AJL - AJ Lucas Group

[Dutchy3]

Hi Analyst

From the AVJ thread here's the AJL chart that might (sic) make the most sense.

Monthly chart - some 'tails' appearing and if March cant hold up this might indeed be some sort of turning point. Very long bow though and much better LONG plays out there too.

Not a buy for me. Indeed as I would not put on my watchlist at this juncture. I do like to see a reasonable 'basing' pattern develop after such a decline on a stock.

 

[TheAnalyst]

Thx Dutchy

I am trying to get good at picking turning points before they actually happen but have started to realise it is a bit energy sapping.

What do you mean by the tails appearing?? is this the longer tails appearing on the bodies of the candles from their intra day lows and the closes being above the daily low range??

 

[Dutchy3]

Hi Analyst

Yes ... that's right.

Remember the chart above is monthly so the daily and weekely detail is summarised. All depends on the term of an investors view. I tend to hold positions for weeks/months so a monthly chart is a little too lacking in the finer detail for me. I actually take positions based on a weekly chart and use the daily to fine tune entry positions and exits.

 

[yogi-in-oz]

Hi Dutchy,

AJL ..... that hammer in the monthly chart,
includes a nice v-bottom on the daily chart,
on the lower extreme of a rounding bottom.

A few key dates to watchover the next month
or so, which may give us lift-off:

31032006 ..... minor changes ... finance-related???

03042006 ..... minor cycle

11042006 ..... significant and positive news???

14042006 ..... negative spotlight on AJL???

28042006 ..... significant and positive ... finances???

02052006 ..... significant and negative news???

12-15052006 ..... minor and positive cycle

17052006 ..... minor and positive news???

24052006 ..... 2 significant cycles here ..... finances???

31052006 ..... minor news???

happy days

yogi

 

[TheAnalyst]

Hi Dutchy,

AJL ..... that hammer in the monthly chart,
includes a nice v-bottom on the daily chart,
on the lower extreme of a rounding bottom.

A few key dates to watchover the next month
or so, which may give us lift-off:

31032006 ..... minor changes ... finance-related???

03042006 ..... minor cycle

11042006 ..... significant and positive news???

14042006 ..... negative spotlight on AJL???

28042006 ..... significant and positive ... finances???

02052006 ..... significant and negative news???

12-15052006 ..... minor and positive cycle

17052006 ..... minor and positive news???

24052006 ..... 2 significant cycles here ..... finances???

31052006 ..... minor news???

happy days

yogi

Hi Yogi

Whats the substance behind these dates as i am interested in AJL at the moment as well as SUN.

cheers

 

[yogi-in-oz]

..... dates determined by Gann's astrostuff,
natural cycles of our solar system ..... a
cosmic clock, if you wish.

happy days

yogi

 

[TheAnalyst]

This baby is shooting up hehe

 

[alankew]

Might not be shooting up at the moment but might be worth watching this space

 

[alankew]

Any chartists got any comments on AJL,i havent bought in yet but think it looks interesting.No comments and i will start hassling you!

 

[Col Lector]

AJL is 70% holder of the Gloucester permit with Molopo 30%. Good proximity to high gas-demand Newcastle mkt. Early drilling for CSM with promising results announced this morning (MPO ann.).

The Gloucester Basin permit is located approximately 100km north of Newcastle, where gas prices could exceed other major east coast markets such as Sydney and Brisbane. The permit covers an area of 1,050km², with over 200km² of prospective coal measure sequence

Preliminary core analysis indicates a gross coal thickness of approximately 10.8m in several coal seam splits, with 3 coal seams greater than 2m thick in this hole. The partially penetrated coal seam at the base of the hole had a thickness of at least 4.0m. On visual inspection, the seams contain predominately bright, vitrinite rich, highly cleated and fractured coal with little cleat mineralisation. Coal core and gas sample testing is in progress, with early gas content results showing these coals are gassy.
On the basis of the above intersected coal thickness and preliminary gas content results, the CBM potential of this coal seam sequence is very encouraging.

 

[Col Lector]

AJL 's core operations are in engineering& construction /utilities management/drilling services. Involved in directional drilling & pipeline construction for water/gas etc Growing its focus on Coal Seam Gas (CSG) industry.
Has been sitting on the Gloucester CSG project (see prev.post above) for a while. That it is now actively exploring spices up this profitable "services company".
Initially AJL were cautious not to "talk-up" Gloucester's potential....even issued anns within last 6 months to stress this; Sounding markedly more upbeat recently & have just raised $25mill to accelerate the project (convertible secs) Currently drilling a second hole.
Mkt Cap 123 mill approx. Last $2.35.
Previous years earnings (5.7cps 2006) have been disappointing due to the company's exposure to projects that didnt eventuate or were delayed (ie, Rioters at Goro nickel pipeline construct). The upcoming FY07 results should be big improvement.Aspect/Comsec is forecasting +149% to 14.2cps for pending FYO7 results. And +11% to 15.8cps 08 (08PE approx 15)

Recent SP buoyancy . Not huge volume but reluctant sellers.Ticking over.
Difficult to set a target price for AJL given a growing cashflow from existing diversified business base, is additional to the upside potential of Gloucester.
*Ramp Warning:I own shares & tipped AJL in the current competition.

 

[Col Lector]

Excerpts From Today's Broker Call
Thursday, 13 September 2007

AJL - AJ LUCAS GROUP LIMITED
ABN Amro rates AJL as Buy - Initiation of Coverage - The broker has initiated coverage with a Buy rating as it sees scope for the company's drilling division to more than double earnings in FY08.
It also expects the gas and water pipeline operations to perform strongly given spending in the sector should remain high.

Target price is $3.04 Current Price is $2.53 Difference:$0.51 - (brackets indicate current price is over target). If AJL meets the ABN Amro target it will return approximately 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

ABN Amro forecasts a full year FY07 dividend of 2.50 cents and EPS of 17.80 cents . At the last closing share price the estimated dividend yield is 0.99%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.21.

Market Sentiment: 1.0

 

[Col Lector]

AJL gaining more followers in the market...not so at ASF it appears. CS gas project Gloucester continues to raise eyebrows in anticipation of confirmation of the extent of the gas-find. AJL's full services to the coal/csg industry in full demand; and other sectors too...eg, the
gas pipeline project announced today.

 

[Col Lector]

AJL is vertical-integration in action in the Coal-Seam-Gas industry. Have long experience at drilling/gas recovery/pipeline construction. Also a history of alliances with major utility/energy operators.
a share to consider if looking at the CSG or energy infrastructure sectors. Mkt Cap 190mill.
A twelve month perspective below...
Plenty of sp growth but Gloucester project remains a dark horse....how much has been/should be priced in?

 

[Col Lector]

AJL's Gloucester project progress report today very promising. Hidden amongst the heap of quarterlies.
Good gas content/composition; widespread resource apparent. Large tenement comprising all of the Gloucester Basin,, which includes both Stroud & Gloucester townships within.
Development decision close - anticipated within next couple of months once extent of gas resource is clarified.
Potential for AJL to utilise theit CSG (&pipeline) capability to fast-track development cost-effectively.
Potential for Gloucester to be spun-off.

31 October 2007
Australian Stock Exchange Limited
Via Electronic Lodgement
Gloucester Basin Drilling Update
During the September quarter, the Lucas/Molopo Gloucester
joint venture (AJ Lucas 70%/Molopo 30%) focused on
progressing the expanded Phase II Gloucester Basin
appraisal programme, comprising the Stratford Production
Pilot and the Gloucester Basin exploration drilling
programme. The five well Stratford production pilot and
the current exploration drilling programme comprising four
part-cored and nine stratigraphic chip holes, have been
designed by the Gloucester JV to establish reserves across
the Gloucester Basin and to ascertain production capabilities
prior to a development decision.
The promising LMG03 production test well was recompleted
with a new progressive cavity pump and
dewatering operations commenced on 28th August. In
previous tests the unstabilised gas flow rates of
666,900scf/d from this well demonstrated the production
potential of the Stratford Pilot area.
Drilling commenced on the first of four new production test
wells on the Stratford Pilot in early September. Stratford #6
was drilled to 660m total depth on 13th September. Precollar
drilling for the second production well Stratford #5
commenced on 26th September. Two additional wells
Stratford 4 and Stratford 8 will be drilled prior to
commencement of a fracture stimulation programme in
November. Pilot production will be gathered at a central
location to facilitate ease of expansion into an early
production scenario if the results match the encouraging
performance of the earlier pilot production in LMG03. A
well redrill is under consideration.
It is anticipated that the new pilot production wells will be
progressively placed on production test during November and December this year.
The first dedicated part-cored exploration hole Weismantel 01 tested the CBM potential of coal seams in the
Dewrang Group below the highly prospective Gloucester Coal Measures in the southern part of the
Gloucester Basin. The hole reached 703m after intersecting a thick, fractured coal seam from 697m to
701m. Seven coal cores were sampled from 459m to 701m. The raw gas content range is 4.3 m³/t to
12.6 m³/t and methane composition is in the range 93% to 96%. These results are very encouraging with
respect to the CBM potential of this previously untested coal seam sequence.

Drilling in Craven 01, the second part-cored hole, reached 707m and now awaits additional light weight
drill rods to be secured to progress drilling to a target depth of 900m. The Craven hole is testing the
prospective Gloucester Coal Measure sequence in the Central portion of the Basin. To date twelve coal
cores less than 1.0 m thick, have been tested from 208m to 648m. Early results show high gas contents in
the range is 3.3 m³/t to 22.1 m³/t and high methane composition up to 96%. The anticipated underlying
thicker coal seams are yet to be drilled.
On 2nd August drilling commenced on Waukivory 01, the third part-cored hole. Thick gassy coals of the
Gloucester Coal Measures have been intersected and sampled. The hole was suspended at 798m on 30th
September and waits a larger rig to progress the hole to its proposed total depth of 1,000m.
The exploration drilling programme was accelerated in August with the mobilisation of a second rig to
commence drilling the nine chip holes and also drill the Stratford production pilot wells. Drilling on the first
chip hole Faulkland 01 commenced on the 8th of August. Faulkland 01 tested the CBM potential in the
deeper far northwestern portion of the Gloucester Basin. The hole was drilled to 930m during the quarter,
before being temporarily suspended short of its proposed total depth of 1,000m on 16th of August. While
the full target sequence has not yet been drilled, only two thin seams warranted sampling for testing.
Options to deepen the hole to assess the full sequence are under consideration.
Allan Campbell
Chairman & Chief Executive Officer

 

[Col Lector]

AJ Lucas (AJL) is proving up gas resources at its Gloucester Basin CSM project where in JV with MPO (30%). This encompasses a large area that includes both Stroud & Gloucester townships. Indications suggest it could be a highly significant project with potential to supply gas to the Newcastle/Sydney market.
AJL is investigating develpment options through dedicated business arm Lucas Energy.
AJL is a vertically integrated CSM operator with 48+ drilling rigs, pipeline building capability etc.
Significantly, AJL has historic ties to AGL....has been preferred contractor on a range of AGL (& other projects); one of the directors,Garry O'Meally was formerly AGL Gen Manager.
AGL has been constrained by reliance on others to supply gas and to meet power demands. They have stated that it considers securing future generating capacity as a priority.
Gas-fired power stations are in vogue. Origin's Darling Downs 400MW gas-fired power-station is publicised as Co2 efficient....equiv to taking 200 000 cars off the road vs conventional coal.
To my speculative point....
Is AGL positioning itself to ann a gas-fired powerstation for Sydney/Hunter??....And towards this, are they in the process of firming up long-term gas resources...& development capability, targetting both SGL (both Camden, then Hunter projects) and also AJL??
Plenty of synergies exist for all parties if AGL was to coordinate such an arrangement .

 

[james99]

I think that regardless of whether you are right Col, the MPO share price is the one that will benefit most from the Gloucester Basin project, at least in the short term. Although MPO has a lesser share in it, its lower share price (.195 - .22 av over last week or so) means a small success in the basin has potential for a substantial percentage increase; cf the large rise necessary for a similar percentage with SGL (SP .415) and AJL (SP 3.37).

I have put to one side the capitalisation, number of shares on issue and potential returns, because those factors tend to be more relevant to longer, not short, term share prices. I have also put to one side the other projects of MPO and AJL, because both have other substantial projects. I would accept that in the long term, if AJL has an infrstructure interest as well, then obviouly that will be an extra benefit to it.

It is probably fair to say that all three have significant potential, and I think that trading styles may determine the best investment for each shareholder.

 

[Col Lector]

James...not sure you can assume other players/investors will disregard the factors you mentioned and focus only on the nominal sp numeral.
Consider this.....
MPO Mkt cap $178mill (@$0.20)
AJL mkt Cap $184mill (@$3.37)

MPO yet to make a profit. Forecast earnings...?
AJL (Comsec/Aspect figs)
eps07 11.8cents PE 22.5;
eps08 21.0c PE 16; Growth 78%;
eps 09 32.5c PE 10.4; 54%
eps 10 28.1....

Significantly, this income is generated independently of AJL's Gloucester (& QLD) potential gas production assets..!
We are comparing apples and abalone here; although I must admit to lacking a full knowledge of MPO's other projects.
However, it must be considered that all AJL non-gas-production sectors are growing - contributing to current earnings & growth projections ...eg pipelines, directional drilling, water projects etc.
These earnings at least underwrite the sp of AJL and justify the current $3.37sp & $184 mkt cap.

Difficult though to place a confident value on sp until the full extent of AJL/MPO Gloucester reserves are spelt out ( next couple of months).
The value of SGL may become apparent in this time-frame also, given evident positioning there, and may help decide AJl's ultimate value.
I'm tipping a further positive rerating.... but then, I do hold a few of these..

 

[james99]

Col, all three companies, as I indicated, have potential. MPO has a variety of other and arguably more important projects than the basin.

I agree that not all investors will disregard fundamentals, but that will not necessary deter investment in either. They are at different stages of the cycle. Both have prospects and good management. My money is with one, and yours is (I infer) with the other.

You and are are in essence talking about different things. I am referring to short term market reaction and you are talking about longer term aspects. I think in the long term both are excellent. No doubt the market will determine the short term result. We could both be wrong or partially right ;-).

 

[Col Lector]

AJL's Chairman's Address (& presentation) today extremely positive. Well worth a read.
http://www.asx.com.au/asxpdf/20071123/pdf/3160hhtcsxnlz5.pdf
Forecasting a 70% increase in revenues this year and improved margins. Expansion plans well underway. Fingers in a lot of strrategic pies.
Looks like they will spin off Lucas Energy (CSG assets including Gloucester & Walloon). Considering powerstation adjacent site &/or pipeline to Hexham. Talking to potential offtake parties.
Has corrected recently after a strong run. IMO this is one for the bottom drawer. Holding & accumulating on dips.