Opportunity, Stock Thoughts: VLL, ORE, COAL

Opportunity

Assuming you are still in high school. What if your parents would request you to move heavy pots of flowers from the backyard to the front yard in the Morning and at noon you are tasked to move the same heavy pots back to the backyard? You are to do these tasks every day. How would you react to it?

Would you complain?

Or

Would you just do it?

Or

Would you innovate? Use a wheelbarrow to make the task easier.

Or

Would you innovate and attempt to eliminate the task by knowing the objective of their request? You put a net over the flowers since the objective of moving the flowers is to avoid direct sunlight.

The world is full of circumstances that you can complain about. Why not accept the world as it is and exploit the opportunities that it presents?

 

VLL

Made a quick glance on VLL here:

https://fundamentalenthusiast.wordpress.com/2013/02/11/quick-glance-vista-land-and-lifescapes-inc-pse-vll/

I will post more “quick glance” stock coverage rather than the usual comprehensive stock reports. Comprehensive stock reports will still be posted weekly.

Thanks to a reader for the heads up on VLL.  He gave me A LOT of ideas and will try to cover it all. 🙂

 

ORE

ORE on the rise?

More on ORE here:

https://fundamentalenthusiast.wordpress.com/2013/01/04/oriental-peninsula-resources-group-inc-pse-ore/

Be aware that nickel prices are mainly driven by demand from China. When China sneezes, nickel producers get sick too.

 

COAL

COAL up on news that it is accelerating commercial production:

http://www.bworldonline.com/content.php?section=Corporate&title=Commercial-start-advanced&id=65652

Extraction of coal requires (Certificate of Compliance) COC from DOE and Environmental Compliance Certificate (ECC) from the DENR. Currently COAL COC is at exploration. In order to extract commercially, COAL has to get COC for development.

DOE granting that COC might be a good catalyst for the market to value COAL at P1.35.

More here:

https://fundamentalenthusiast.wordpress.com/category/stock-ideas/coal-stock-ideas/

 

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Funny, Stock thoughts: ORE, Strengthened Peso

Funny

I read this printed in the shirt of someone:

“Some say WE CANNOT LIVE WITHOUT LOVE, I think oxygen is more important.”

 

ORE

The spill incident by ORE’s subsidiary Citinickel is not financially damaging for the Company:

http://www.rappler.com/business/special-report/whymining/whymining-latest-stories/20099-another-mine-spill-govt-penalizes-citinickel-in-palawan

A fine of not more than P600k? What is that to a company that earns 500 million and generates 200+ million free cash flows?

 

Strengthened Peso

Strengthened peso damages the margins of some companies like I-Remit but it also benefits some companies.

The obvious business activity that will benefit on the strengthened peso is importation. Strengthened peso can also benefit a company’s balance sheet if it has substantial debt that is in foreign currency.

Find your next investment opportunity by asking yourself these questions:

What company imports and sells it here in the Philippines?

What company has huge foreign debt?

Happy hunting! 🙂

 

Funny, Luck We Have Tetangco, Stock Thoughts: AT, NIKL, ORE

Funny

I find this cartoon funny:

http://news.investors.com/photopopup.aspx?id=639688

 

Lucky We Have Tetangco

He is the reason why we have a good financial system.

http://www.bworldonline.com/content.php?section=Finance&title=Tetangco-named-as-best–central-banker-for-Asia-Pacific&id=64105

 

AT, NIKL, ORE

AT, NIKL, and ORE are bound to rise should China recover due to the increase in demand of metals like nickel. Luckily, it is almost certain that China will present growth in GDP and it would be through more government spending.

Anybody new to macroeconomics go here:

https://fundamentalenthusiast.wordpress.com/2012/08/08/macroeconomics-basics/

AT nearing my target price of 20.90.

More here:

https://fundamentalenthusiast.wordpress.com/2012/12/17/atlas-cons-mining-and-devt-corp-pse-at/

ORE doing good too. 🙂

https://fundamentalenthusiast.wordpress.com/2013/01/04/oriental-peninsula-resources-group-inc-pse-ore/

Oriental Peninsula Resources Group, Inc. (PSE: ORE)

Oriental Peninsula Resources Group, Inc. (the “Company”, “ORE”) derives 100% of its earnings from its 94% interest in Citinickel Mines and Development Corporation (Citinickel).

Citinickel was granted with a Mineral Production Sharing Agreement (MPSA) on January 3, 2007 for their Toronto and Pulot Nickel Mining Projects located in Narra and Sofronio Espanola, Palawan respectively.

On March 9, 2011, Citinickel was registered with the Board of Investments which entitles Citinickel to the following incentives:

  1. Income Tax Holiday for four years from March 9, 2011 to 2015
  2. Exemption from wharfage dues, export tax, duties, and imports and fees for 10 years.

The Company started commercial operations in the third quarter of 2011 ending the year with 20 shipments or 1 million WMT of nickel ore sold. As of the 3rd quarter of 2012, ORE performed 56 shipments with a total of approximately 2.8 million WMT.

Comments:

Nickel mining companies went out of favor mid-year of 2012 and with a very valid reason:

ORE3

Nickel prices went plunging from a high of $21,000+ a ton to as low as just over $15,000 in the 3Q of the year. A sudden drop in price should translate to a sudden drop of net income for any nickel producing company.

Below is Nickel Asia’s (PSE: NIKL) earnings chart, the largest nickel miner in the country:

ORE4

But ORE defied the trend:

ORE5

This is possible because the Company has a huge capacity for growth in terms of production. ORE compensated the decline in nickel prices through increase in shipment volume. According to the interview done by First Metro Securities [1] with ORE’s CEO, Ms. Caroline Tanchay, ORE is shipping a minimum of 3.5 million WMT for 2012 and 4 million WMT for 2013.

As of 3Q ORE has a total of 56 shipment or 2.8 million WMT sold ore. Assuming that ORE will be able to complete 10 more shipment for the quarter or an additional of 500,000 ore sold for $16,000/t we can expect ORE to report an EPS of 0.39/sh. That makes ORE trade with a single digit PE ratio of 8x at P3.10. Even at 3Q EPS of 0.36, ORE is already trading at 9x PE ratio.

ORE stands at numerous advantages that will enable them to generate growth:

  1. Income tax holiday until 2015
  2. Young MPSA rendering it unaffected with EO 79
  3. Exemption from wharfage dues, export tax, duties, and imports and fees for 10 years.
  4. The Company still has room for increasing its production.

A Company with a growth potential and competitive advantages but trading in a single digit PE ratio is definitely undervalued.

Other data:

ORE1 ORE2

Sources:

  1. The Bellwether, “Oriental Peninsula Resources Group, Inc.”, http://fami.com.ph/wp-content/uploads/2012/07/Bellwether-1-5.pdf
  2. SEC filings

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell.