9/08/2013

3 Deep Value Oversold Ideas each for less than 50M

The first 2 ideas are Canadian Potash focused available on the pink sheets.

I can't forecast the future value of Potash prices. Instead my focus is on the deep asset value of these two stocks, very cheap and oversold relative to their industry peers. Potash related stocks have taken a big hit after potash prices plummeted. Potash per metric tonne reached $600 a few years ago but now for multiple reasons Goldman Sachs is projecting potash prices to sink to $300 per ton. But these two tiny Potash related ideas are not only financially strong but relative to its industry peers had the biggest valuation and price drop.

PCCLF: Phoscan Chemical Corp "engages in acquiring, exploring, and developing mineral and natural resource properties in Canada. It holds a 100% interest in the Martison Phosphate project, which is located towards north of Hearst, Ontario." Source Yahoo
Why does it look interesting?

Current price is .25 (09/06/13) with a NCAV of just .26. Yes it's selling for slightly less than it's NCAV. (Net current asset value (Net Current Asset Value (NCAV) = Cash and short-term investments + (0.75 * accounts receivable) + (0.5 * inventory) - total liabilities) = .26

Book value is .85 or P/B of just .30.

Optimistic insider activity was reported during 2013. 67,000 shares purchased in July 2013 for .26, 70,000 during April 2013 for .25, 56,000 in March for .26

PCCLF has a negative enterprise value of -17.86M, market cap value of 41.78M and posted a 52 week change of-negative 12%
I consider this a major company positive as they executed aggressive company share repurchases. The outstanding share count of 172.18M and has been reduced to the current balance of 163.69M.

Value Institutions with a longer term investment style have positions, Royce, Mackenzie Canadian Resource among others at much higher prices.

KRLTF: Karnalyte Resources, Inc "Karnalyte Resources, Inc., is engaged in the business of exploration and development of high quality agricultural and industrial potash and magnesium products." Source MSN

Why take closer look?  Negative enterprise value of -3.99M, Market cap of 53.33M, 52 week change of negative 76%, Gujarat StateFertilizers & Chemicals (GSFC india) was willing to take a 19.8% stake in the company paying 44.7M or 8.15 per share in a private placement. That was January 2013. Their investment is down 75.7%.

Yes Potash prices have dropped but that should not justify a 75.70% drop in their KRLTF investment less than a year ago.

RVM: Revett Minerals Inc (RVM)

Last Sunday I posted the idea of RVM based on positive renewed insider confidence with open market purchases; furthermore I provided some decision making data. 329% off the 52 week high of 3.95 on Sept 12, 2012 , 52 week changed of -71%, cash as a percentage of the price was 47.83%,EV/GP of 1.15, Price to book of just .39, Market cap of only 32M

The stock quickly moved 27% higher from last Sunday's price of .92 to close Friday at 1.17. This was based on updates of operations,more transparency for shareholders but nothing significant yet. The stock is still way off its 52 week high of 3.95 and statistically deeply discounted.


6 comments:

Chris said...

Another nice thing about Phoscan is that there are virtually no employees other than the ceo, so no severance packages. Also, I think the cash is north of .32 per share, so it is almost meets the definition of a Net net.

Jack Huddleston said...

One problem with Phoscan is they have no revenues.

cacarory said...

One issue with Phoscan is that they have no revenues.

cacarory said...

One issue with Phoscan is they have no revenues.

ShadowStock said...

Hello ,
I understand but “There Are No Bad Assets Just Bad Prices".

So what does an investor get for a .26 per share price?

They get cash per share of .37, NCAV of .26, mining property in Ontario with phosphate and niobium potential , aggressive share buybacks make this very shareholder friendly,2013 CEO insider buying, reduction of outstanding sharecount, potential outside acquisition just for mining properties, total assets of .93 per share, mgmt is buying back shares below or at NCAV. that's a smart allocation of shareholder capital.

I purchased a few shares today and will add if the price drops but expect to hold long term.

Kinds regards
John

AEBlinston said...

Also, Potash prices have collapsed after a Ukranian company pulled out of a pricing cartel.

There is a chance they are just throwing their weight around and will end up doing another deal because tbh it isn't really in their interests to break it up.

Great find, can't much go wrong with a company selling below net cash.