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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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  • Mart Resources, My Stock Of The Year, Is Up Over 100% 5 comments
    Jul 5, 2012 7:54 AM | about stocks: MAUXF.PK

    I used to write a newsletter called the Actionable Intelligence Alert. I have since quit publishing the newsletter because of time constraints and also because it was just not paying off. I have chosen to continue publishing using the Seeking Alpha platform as I can reach millions of engaged and interested investors.

    One of the main focuses of the newsletter was the selection of a "stock of the year" at the beginning of each year. The premise behind this selection was to select a stock that I thought had the possibility of doubling over the next twelve months. The stock was chosen because it had some upcoming catalyst that was unknown by the market that once it took place would catapult the stock higher. Over the last five years I was successful four out of the five years in selecting stocks that were up at least 100%.

    This years selection was an oil company called Mart Resources (MMT.V) (MAUXF).

    Mart Resources, Inc. is an international oil and gas company incorporated in Canada and listed on the TSX Venture Exchange. Mart's core focus is on acquiring and developing proven oil and gas assets in the highly prolific Niger Delta region of Nigeria. Mart has successfully acquired proven, development and exploration assets in Nigeria and plans to expand its portfolio in the near to mid-term.

    I bought the stock around $.65 per share. Subsequent to recommending Mart the company has increased production, cashflow, earnings, and reserves all the while ridding it self of debt. In fact the company is actually hamstrung from increasing production because of pipeline constraints but it is addressing this issue also.

    Mart recently hosted its Annual General Meeting and several exciting news items came out of the meeting. Total sales for 2011 were $162 million dollars and 1Q12 sales were $70 million with net income of $38 million dollars or $.11 cents per share. Cashflow from operations was $144 million and EPS for 2011 was $.21 per share. The company drilled three new wells and had a 48% increase in reserves.

    One of the most exciting and anticipated items was that management declared a special dividend of $.10 per share payable in August and the institution of a quarterly dividend at a rate of $.05 per share beginning in September 2012 which is incumbent on oil prices. The company produces a crude called Brass and it commands a few dollar premium to the Brent Crude price which is currently around $100 per barrel.

    For shareholders who bought back in the $.65 range the dividend yield will be nearly 50%! The shareprice has leapt to a current price of $1.46 which is a share price gain of approximately 115% since I recommended it in late November 2011. Normally I would advise selling half of the position on the doubling of the price but with the initiation of the dividend and the prospects for increased production over the next year I am going to hold the shares I have. Obviously if the oil price were to decline significantly the dividend would be in jeopardy. However with all the money printing going on by CB's around the world I do not view this as a huge risk. The other risk is that the company has all of its operations in Nigeria. The stock is discounted some because of this but in the past the company has not had any significant issues expect some oil pilfering from the export pipeline. However this is an issue all over Nigeria and not unique to just Mart Resources.

    My view is that Mart Resources is interesting oil play and with the initiation of the dividend the management has demonstrated a willingness to reward shareholders for their patience. The company plans significant production gains over the next year or so and signed a deal with Shell to tie into their pipeline 54 kilometers away from Mart's current operations. Even though the stock has doubled I think it is still undervalued on a NPV basis and with the dividend you are still getting a double digit yield. Mart is an interesting speculation even at these levels.

    Disclosure: I am long MAUXF.PK.

    Stocks: MAUXF.PK
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This post has 5 comments:

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  •  
    Good pick. Too bad I only have a tiny amount. I hope you had a boatload.
    5 Jul 2012, 02:20 AM Reply Like
  •  
    While MMT has indeed been an excellent pick (my average is somewhere in the $0.40 range), share price is likely to be locked in around current levels due to the dividend. Institutions have indicated they believe "fair value" is around 12% yield - until the new pipeline is commissioned H2 2013, not likely to see much movement even though they will continue to drill and add "behind pipe" production - but with such a fat divvy, you are paid to wait (with the Special and regular divvies you will get $0.30 in the next 18 months). Then comes the fun part - production should more than double and perhaps triple - that will allow increase in divvy again. Plus they expect to pick up new fields to grow production even further. With debt free, cashed up balance sheet and one of the most profitable oil companies on the planet (low cost to drill/big wells/fast payback measured in a few months), it is a top pick if you have some patience. But you are well paid to do so - a rarity.
    8 Jul 2012, 04:31 PM Reply Like
  •  
    Nice article.

    Mart Resources is my top energy pick right now.

    I am loathe to put a target price on any stock, but I agree that a 12% yield is about right, putting Mart Resources over 3 dollars in fair value.

    A powerful dividend and growth play.

    This one looks good from every angle.
    9 Jul 2012, 02:07 PM Reply Like
  •  
    What are your comments for MMT now that they announced huge fall on their net income? Is there any hope left, or is this just a good time to add some more stocks to my portfolio? Thanks. Mikko.
    29 Aug 2012, 04:23 PM Reply Like
  •  
    There was a production loss in the second quarter, and lower prices. They did receive more cash in July and they are sitting on about $77 million in cash. There was a timing impact that reduced earnings by $10.3 million. In addition 18% of their production was pilfered from the pipeline. This is beginning to get out of control and needs to be watched. In the past pilferage was in the 8-10% range. You will note that this was mentioned as a risk in the initial writeup. Basically the quarter sucked.

    Nevertheless I still own shares and I am not to worried yet but remember I bought my shares at $.65 per share. So it depends where you bought the shares and whether you think they can maintain the dividend, increase production, and deal with the pilferage from the pipeline. These are unknowable at this point consequently the drop in the price. Remember this is a speculation not an investment. It is in Nigeria for heavans sake not West Texas.
    29 Aug 2012, 04:49 PM Reply Like
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