lead with Frontier on the first round of the secondary offering.
    b) Large, liquid and reasonably transparent companies are at a minimum on the Mongolia Stock Exchange. Remicon is among the very few that approach this standard.
    c) Infrastructure clearly needs to build out a lot in Mongolia; there is an obvious construction boom in Ulaanbaatar; mining facilities will require a lot of their product; etc.
    d) The cost of buying concrete and cement in Mongolia is so much cheaper than getting it from an outside source; and demand is high enough that some concrete and cement must be imported; therefore Remicon will sell everything it can produce for the foreseeable future unless they can magically increase their capacity exponentially.
    20 Mar 2012, 02:46 PM Reply Like
  • John Polomny
    , contributor
    Comments (609) | Send Message
     
    Author’s reply » This is a good observation and normally I would concur with this sentiment and my spidey sense would be telling me to watch out. However, in this case there is so much demand and as Jon says there is a dirth of companies with decent reporting that everyone is on the bandwagon and recommending these shares. The same thing could have been said about SUU which I bought almost two years ago and the stock is up over 200% since then.
    20 Mar 2012, 06:19 PM Reply Like
  • Jon Springer
    , contributor
    Comments (4073) | Send Message
     
    RE: SUU...

     

    Stock is up indeed. However, word on the street is SUU gamed the system last year and dribbled shares onto the market to limit-up early and often. (no one would be quoted on that, so this is pure speculation from anonymous sources)
    20 Mar 2012, 06:59 PM Reply Like
  • crozz
    , contributor
    Comments (297) | Send Message
     
    Where can I get a stock quote and history? If I look here:
    I just get a history back to July :(
    13 Dec 2012, 05:14 PM Reply Like
  • Jon Springer
    , contributor
    Comments (4073) | Send Message
     
    http://bloom.bg/VDLg4p

     

    Bloomberg spells it Remikon. Chart can be drawn for 5 years.

     

    Mongolian not being English, English translations of words vary (e.g. Remicon and Remikon are both accepted and used)

     

    If I ever fix my MSE holdings, I'll only own Remicon and BDSec at the moment (though some crappy thermal coal mine and a B board stock with no underlying business will probably outperform them by many 100s of per cent)

     

    JMHO

     

    What do you think John?
    13 Dec 2012, 06:39 PM Reply Like
  • John Polomny
    , contributor
    Comments (609) | Send Message
     
    Author’s reply » Rescap has a free and pretty decent market recap everyday that can be accessed here:

     

    http://bit.ly/QYlwmi

     

    On the right side of page under "Daily Trading Update"
    14 Dec 2012, 08:00 AM Reply Like
  • crozz
    , contributor
    Comments (297) | Send Message
     
    Sorry, I forgot to add the link to the Mongolian Stock Exchange
    14 Dec 2012, 09:17 AM Reply Like
  • Jon Springer
    , contributor
    Comments (4073) | Send Message
     
    Knew what you meant Crozz. Historical data charts used to be there on the MSE site. Seems weird that Bloomberg has better data than the local market. I'd suggest e-mailing Altai (MSE head) but he hasn't responded to my e-mails in the past (with an introduction). So, I'll just chalk it up to Mongolian "efficiency" and be happy we found somewhere else with the data.
    14 Dec 2012, 11:43 PM Reply Like
  • MRebel
    , contributor
    Comment (1) | Send Message
     
    Government approves programme to support construction material production

     

    http://bit.ly/XH3Vh2

     

    The article is a bit confusing: Does it mean Mongolian Government will begin producing construction materials themselves / support related companies ... (not so positive for Remicon)
    or will it stimulate / subsidize Mongolian companies in general (very positive for Remicon) in that market to produce more ...?

     

    Anyone has more info on this?
    18 Dec 2012, 09:32 PM Reply Like
  • Jon Springer
    , contributor
    Comments (4073) | Send Message
     
    There's about four sources of cement in Mongolia:

     

    - Remicon
    - state-run company (don't know the name off-hand)
    - APIP's company
    - imports (which are *much* more expensive)

     

    There isn't enough to go around. It doesn't matter if this project uses up the gov't supply or Remicon's. In the end, increased usage is increased demand and higher prices.

     

    The main key and difficult is getting through the winter, as it is too cold too work on many projects in the winter. Thus, investing in a materials company in Mongolia has seasonality.

     

    Hope that helps.
    18 Dec 2012, 09:44 PM Reply Like
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