Multibagger speculative ideas

[sculpin]

Potential Multibagger dependent on Near Term M&A Process

 

Legumex Walker - (TSX - LWP) currently trading at $1.00 Cdn has been in a strategic review process for about 5 months. They have 2 divisions

 

PCC Canola - this is a specialty canola crusher located in Washington State which has been an albatross around the Company's neck. It has defaulted on its loans and will result in $0 return to the parent Company. However its large debt does not have any claim to Legumex.

 

Specialty Crops - this is where the core value lies in LWP and which Raymond James (note below) and Cormark Securities (also below) estimate value return from $1.25 to $3 per share if the strategic sales process finds a willing buyer.

 

This is very speculative due to LWP's debt and dependence on the outcome of the strategic review. However, from the $1 level, speculators could realize multi bagger potential based on the quality of  LWP's attractive Specialty Crops business.

 

Raymond James.... (pdf attached)

 

Steve Hansen CMA, CFA | 604.659.8208 | steve.hansen@raymondjames.ca Daniel Chew CA (Associate) | 604.659.8238 | daniel.chew@raymondjames.ca Agribusiness

 

Weak 2Q15 Results (but Irrelevant); Company Still for Sale, Expect Update Soon

 

Recommendation

 

Legumex Walker’s tumultuous history as a public company is nearing an end, with a strategic sale increasingly likely in the coming weeks, in our view. Our fundamental assessment of the company’s Specialty Crops division—where all of the residual equity value lies—suggests a potential exit well above LWP’s current trading value. However, given the acute uncertainty surrounding recent events, and the potential for the sale transaction(s) to fall through, we rate the story Market Perform (vs. Under Review prior).

 

Analysis

 

 Company Still for Sale; Update Expected in the Coming Weeks—The most salient

takeaway from LWP’s 2Q15 results, in our view, was the clear message that: 1) the company is still for sale; and 2) that the process is likely to conclude in the coming weeks. Underscoring this message, we highlight that both the Special Crops and Oilseed Processing (PCC) segments have been reclassified as ‘discontinued operations’, with supporting disclosure that the assigned Special Committee ‘expects to provide an update in the coming weeks as the process nears completion’. With little equity value currently ascribed to PCC, we believe that the sale of Specialty Crops will be the key to unlocking value for LWP shareholders.

 

 Forbearance Received on AgCountry PCC Loan—In an odd twist, AgCountry has now provided forbearance on PCC’s senior credit facility, which is expected to allow the strategic sales process to continue. Unknown at this juncture, however, is what kind of damage was done to the sales process subsequent to AgCountry issuing a notice of demand on PCC’s senior credit facility on July 31, a move that sent LWP shares spiraling lower.

 

 Wide Range of Outcomes—As illustrated in the accompanying exhibit, we foresee a wide range of potential outcomes for LWP shareholders, with a potential sale of the company expected to generate somewhere between $1.25 and $3.00 per share.

 

Valuation

 

Our $2.00 target price is based on an 8.6x multiple applied to our 2015E Specialty Crops EBITDA estimate, a multiple that resides at the low end of LWP’s historical trading range (6.0x-15.0x), reflective of the company’s recent financial challenges and ongoing extended strategic review process.

 

Cormark....

Investment Thesis:

 

Legumex Walker consists of two ag-processing businesses. The special crops

processing business is among the most diversified players in Canada. The

canola crushing operation has significant logistical advantages, strong

partnerships, and substantial barriers to entry.

 

Highlights:

 

• Q2/15 Results; Strategic Review Ongoing

 

Q2/15 results were soft but not all that relevant given the ongoing strategic

review process, which is now heading into its fifth month. As a result of the

intention to sell both PCC and Special Crops, both segments have been

presented as discontinued operations, resulting in very messy disclosure. With

the quarter, the company announced that AgCountry has granted forbearance

on the PCC loan breach and that all other creditors have issued a similar

forbearance under cross default provisions. Despite these tensions abating, as

a result of the very challenging crushing environment expected to persist into

the foreseeable future, it is unlikely the company will recapture any equity

value from PCC, regardless of whether it defaults or is sold. The company

once again articulated a view that the PCC debt is non-recourse to Special

Crops, allowing the segment to be sold on an unencumbered basis. We

continue to believe that this asset has equity value, and notwithstanding a

stock price and financial position that renders the company with very little

negotiating leverage, believe this asset will be sold, likely shortly. We reiterate

a $2.50 target, based on now just Special Crops, and a Buy (S)

recommendation.

 

Legumex Walker says shareholders to get $2.50 to $2.75 in liquidation....

 

LEGUMEX WALKER ANNOUNCES SALE OF SPECIAL CROPS DIVISION TO THE SCOULAR COMPANY

 

Legumex Walker Inc. has entered into a definitive agreement with the Scoular Company pursuant to which Scoular has agreed to acquire substantially all of the assets of LWI's special crops division for $94-million plus the amount of net working capital at closing, on a cash-free debt-free basis, paid in cash. The sale represents a CAD$174.6 million transaction value for LWI, based on LWI's working capital as at June 30, 2015. The actual purchase price and transaction value are subject to working capital and other adjustments in accordance with the Agreement (all figures are in Canadian dollars).

 

Scoular is a leading U.S.-based agricultural marketing company that manages supply chain risk for global suppliers and end-users of grains, oilseeds, and other feed and food ingredients.

 

As announced previously, the Special Committee of the Board of LWI (the "Special Committee") oversaw an extensive process starting in March 2015 (the "Strategic Review") and considered a number of alternatives to maximize shareholder value. As a result of the Strategic Review, and in light of the challenges facing the Company, the Special Committee unanimously determined that a sale of the Special Crops Division was most likely to maximize shareholder value.

 

"Following careful review of the transaction by the Special Committee in consultation with our external financial and legal advisors, we believe this transaction represents excellent value and is in the best interests of LWI shareholders," said Bruce Scherr, Chairman of the Board of Directors of Legumex Walker Inc.

 

"This is a highly strategic addition to our existing global feed and food ingredient merchandising business and U.S.-based grain-handling network," said Bob Ludington, Scoular's Chief Operating Officer. "The transaction will significantly increase our product and geographic footprint, which in turn will increase our ability to serve new and existing customers worldwide. We expect to operate Scoular Special Crops much like LWI operates the business today, but with the financial capacity to expand operations, product lines, and distribution channels. As a result, we will be able to provide additional value to Canadian producers and pursue opportunities to serve a global customer base seeking specialty products associated with healthy food trends."

 

"The goal for our Special Crops Division was to bring together several exceptional businesses in our industry, diversify across our product offerings, growing regions and customers, and create an exceptional platform that would thrive as it grew," said Joel Horn, President and Chief Executive Officer, Legumex Walker Inc. "Coming off a record year for Special Crops, we are proud that an organization of the caliber of Scoular recognizes the value that we have created."

 

Unanimous Approval of the Board

 

The transaction has been approved unanimously by LWI's Board of Directors, which has determined that the transaction is in the best interests of the Company and its shareholders and recommends that shareholders vote in favour of the transaction at a Special Meeting of Shareholders, which will be scheduled for November 9, 2015 (the "Meeting"). Altacorp Capital Inc. ("Altacorp"), financial advisor to LWI's Board of Directors, has provided an opinion to the Board of Directors that, subject to the assumptions and limitations upon which the opinion is based, the consideration to be received by the Company in the transaction is fair from a financial point of view.

 

Shareholder Approval and Other Conditions

 

The implementation of the transaction will be subject to shareholder approval at the Meeting. The transaction must be approved by 66?% of shares voted at the Meeting and by majority of the shares voted at the Meeting, excluding votes attached to any shares owned or controlled by Scoular. At the date of this release, Scoular owns a $16.5 million convertible debenture of the Company, but does not own any shares of the Company.

 

Each of LWI's directors and senior officers that hold common shares in the Company and the Company's largest shareholder group, Mr. Ivan Sabourin, the Ivan Sabourin Family Trust and the Richard and Elaine Sabourin Trust, which collectively hold approximately 15.5% of the outstanding common shares of LWI, have entered into voting support agreements with Scoular and have agreed to vote their common shares in favour of the transaction.

 

Because Scoular holds a $16.5 million principal amount convertible debenture (which will be repaid out of the proceeds received at closing), it constitutes a related party of LWI for purposes of the Agreement under applicable securities law. Accordingly, the Special Committee retained Deloittes LLP to prepare a formal valuation, a summary or copy of which will be included in a Management Information Circular to be provided to shareholders of LWI in connection with the Meeting.

 

The completion of the transaction is subject to regulatory approval, including approvals required under the Competition Act (Canada), Farm Lands Ownership Act (Manitoba) and The Saskatchewan Farm Security Act and certain other third party consents required for the assignment and transfer of assets and contracts.

 

The Agreement includes customary non-solicitation, right to match and termination provisions, including termination in the event of a "Superior Proposal" (defined to include, among other events, an unsolicited offer for the purchase of not less than 50% of the shares of the Company which satisfies the requirements set out in the Agreement).

 

The termination of the Agreement in the event of a Superior Proposal or a failure of shareholders to approve the transaction in the event of a Superior Proposal will trigger the payment by the Company of a $6 million termination fee to Scoular. In addition, the failure of shareholders to approve the transaction in the absence of a Superior Proposal will result in an obligation of the Company to reimburse Scoular for transaction related expenses, subject to a maximum of $950,000.

 

The terms and conditions of the transaction will be disclosed in more detail in a Management Information Circular that will be mailed to shareholders as of the record date to be established. It is anticipated that the transaction, if shareholders approve and regulatory and other approvals are obtained, will be completed in the fourth quarter of 2015.

 

Copies of the Agreement and of the Management Information Circular for the Meeting will be filed with Canadian securities regulators and will be available on the SEDAR profile of the Company at www.sedar.com. In addition, investors and shareholders may obtain free copies of the documents the Company files with Canadian securities regulators by directing a written request to LWI, 1345 Kenaston Boulevard, Winnipeg, MB R3P 2P2 Attention: Corporate Secretary. Investors and shareholders of the Company are urged to read the Management Information Circular and the other relevant materials when they become available because such materials will contain important information about the transaction.

 

Update on Pacific Coast Canola LLC (PCC)

 

The Special Committee of the Board has entered into a non-binding term sheet on an exclusive basis with respect to a possible transaction for the Company's ownership interest in PCC (the "PCC Transaction"). There is also a forbearance agreement in place with AgCountry Farm Credit Services to allow all parties time to finalize the PCC Transaction. Although the outcome of any such transaction is uncertain, the Company currently believes it will complete the PCC Transaction prior to the Meeting but does not expect to receive any value from the sale of its 84% interest in PCC.

 

Plan of Liquidation

 

The sale of the Special Crops Division and the PCC Transaction will allow the Company to wind up its operations and return to its shareholders the net proceeds of the sale of the Special Crops Division, after repayment of all bank debt and other liabilities, taxes and transaction related other expenses (in total the "Obligations") as part of a Court approved liquidation process.

 

Accordingly, at the Meeting shareholders will also be asked to approve a plan of liquidation for the Company. While there is no guarantee as to the net amount of distributions to shareholders following the sale of the Special Crops Division, the Company currently expects, after repayment of all Obligations, to distribute a per share amount in the range of $2.50 to $2.75. A decision in respect of the timing and the amount of distribution will be made by the liquidator to be appointed following completion of the sale of the Special Crops Division and completion of the PCC Transaction. An initial distribution is expected in the first or second quarter of 2016, with a possible final distribution following liquidation. The amount and timing of any distribution will only be determined during the liquidation process by the liquidator under supervision of the court.

 

The common shares of the Company are expected to cease trading and be delisted from the Toronto Stock Exchange within a month following court approval of the plan of liquidation.

 

AltaCorp Capital Inc. has acted as financial advisor to the Company's Special Committee. Origin Merchant Partners has acted as financial advisor to Scoular.

[Cardboard]

You beat me to it! Congratulations Sculpin!

 

Cardboard

[gurpaul88]

Great call! Congrats!

[bizaro86]

Congrats! After all the money I made on MHY.UN, I don't know why I didn't just auto-buy this one after I saw a sculpin post in this thread.

[Cardboard]

Sculpin also mentioned this name to me and I think it is a phenomenal idea:

 

CCZ - Critical Control Energy Services

 

Near debt free software company involved in the Canadian and U.S. energy patch. A CRM player trading for 60% of book value and less than half sales with first mover advantage. The company has already restructured and is now entirely focused on this rapidly growing segment and has made a smart acquisition in Q2. Around 24% of shares are held by insiders.

 

This company saves money to energy companies which may explain why sales have kept growing during this downturn. They have some very well known clients such as CNRL as you can see on their website. The key for re-evaluation IMO is an increase in EBITDA margin and recurring revenues from the U.S. which the acquisition and recent re-alignement in executive compensation towards more profitability should help.

 

Here is a good analysis on the company, although about 6 months old. This poor company is not covered by analysts:

 

http://seekingalpha.com/instablog/13833412-sujan-lahiri/3850336-criticalcontrol-solutions-a-deeply-undervalued-c-0_30-software-play-trading-on-the-toronto-venture-exchange

 

Cardboard

[sculpin]

Actually CCZ is followed (not very well since Steve Li left) by Industrial Alliance Securities....

 

 

Critical Control Energy Services (CCZ-T, $0.35, Speculative Buy, Target $0.55)

CCZ Transforms into a Pure Play Energy Services Company. Speculative Buy Rating Established with a $0.55 Target Price

Click here for summary                                                  Click here for full report

 

SUMMARY

 

Critical Control Energy Services (CCZ-T, $0.35, Speculative Buy, Target $0.55)

Analyst: Elias Foscolos                                                  efoscolos@iagto.ca                                                        403-705-4980

CCZ Transforms into a Pure Play Energy Services Company. Speculative Buy Rating Established with a $0.55 Target Price

·        Critical Control has completed a transformative four months in which the Company has divested its non-energy services business and closed a US acquisition, positioning itself for focused growth.

·        On Tuesday, shareholders approved a name change to Critical Control Energy Services Corp. from CriticalControl Solutions Corp. symbolizing the Company’s new energy services focus.

·        Financial highlights from Q1/15 include the fact that revenue grew to $9.5M, which was a YoY increase of 27%. Adjusted EBITDA, on the other hand, remained flat during the same time period.

·        Through a series of three transactions, the Company divested its non-energy services businesses for total consideration of $4M. In addition, CCZ closed the acquisition of assets from Dallas based Legacy Measurement.  The Legacy acquisition should contribute $7M in annualized revenue and positively contribute to EBITDA.

·        We have made numerous modelling adjustments reflecting the fact that CCZ is now a pure-play energy services software focused company. Based on our valuation methodology, we established a target EBITDA multiple of 8x based on CCZ’s historical trading band.

·        Following the transfer of coverage on May 7, we are establishing a rating of Speculative Buy and Target Price of $0.55.

·        Our financial forecasts and target EBITDA multiple simultaneously contribute to our target price of $0.55. This correlates to a 57% potential one-year return supporting our Speculative Buy rating.

·        To see our full Research Update (June 26), please click here.

[ATLValue]

PGN - offshore oil driller that recently spun out of Noble. The company spun out above $10 last year and now is trading at around $1.10.

 

In my opinion several things are causing the stocks decline, 1) fall in oil price, 2) offshore rig sector has been weak based on speculation that the market will be oversupplied for the next 2-3 years as chinese rigs come onto the market, 3) selling as a result of the spin off, 4) recent debt for equity swap by similar competitor HERO and 5) fears about bankruptcy

 

Market cap: $95M (first quarter operating cash flow was $210M!!!)

 

Debt covenants are 4.0x EBITDA and 3.0x Minimum Interest Coverage Ratio and only apply to the revolver. As of March 31, 2015, the covenants under the Revolving Credit Facility were a net leverage ratio of 2.39 and an interest coverage ratio of 7.90

 

You might want to take a look at what PGN looks like in 2016 and 2017... they have some very high priced contracts rolling off and their rigs are more likely to be scrapped than re-contracted over the investment horizon before this company goes BK

 

I hear ya, it really does come down to what happens when these contracts expire and if the management team can find away to limit the haircuts to the rates. Speculative indeed!

 

I did some more work on PGN, Company is a dog, definitely not a multibagger, I'm guessing they start tripping their covenants in 2Q 2016

 

Isn't the revolving credit facility the only debt with coverage  and leverage requirements? Won't they be able to pay that off in full before 2016?

 

Hey Moustachio, I never responded to your question but I did end up writing a few articles on Seeking Alpha about PGN that go into the details. One other thing to mention about this company is that they recently revealed that Petrobras is challenging their most profitable contracts. Things keep getting worse this this business.

 

http://seekingalpha.com/article/3314075-paragon-offshores-imminent-bankruptcy-a-fleet-utilization-scenario-analysis

http://seekingalpha.com/article/3445846-paragon-offshores-brazilian-knockout-august-fleet-status-and-second-quarter-update

[gurpaul88]

http://www.newswire.ca/news-releases/legumex-walker-commences-mailing-of-management-information-circular-regarding-sale-of-special-crops-division-533012891.html

[sculpin]

http://www.newswire.ca/news-releases/legumex-walker-commences-mailing-of-management-information-circular-regarding-sale-of-special-crops-division-533012891.html

 

Sold it all on announcement of the deal > $2.15.

 

Put more into next spec multibagger - a debenture trading at $34 on the TSX. Discovery Air (DA.DB.A) 8.375% debentures - 60% yield to maturity backed by Clairvest who have been buying the equity over the last 6 months. Selling off non core assets that contribute little to cash flow and reinvesting in the high margin military air training business.

 

CLAIRVEST GROUP INC. ENTERS INTO AGREEMENTS TO ACQUIRE SHARES OF DISCOVERY AIR INC.

 

Clairvest Group Inc. has entered into agreements to acquire 4,249,457 common shares of Discovery Air Inc., representing approximately 5.2 per cent of Discovery's current issued and outstanding common shares, at a price of 30 cents per share.

 

DISCOVERY AIR ANNOUNCES COMPLETION OF RIGHTS OFFERING

 

Discovery Air Inc. has completed its rights offering, which was first announced on Jan. 19, 2015. A total of 50 million Class A common voting shares and no Class B common variable voting shares were issued at a price of 22 cents per common share, for aggregate gross proceeds of $11-million.

 

In aggregate, 46,267,443 Class A shares were issued to certain funds and co-investors of Clairvest Group Inc., for gross proceeds of $10,178,837.

[sampr01]

What is your estimated time line for Discovery air debentures for maturity. I was unable find anything on net.

 

Thanks

[sculpin]

What is your estimated time line for Discovery air debentures for maturity. I was unable find anything on net.

 

Thanks

 

30 June 2018 - little under 3 yrs to maturity

 

Discovery Air DA.DB.A 8.38% 30-Jun-18 34.40 4.34 60.51% 626.70% 19.72 5.07 DA.A 0.24

 

Good Canadian exchange traded debenture listing site...

 

http://www.financialpost.com/markets/data/bonds-debentures.html

 

 

[sampr01]

Thanks for the link. These are look like unsecured and are they any risk for BK

[sculpin]

Thanks for the link. These are look like unsecured and are they any risk for BK

 

Yes there is potential for bankruptcy but with a very well funded PE firm like Clairvest determined to make this Company work, these bonds should not be trading at the price they currently are. The military training business is stable cash flow generator. The businesses that are a drag on the profitability will either be fixed or their assets sold to reduce the overall debt burden of Discovery Air. I believe the risk reward tradeoff on the debentures is attractive at these levels.

 

 

[sculpin]

Marret final distribution from the Mobilicity position. Anyone buying around the $0.26 level are essentially getting a free ride on the $0.78/unit value still recorded for the Cline mining position.

 

Marret High, Marret Multi-Strategy to pay distributions

 

Marret High Yield Strategies Fund (C:MHY)

Shares Issued 36,729,002

Last Close MHY.UN 10/28/2015 $0.265

Thursday October 29 2015 - News Release

 

Also Marret Multi-Strategy Income Fund (C:MMF) News Release

 

Mr. Barry Allan of Marret Asset Management reports

 

MARRET ASSET MANAGEMENT ANNOUNCES DISTRIBUTION FOR MARRET HIGH YIELD STRATEGIES FUND AND MARRET MULTI-STRATEGY INCOME FUND

 

Marret High Yield Strategies Fund and Marret Multi-Strategy Income Fund will pay distributions to unitholders of record on Nov. 9, 2015, with a payment date on Nov. 13, 2015. Marret High Yield Strategies Fund will pay a distribution of $0.2559 per unit and Marret Multi-Strategy Income Fund (TSX: MMF.UN), will pay a distribution of $0.1624 per unit to Class A unitholders.The distributions represent further proceeds received by the funds from certain bonds issued by Data & Audio-Visual Enterprises Wireless Inc., which operates as Mobilicity, pursuant to the sale of Mobilicity to Rogers Communications. The distributions represent the net proceeds received by the funds and will be the final distributions of the Mobilicity proceeds. They are being made in accordance with the ongoing termination of the funds.In accordance with the applicable rules of the Toronto Stock Exchange ("TSX"), the "due bill" trading procedures of the TSX will apply to the distributions. The units of the funds will trade on a "due bill" basis from two trading days prior to the Distribution Record Date (i.e., November 5, 2015) to the Payment Date, inclusively (the "due bill period"). Any trades that are executed on the TSX during the due bill period will be identified to ensure purchasers of the funds' units receive the entitlement to the respective distribution.The units will commence trading on an ex-dividend basis on November 16, 2015, as of which date purchases of units will no longer have an attaching entitlement to the distribution. The due bill redemption date will be November 18, 2015.

 

 

 

 

[sculpin]

Marret final distribution from the Mobilicity position. Anyone buying around the $0.26 level are essentially getting a free ride on the $0.78/unit value still recorded for the Cline mining position.

 

Marret High, Marret Multi-Strategy to pay distributions

 

Marret High Yield Strategies Fund (C:MHY)

Shares Issued 36,729,002

Last Close MHY.UN 10/28/2015 $0.265

Thursday October 29 2015 - News Release

 

Also Marret Multi-Strategy Income Fund (C:MMF) News Release

 

Mr. Barry Allan of Marret Asset Management reports

 

MARRET ASSET MANAGEMENT ANNOUNCES DISTRIBUTION FOR MARRET HIGH YIELD STRATEGIES FUND AND MARRET MULTI-STRATEGY INCOME FUND

 

Marret High Yield Strategies Fund and Marret Multi-Strategy Income Fund will pay distributions to unitholders of record on Nov. 9, 2015, with a payment date on Nov. 13, 2015. Marret High Yield Strategies Fund will pay a distribution of $0.2559 per unit and Marret Multi-Strategy Income Fund (TSX: MMF.UN), will pay a distribution of $0.1624 per unit to Class A unitholders.The distributions represent further proceeds received by the funds from certain bonds issued by Data & Audio-Visual Enterprises Wireless Inc., which operates as Mobilicity, pursuant to the sale of Mobilicity to Rogers Communications. The distributions represent the net proceeds received by the funds and will be the final distributions of the Mobilicity proceeds. They are being made in accordance with the ongoing termination of the funds.In accordance with the applicable rules of the Toronto Stock Exchange ("TSX"), the "due bill" trading procedures of the TSX will apply to the distributions. The units of the funds will trade on a "due bill" basis from two trading days prior to the Distribution Record Date (i.e., November 5, 2015) to the Payment Date, inclusively (the "due bill period"). Any trades that are executed on the TSX during the due bill period will be identified to ensure purchasers of the funds' units receive the entitlement to the respective distribution.The units will commence trading on an ex-dividend basis on November 16, 2015, as of which date purchases of units will no longer have an attaching entitlement to the distribution. The due bill redemption date will be November 18, 2015.

 

Cline Mining

 

Our  focus  for  Cline  remains  on  improving  liquidity  through  the  sale  of  non-core  assets  and  the  reduction  of  expenses.  Following  its  emergence  from  the 

Companies’ Creditors Arrangement Act in mid-2015, Cline has meaningfully reduced legal costs and headcount. Cline management remains focused on asset

sales, including surplus land and Cline Gold, both of which are expected to be sold in the first half of 2016. As the mine remains on ‘care and maintenance,’

Cline management continues to sell used equipment into a challenging market. Sales of equipment and the non-core assets are being undertaken with an

aim to maximize corporate liquidity until a buyer for the asset can be secured. Cline management is continuing to consider alternative strategies which may

include outright liquidation.

 

The market for metallurgical coal remains very challenging due to weakness in the Chinese steel market and the strength in the U.S. dollar. Met coal prices

have declined to the lowest levels in a decade, and are well below the break-even costs for most producers. While money-losing production has been shut in,

the market remains oversupplied, and further cuts and/or a pickup in end-demand will be required to rebalance the market. The strong U.S. dollar has been a

competitive headwind for U.S. producers versus their Canadian and Australian peers, given the weakness in those currencies. One offset to this is that Cline’s

debt is denominated in Canadian dollars; Australian and Canadian dollars tend to move in the same direction, so this acts as a partial buffer in Cline’s favou

[sculpin]

Anyone want to revive this thread?

 

TWIN BUTTE ENERGY LTD. 6.25% DEB (TSX - TBE.DB - $16.00)

 

Maturity December 2018. Current yield 39%. Potential 6 bagger to face value.

 

In discussions with bank to extend revolving credit facility which came due on 30 April. Peters & Co been marketing them

since December. 14,000 bbls/d heavy & medium oil. Highly leveraged to oil price.

 

Cardboard started a discussion on them in January. Link here...

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/tbe-db-twin-butte-convertible-debentures/

 

 

[bskptkl]

Anyone want to revive this thread?

 

 

Sure - I do.

 

I'll throw out a speculative, distressed, bankrupt - but cheap pos that I was buying yesterday.

 

ICSH

International Shipping files Chapter 11 yesterday http://www.intship.com/international-shipholding-corporation-voluntarily-files-for-chapter-11-relief/

Docket is here https://cases.primeclerk.com/ish/Home-DocketInfo

Read docket entry 7 for a good summary.

 

March 31 financials show $78 million equity made up of mostly 26 ships on the balance sheet for $171 million (though they say in 10Q that they had a recent appraisal done valuing them for $207 million).

 

However there are 2 classes of preferred; ISHCP and ISHCO that have current liquidation preference of $63 million that have a combined market cap of $7 million at $12 per preferred share. So I don't think equity is entitled to much, but the preferreds look like a buy to me.

 

This is not very liquid to say the least.

 

I do think there is some risk that the plan of reorg tries to finesse some of the recovery from the preferreds to the equity seeing as the insiders own 20% of the equity. An equity committee would be helpful in that regard.

[sculpin]

What is amount of debt ahead of preferreds? Estimate of total business value as a going concern or ultimate liquidation value if it proceeds to this? Need to know if there is any margin of safety to pref value of $7mm as you say.

[bskptkl]

As of March 31, 2016, International Shipholding reported total assets of

approximately $305,087,000 on its unaudited consolidated balance sheets, of which

approximately $59,399,000 were current assets. The remaining $245,688,000 in reported assets

related to (i) vessels, property, and other equipment, net of accumulated depreciation,

(ii) deferred charges, net of accumulated amortization, (iii) amounts due from related parties,

(iv) notes receivable, (v) investment in unconsolidated entities, and (vi) other long-term assets.

 

Total current liabilities was $179 mm including $114 secured debt. They booked deferred gains as a liability of $21 million (not sure how to treat this) and listed other liabilities of $24 million on the 3/31 balance sheet.

 

I am hoping they can get the balance sheet number ($170 million) for the ships if it comes to that (considering recent appraisal was reportedly higher). Their strategic plan had them selling all ships but Jones Act, PCTC, and Rail Ferry - which I take to mean keep the best ones. But they couldn't raise enough so now I think they have to sell better stuff - the 2 Rail Ferry ships (they hint at it in filings), maybe the PCTC too.

 

 

[valuedontlie]

STR Holdings (STRI)... makes solar module encapsulants... commodity, sub-scale, upstream solar business with negative gross margins and sales falling off a cliff...

 

Despite that... company sits on a huge pile of cash/book value... net cash is $0.78/share and BV is $2.15/share relative to a $0.165 stock price... i.e. 0.2x net cash and 0.08x book value... absolute amounts -- $14.4m cash, $39.7m BV, $3m market cap

 

So why own this POS?

 

The company is sitting on a few assets that are about to turn into cash... a $2m note receivable, a $6.2m Malaysian factory which was recently sold, and a large receivables balance (management noted A/R at 2x their "desired level") which could add $2-4m... cash burn is expected to be $2-2.5m per quarter... this would bring in a net $5-6m by yearend which would mean $20m in net cash or $1.08/share...

 

Then what?

 

Management sees the abysmal pricing of its company... they noted biz dev activity could soon bring in 1 or 2 "gamechanging" customers (i.e. turn from CF negative to CF positive instantly)... also looking at acquiring profitable companies in industry (they are sitting on $8-9m in fully reserved NOLs)...

 

This has hair on it (fundamentals, China solar exposure, 50% owner is Chinese company) and I have a hard time believing management's comments on fundamental improvement coming soon but I see catalysts for cash inflows and the idea of liquidation is not off the table (they are waiting to see if these "1 or 2 customers" come through)... at 15% of cash value worth a flier...

[sculpin]

STR Holdings (STRI)... makes solar module encapsulants... commodity, sub-scale, upstream solar business with negative gross margins and sales falling off a cliff...

 

Despite that... company sits on a huge pile of cash/book value... net cash is $0.78/share and BV is $2.15/share relative to a $0.165 stock price... i.e. 0.2x net cash and 0.08x book value... absolute amounts -- $14.4m cash, $39.7m BV, $3m market cap

 

So why own this POS?

 

The company is sitting on a few assets that are about to turn into cash... a $2m note receivable, a $6.2m Malaysian factory which was recently sold, and a large receivables balance (management noted A/R at 2x their "desired level") which could add $2-4m... cash burn is expected to be $2-2.5m per quarter... this would bring in a net $5-6m by yearend which would mean $20m in net cash or $1.08/share...

 

Then what?

 

Management sees the abysmal pricing of its company... they noted biz dev activity could soon bring in 1 or 2 "gamechanging" customers (i.e. turn from CF negative to CF positive instantly)... also looking at acquiring profitable companies in industry (they are sitting on $8-9m in fully reserved NOLs)...

 

This has hair on it (fundamentals, China solar exposure, 50% owner is Chinese company) and I have a hard time believing management's comments on fundamental improvement coming soon but I see catalysts for cash inflows and the idea of liquidation is not off the table (they are waiting to see if these "1 or 2 customers" come through)... at 15% of cash value worth a flier...

 

Interesting - thanks for posting

[sculpin]

Marret final distribution from the Mobilicity position. Anyone buying around the $0.26 level are essentially getting a free ride on the $0.78/unit value still recorded for the Cline mining position.

 

Marret High, Marret Multi-Strategy to pay distributions

 

Marret High Yield Strategies Fund (C:MHY)

Shares Issued 36,729,002

Last Close MHY.UN 10/28/2015 $0.265

Thursday October 29 2015 - News Release

 

Also Marret Multi-Strategy Income Fund (C:MMF) News Release

 

Mr. Barry Allan of Marret Asset Management reports

 

MARRET ASSET MANAGEMENT ANNOUNCES DISTRIBUTION FOR MARRET HIGH YIELD STRATEGIES FUND AND MARRET MULTI-STRATEGY INCOME FUND

 

Marret High Yield Strategies Fund and Marret Multi-Strategy Income Fund will pay distributions to unitholders of record on Nov. 9, 2015, with a payment date on Nov. 13, 2015. Marret High Yield Strategies Fund will pay a distribution of $0.2559 per unit and Marret Multi-Strategy Income Fund (TSX: MMF.UN), will pay a distribution of $0.1624 per unit to Class A unitholders.The distributions represent further proceeds received by the funds from certain bonds issued by Data & Audio-Visual Enterprises Wireless Inc., which operates as Mobilicity, pursuant to the sale of Mobilicity to Rogers Communications. The distributions represent the net proceeds received by the funds and will be the final distributions of the Mobilicity proceeds. They are being made in accordance with the ongoing termination of the funds.In accordance with the applicable rules of the Toronto Stock Exchange ("TSX"), the "due bill" trading procedures of the TSX will apply to the distributions. The units of the funds will trade on a "due bill" basis from two trading days prior to the Distribution Record Date (i.e., November 5, 2015) to the Payment Date, inclusively (the "due bill period"). Any trades that are executed on the TSX during the due bill period will be identified to ensure purchasers of the funds' units receive the entitlement to the respective distribution.The units will commence trading on an ex-dividend basis on November 16, 2015, as of which date purchases of units will no longer have an attaching entitlement to the distribution. The due bill redemption date will be November 18, 2015.

 

Cline Mining

 

Our  focus  for  Cline  remains  on  improving  liquidity  through  the  sale  of  non-core  assets  and  the  reduction  of  expenses.  Following  its  emergence  from  the 

Companies’ Creditors Arrangement Act in mid-2015, Cline has meaningfully reduced legal costs and headcount. Cline management remains focused on asset

sales, including surplus land and Cline Gold, both of which are expected to be sold in the first half of 2016. As the mine remains on ‘care and maintenance,’

Cline management continues to sell used equipment into a challenging market. Sales of equipment and the non-core assets are being undertaken with an

aim to maximize corporate liquidity until a buyer for the asset can be secured. Cline management is continuing to consider alternative strategies which may

include outright liquidation.

 

The market for metallurgical coal remains very challenging due to weakness in the Chinese steel market and the strength in the U.S. dollar. Met coal prices

have declined to the lowest levels in a decade, and are well below the break-even costs for most producers. While money-losing production has been shut in,

the market remains oversupplied, and further cuts and/or a pickup in end-demand will be required to rebalance the market. The strong U.S. dollar has been a

competitive headwind for U.S. producers versus their Canadian and Australian peers, given the weakness in those currencies. One offset to this is that Cline’s

debt is denominated in Canadian dollars; Australian and Canadian dollars tend to move in the same direction, so this acts as a partial buffer in Cline’s favou

Perhaps Cline may be worth something to Marret high yield/resource after all....

 

After years of pain, coal becomes one of the hottest commodities of 2016

 

http://www.reuters.com/article/coal-markets-idUSL3N1AY58G

[Foreign Tuffett]

STR Holdings (STRI)... makes solar module encapsulants... commodity, sub-scale, upstream solar business with negative gross margins and sales falling off a cliff...

 

Despite that... company sits on a huge pile of cash/book value... net cash is $0.78/share and BV is $2.15/share relative to a $0.165 stock price... i.e. 0.2x net cash and 0.08x book value... absolute amounts -- $14.4m cash, $39.7m BV, $3m market cap

 

So why own this POS?

 

The company is sitting on a few assets that are about to turn into cash... a $2m note receivable, a $6.2m Malaysian factory which was recently sold, and a large receivables balance (management noted A/R at 2x their "desired level") which could add $2-4m... cash burn is expected to be $2-2.5m per quarter... this would bring in a net $5-6m by yearend which would mean $20m in net cash or $1.08/share...

 

Then what?

 

Management sees the abysmal pricing of its company... they noted biz dev activity could soon bring in 1 or 2 "gamechanging" customers (i.e. turn from CF negative to CF positive instantly)... also looking at acquiring profitable companies in industry (they are sitting on $8-9m in fully reserved NOLs)...

 

This has hair on it (fundamentals, China solar exposure, 50% owner is Chinese company) and I have a hard time believing management's comments on fundamental improvement coming soon but I see catalysts for cash inflows and the idea of liquidation is not off the table (they are waiting to see if these "1 or 2 customers" come through)... at 15% of cash value worth a flier...

 

Interesting - thanks for posting

 

Thanks for the interesting idea. Where did you find the management comments on "gamechanging" customers and possible acquisitions?

[scorpioncapital]

Maybe LGND...it seems to have more upside than downside but I highlight the request for *speculative* ideas.

[valuedontlie]

STR Holdings (STRI)... makes solar module encapsulants... commodity, sub-scale, upstream solar business with negative gross margins and sales falling off a cliff...

 

Despite that... company sits on a huge pile of cash/book value... net cash is $0.78/share and BV is $2.15/share relative to a $0.165 stock price... i.e. 0.2x net cash and 0.08x book value... absolute amounts -- $14.4m cash, $39.7m BV, $3m market cap

 

So why own this POS?

 

The company is sitting on a few assets that are about to turn into cash... a $2m note receivable, a $6.2m Malaysian factory which was recently sold, and a large receivables balance (management noted A/R at 2x their "desired level") which could add $2-4m... cash burn is expected to be $2-2.5m per quarter... this would bring in a net $5-6m by yearend which would mean $20m in net cash or $1.08/share...

 

Then what?

 

Management sees the abysmal pricing of its company... they noted biz dev activity could soon bring in 1 or 2 "gamechanging" customers (i.e. turn from CF negative to CF positive instantly)... also looking at acquiring profitable companies in industry (they are sitting on $8-9m in fully reserved NOLs)...

 

This has hair on it (fundamentals, China solar exposure, 50% owner is Chinese company) and I have a hard time believing management's comments on fundamental improvement coming soon but I see catalysts for cash inflows and the idea of liquidation is not off the table (they are waiting to see if these "1 or 2 customers" come through)... at 15% of cash value worth a flier...

 

Interesting - thanks for posting

 

Thanks for the interesting idea. Where did you find the management comments on "gamechanging" customers and possible acquisitions?

 

I called them to ask what they plan to do with all that cash... They were optimistic but we'll see if anything materializes... Cash pile is going up and anything else they accomplish would be gravy...