Cash at hand > Market cap...undervalued?

[bigt]

Hi, I understand valuing a company is a complex affair, though is a company technically undervalued if, for example, it has a market cap of $3m and has $4m cash in the bank? Lets say the company has several small scale projects ongoing, at early exploration stages.

[prawn_86]

Hi, I understand valuing a company is a complex affair, though is a company technically undervalued if, for example, it has a market cap of $3m and has $4m cash in the bank? Lets say the company has several small scale projects ongoing, at early exploration stages.

If this were the case then the market would be assigning a value of negative $1mill to it.

If it has $4mill cash (assets) then you would expect it to be priced above that. Unless perhaps there were some things such as debt or gearing, but thats where i start to not know as much.

Have you found a co with a market cap smaller than its assets?

[mark70920]

If this were the case then the market would be assigning a value of negative $1mill to it.

If it has $4mill cash (assets) then you would expect it to be priced above that. Unless perhaps there were some things such as debt or gearing, but thats where i start to not know as much.

Have you found a co with a market cap smaller than its assets?

Lion Select (LST)

August 30th Net Tangible Assets and Cash $418 Million , Current Market Cap $370 Million

The market is a strange place.

[mark70920]

Lion Select (LST)

August 30th Net Tangible Assets and Cash $418 Million , Current Market Cap $370 Million

The market is a strange place.

Sorry got it wrong Current Market Cap is only $295 Million

[prawn_86]

hmm... might have to look into it :D

i'll post my (limited) thoughts on it later

[doogie_goes_off]

I've found one... AXT Argo Exploration - Market Cap is 3.28 mill approx with 82 mill shares on issue at 4c. Cash at hand is 4.4 mill. A difference of 1.12 mill or 1.3c per share!!!

[prawn_86]

Heaps out there at the moment.

The market is assigning a pessimistic valuation to them. Basically 'the market' thinks that the co's will squander their cash and not come up with anything of value. Partly due to dropping commodity markets, partly due to fear.

If you look hard enough there are some co's with positive cashflow and no debt that are trading below their cash value. Now thats a bargain ;)

[JackC]

I've found one... AXT Argo Exploration - Market Cap is 3.28 mill approx with 82 mill shares on issue at 4c. Cash at hand is 4.4 mill. A difference of 1.12 mill or 1.3c per share!!!

Coincidentally, AXT is a portfolio stock of 'Fat Prophets'
Unfortunately for them they bought in at 44c in June 07 :eek:

[skyQuake]

Just be careful at how old the NTA data is. And especially the calculations used to value them.
Centro has quite a good NTA till it was updated...

[cuttlefish]

Skyquake - this isn't NTA we're talking about - this is cash position - but the advice still holds in that its important to check the accuracy of the figures and how current they are, and also look for debt on the balance sheet and also their capital structure in general. e.g. if there are options that are in the money or close to the money they should probably be diluted into the market cap figure. Also sometimes there are other shares on issue that aren't quoted (e.g. escrowed stock, convertible notes/preference shares etc.).


But there are a lot of companies trading below, at or just above their net cash position at the moment and some of them are generating strong positive cashflow from very comfortably profitable operations.

[rub92me]

Heaps out there at the moment.

If you look hard enough there are some co's with positive cashflow and no debt that are trading below their cash value. Now thats a bargain ;)
Yep, a good example of that would be PPP. No debt. Cash in the bank about AUD 135 million. PE of about 2.4. Anticipated revenue for 2008/2009 about AUD 75 million (assuming a pessimistic average oil price at USD 65 and AUD/USD rate of 0.75). And a market cap of AUD 120 million. You gotta laugh in the current market....:rolleyes:

[sinner]

Sounds like people are pricing in an oil slump. 135 capping at 120 isn't so bad compared to others right now.

[skyQuake]

Skyquake - this isn't NTA we're talking about - this is cash position - but the advice still holds in that its important to check the accuracy of the figures and how current they are, and also look for debt on the balance sheet and also their capital structure in general. e.g. if there are options that are in the money or close to the money they should probably be diluted into the market cap figure. Also sometimes there are other shares on issue that aren't quoted (e.g. escrowed stock, convertible notes/preference shares etc.).


But there are a lot of companies trading below, at or just above their net cash position at the moment and some of them are generating strong positive cashflow from very comfortably profitable operations.

Ahh whoops, didn't read it properly.

But yeah, cash position can be offset by debt obligations or contracts... Personally I am on the lookout for those too, but of better known brand names. Eg. From memory, Bluescope and Qantas respectively traded below their NTA (Bluescope below cash too probably) on the back of bad conditions and bad media coverage, and boy did they make a comeback!

[Shrewd Crude]

CFE has large cash backing per share far greater than its market cap...
read the thread...
Ive been warned off the stock due to management and some of the connections management have with companies such as RRS...
also...
PPP is at 100% cash backing or very close to it...
and it still has production from Tui of 3 million more barrels to come...
AWE are proposing a 6 well program to increase reserves in the surrounding area which will cost PPP 30million for big leverage into further revenue streams...(low down) and fully backed by cash...
...
there are a few others... at the spec end of the market (micro caps) is a different story when it comes to cash backing... the market discounts cash highly because market believes that the money will be spent...

NZO is 500 MCap and 400M cash...
and it has two major projects going into production next year...
Kupe will add minimum of 100million cash for 20 years...
(it was built 3 times larger so it could handle much bigger flow rates)... as the surrounding area has big upside potential...
and NZO have Pike also...

NZO is the most undervalued stock on the New Zealand Stock Exchange...
NZX...

good luck all... becareful when you chase stocks with cash backing...
finding companies with great projects is a better place to start...
thank you...
:cool:
.^sc

[Shrewd Crude]

I have taken this from another poster named boysy...
thank you...


outstanding shares 588,612,110
current price asx = A$0.185

market cap A$ 108.9 million

cash on hand 30/06/2008

79 million USD
15 million NZD
6 million HKD

at current exchange rates this is 79 / 0.66 = A $ 120 million
15/ 1.1 = A $ 13.5 million
6/ 5.11 =A $ 1.1 million

production of oil since 30 june 2008 = 10 % of 3,500,000 barrels of oil @ average of
A$145

=A$50 million - opex - tax (30%) - royalties ( 25%)
= A $ 45 - $ 6 milion - 15 million - 12.5 million
= profit around A$16 million since 30/06/2008

so all up

market cap $108.9 million
less : net cash held $150 million ( made up of USD$79 million
NZD$15million
HKD$1.1
cash from operations since 30/06/2008 AUS$16

market cap less net cash = -(negative) $41.1 million

cash held per share currently around A$0.255

current sp on ASX A $ 0.185

so currently no value is being attributed to PPPs 10 % share in TUI . PPPs share of daily production being in the region of 3200 - 3500 bopd even at these prices that brings in around A$ 380,000 gross or around $180,000 net into PPPs pocket.

No woder the directors are stocing up on these prices


PPP is that good...
:cool:
.^sc

[prawn_86]

Yeh and PPP still wont release a dividend. Pathetic management IMO, who are most likely to piss it up the wall from what i have seen so far.

No vision or drive, hence why the negative pricing by the market. How hard can it be to return 1 or .5 of a cent to holders to generate some interest?

All IMO only :2twocents

[cuttlefish]

prawn - they don't care - they are the major shareholders - they're not going to p*ss their own money up against the wall. The more shares sold at this level the more they can buy for themselves.

The reason they haven't done a buy back (the most efficent way to return capital imo) is because they are doing their own private buy back.

[prawn_86]

prawn - they don't care - they are the major shareholders - they're not going to p*ss their own money up against the wall. The more shares sold at this level the more they can buy for themselves.

The reason they haven't done a buy back (the most efficent way to return capital imo) is because they are doing their own private buy back.

Yeh that would be/is my other arguement. They are slowly buying the co up and may launch a t/o or something eventually so full potential is never realised for others holding.

Only have to look at the chart to see that their performance has been quite underwhelming (price has done nothing on the up or downside really), even in the bull period.

[Shrewd Crude]

come on posters...
lets sit back and think about this for a second...
sure PPP's SP has fallen, so has every other stock...
In hignsight it has been great the Pan did not go out on the acquisition path...these opportunities only get cheaper over time...
paying dividends is not the answer... the market value of the company just falls by the amount of the dividend (and then you have to pay tax on it)...
... why not sit on a nest egg...
its not the time in the market to be doing silly things...
Ive not tipped PPP until now...
this is a great buy...
the numbers speak for themselves...
company is not going on a rampage... good things will come to them in time...

did you read the presentation today...
looked good to me...
heres a sneak peak...

PPP is actively seeking growth opportunities
•Acquisition of pre or early development oil reserves to provide short term production and replacement of the declining Tui Area Fields
•Development of a balanced exploration portfolio in proven basins, with a priority on low-medium, rather than high risk prospects
The focus area is Australia-New Zealand and the South East Asia region, leveraging existing knowledge and relationships.
Other quality opportunities will also be considered
We have a preference for oil projects to retain exposure to the oil
The recent fall in oil prices and a tight credit market will provided attractive opportunities for PPP which has a strong cash position and can act quickly
•We are regularly offered opportunities, but are maintaining a disciplined approach to project quality and acceptable risk.
•A range of options are currently under consideration

:cool:
.^sc

[Shrewd Crude]

this is more or less the exact same sentiment we watched on a New Zealand Oil and Gas thread... NZO...
even when Tui production hit, the share price did not take off for 7 months...
7 whole months...
each milestone was met and still nothing...

1st oil...
full production rates...
1st tanker...
1st million produced...

This is the time to get in when all the punters have had enough...
sentiment is the key and yes sentiment is not there...
currently trading at 21c... lets see what happens...
I used to say other things about PPP... now im saying, smart managment...
they have done everything by the book...
chao...
:cool:
.^sc

[Bushman]

Have a look at HDG announcement today for a glimpse of the future ;)

[Shrewd Crude]

bushman,
Can you please elaborate on your post...
you mentioned it, why does it interest you?
:cool:
.^sc

[ormond]

TRY-Troy resources

Market cap.$55 mill.
Cash-$60 mill.
50000 oz per yr low cost gold mine
Iron ore production early next yr
Processing plant in storage worth $30 mill.
Crazy times!

[Wysiwyg]

TRY-Troy resources

Market cap.$55 mill.
Cash-$60 mill.
50000 oz per yr low cost gold mine
Iron ore production early next yr
Processing plant in storage worth $30 mill.
Crazy times!

Do these miners ever turn a profit or just keep churning the money over?

[So_Cynical]

TRY-Troy resources

Market cap.$55 mill.
Cash-$60 mill.
50000 oz per yr low cost gold mine
Iron ore production early next yr
Processing plant in storage worth $30 mill.
Crazy times!

^^^^ Knew someone would post this eventually.

ormond u didn't mention the sandstone mill/plant and the
fact that Troy are Debt free...there's more but who cares.:rolleyes:

Watch the SP fall again again tomorrow....prob insiders selling
cos they know stuff we don't.


Do these miners ever turn a profit or just keep churning the money over?

Payed a dividend every year for the last 7 or so years...Troy had a (paper) loss last year due to
the closing of both there producing mines...and the dev costs of the new mine...still payed a divy.

[nunthewiser]

Do these miners ever turn a profit or just keep churning the money over?

last financials was the first loss booked in a number of years , previous to that has had increasing profits and a growing divie, transitional year in the finishing of mines and starting new ones and also developing an iron ore pocket as a bonus found alongside its gold workings

not saying it will make a profit this year but certainly is in an attractive position for future growth and attractive on its cash to market cap alone not taking into account ANY other assets

[nunthewiser]

Knew someone would post this eventually.

ormond u didn't mention the sandstone mill/plant and the
fact that Troy are Debt free...there's more but who cares.:rolleyes:

Watch the SP fall again again tomorrow....prob insiders selling
cos they know stuff we don't.

LOL i given up with the buggars , what will be will be

i hold

[Wysiwyg]

last financials was the first loss booked in a number of years , previous to that has had increasing profits and a growing divie, transitional year in the finishing of mines and starting new ones and also developing an iron ore pocket as a bonus found alongside its gold workings

not saying it will make a profit this year but certainly is in an attractive position for future growth and attractive on its cash to market cap alone not taking into account ANY other assets


Yes u r write none.Hopefully a rosier pickcha the udder sired off this bare psyche all.

[nunthewiser]

Yes u r write none.Hopefully a rosier pickcha the udder sired off this bare psyche all.

gotta luv a smartarse, u asked a question , i answered

i would apologise if my typing and literacy is not up to your standard but hey what would be the point , it wouldnt change the fact your still a smartarse

[Wysiwyg]

gotta luv a smartarse, u asked a question , i answered

i would apologise if my typing and literacy is not up to your standard but hey what would be the point , it wouldnt change the fact your still a smartarse

Share the luv brutha :)

[nunthewiser]

Share the luv brutha :)

Yes , you are right darl

thankyou

[Bushman]

bushman,
Can you please elaborate on your post...
you mentioned it, why does it interest you?
:cool:
.^sc

Did you do an ASX search on HDG?

They have cash of $5m and a mkt cap of $2m @ the current price. So the directors are engaging in a share buy back.

However the severe liquidity issues in the small end of town will ensure you probably cannot take a position now.

But, IMO, cashed up directors will engage in share buy-backs now as this will often be in the best interest of shareholders when unit prices do not reflect liquid asset values and it adds liquidity to the market for their shares. Could be an arbitrage opportunity there for new investors. Still a risk, off course, and due to the dire liquidity of some of these shares if Directors do not announce a buy-back you might be stuck.

[bas]

Did you do an ASX search on HDG?

They have cash of $5m and a mkt cap of $2m @ the current price. So the directors are engaging in a share buy back.

However the severe liquidity issues in the small end of town will ensure you probably cannot take a position now.

But, IMO, cashed up directors will engage in share buy-backs now as this will often be in the best interest of shareholders when unit prices do not reflect liquid asset values and it adds liquidity to the market for their shares. Could be an arbitrage opportunity there for new investors. Still a risk, off course, and due to the dire liquidity of some of these shares if Directors do not announce a buy-back you might be stuck.

How is that an arbitrage?


Heaps of stocks trading below cash at moment- BRM, GIR to name a couple i've seen. I guess the fear is that they'll just waste all the money on ground that will never turn into a profitable mine. I'm buying them on a day like today though- just hope i don't get taught one :)

[Uncle Festivus]

Red 5 (RED) market cap = $20m, cash = $29m.

Now only if I had a spare $20m I could make a quick 40%?;)

[noirua]

There could be possibilities for mining stocks with tenements and plenty of cash. Sometimes a producer is interested if they need this cash with a drop back on the tenements later.
Can be a way out for a minnow that has little prospects in this tough environment.

[noirua]

There could be possibilities for mining stocks with tenements and plenty of cash. Sometimes a producer is interested if they need this cash with a drop back on the tenements later.
Can be a way out for a minnow that has little prospects in this tough environment.
Have you spotted one yet?

[Kremmen]

If I'd noticed this thread back when the last post was made, I'd have pointed out PGL. Back when you guys were discussing flaky miners, PGL was trading at 60-80c/share with $1.10/share cash in the bank.

So, now that I have my PGL cash, what's the next cash > market cap stock?

[drsmith]

I've found one... AXT Argo Exploration - Market Cap is 3.28 mill approx with 82 mill shares on issue at 4c. Cash at hand is 4.4 mill. A difference of 1.12 mill or 1.3c per share!!!Since this thread is back to life, how much though would be left after the directors have had their fill of long lunches ?