Ah yes, Lonmin. I shared his pain.
He talked about rescue rights issues. It was a subject I mentioned on your own blog, John, with respect to housebuilders a few years ago. The gist of which is: near cyclical lows some companies get themselves into messes and need a rescue right issue. The sector recovers, with the company in reasonable financial shape.
So, the trick is to look for companies that are in this situation and have had a rights issue, then you should take a look. I said it about housebuilders back then, but I failed to heed my own advice last year. Lonmin is up 122% over the last year. Have you missed the boat? Well, Lonmin trades at a PBV of 0.27, which is usually regarded as “quite cheap”, to put it mildly. It has net cash of £138m against a market cap of £363m. It’s PE is 21 – which is actually quite encouraging, because you expect cyclical companies to be on high PEs in cyclic troughs.
I don’t any, BTW. D’oh.
I actually commented on their recovery fund last year. They had added a new position on ACHL (Asian Citrus), which I had identified as a fraud. They would have saved themselves some damage if they had steered clear of that one.
Thank you for posting. Very interesting….
Your email address will not be published. Required fields are marked *
Save my name, email, and website in this browser for the next time I comment.