Great letter, it was well articulated and you make a strong case – let’s hope management listens.
On a side note – with current market conditions and the sky seemingly falling do you have plans to updates all investments ideas and if you still believe the thesis is intact most concerned w/ –
LMN/HRBR – travel with oil/ticket prices killing demand/Europe issues with Russia
SQZ – Management’s update and the multiple 10% drops in value on back to back days following.
URF – impacts of AUD/USD breakdown and interest rate hikes in US having headwinds on home prices in the near term.
and overall strong USD and impacts on commodity names.
Thanks Jeremy appreciate all of the thoughtful updates and analysis!
just posted update on many of these names. no change on LMN, the stock keeps going down but literally every other travel co, both in the US and Europe, is talking up demand. it is simply an absence of buyers at the moment.
let me come back on SQZ and the commodity names later on.
Normally I wouldn’t comment on something like this but once again they are going with an outsourced/cut price solution. In the PR they specifically mention this is part of the ongoing drive to cut fixed costs.
Hence now both the CFO and Company Secretary are both effectively outsourced/temporary hires.
I believe the company is doing everything it can to tell us this is a liquidation waiting to happen.
There are many interesting investment opportunities out there, especially in E&P land, but none I can find where the base case return in ~40% with effectively no downside, in a variety of adverse, punitive scenarios. My base case NAV today is ~$1.12 per share, which I derive using almost no value for Gambia; a 12% discount rate for the Woodside earnout; and ZERO accretion through capital returns (buybacks etc) – something I still think happens as soon as Gambia is resolved.
To put this in context, even if you used a 25% DR on the Woodside earnout; assumed Gambia was worthless; and that the company would not do anything accretive with the cash – I still get 90c a share of value.
Next steps would be: 1) resolution on the Gambia (probably August sometime); then 2) clarity on near-term capital returns. Even if the Gambia is a total zero, I would view that as positive for closing the discount as it would obviate the need for any further discussion on what to do with the company/cash (ie they would simply move to wind up). I continue to expect a good chunk, if not nearly all, of the available cash in the company (close to 50c a share) to be returned via buyback/dividend in the next 3mos.
I have continued to add to my position, and now own ~3.9% of the company.
Thanks Jeremy – great letter.
Very well written! Thank you Jeremy.
Hey Jeremy,
Great letter, it was well articulated and you make a strong case – let’s hope management listens.
On a side note – with current market conditions and the sky seemingly falling do you have plans to updates all investments ideas and if you still believe the thesis is intact most concerned w/ –
LMN/HRBR – travel with oil/ticket prices killing demand/Europe issues with Russia
SQZ – Management’s update and the multiple 10% drops in value on back to back days following.
URF – impacts of AUD/USD breakdown and interest rate hikes in US having headwinds on home prices in the near term.
and overall strong USD and impacts on commodity names.
Thanks Jeremy appreciate all of the thoughtful updates and analysis!
just posted update on many of these names. no change on LMN, the stock keeps going down but literally every other travel co, both in the US and Europe, is talking up demand. it is simply an absence of buyers at the moment.
let me come back on SQZ and the commodity names later on.
Hey Jeremy, much appreciated thank you for helping me keep emotions out of this scary times 😀 reading through the update now.
it is always hard to keep emotion out of it!
Update: FAR announced a new Company Secretary, per below:
https://far.live.irmau.com/irm/PDF/7713fae1-3476-4b75-9c18-bf32848bbaf9/AppointmentofCompanySecretary
Normally I wouldn’t comment on something like this but once again they are going with an outsourced/cut price solution. In the PR they specifically mention this is part of the ongoing drive to cut fixed costs.
Hence now both the CFO and Company Secretary are both effectively outsourced/temporary hires.
I believe the company is doing everything it can to tell us this is a liquidation waiting to happen.
There are many interesting investment opportunities out there, especially in E&P land, but none I can find where the base case return in ~40% with effectively no downside, in a variety of adverse, punitive scenarios. My base case NAV today is ~$1.12 per share, which I derive using almost no value for Gambia; a 12% discount rate for the Woodside earnout; and ZERO accretion through capital returns (buybacks etc) – something I still think happens as soon as Gambia is resolved.
To put this in context, even if you used a 25% DR on the Woodside earnout; assumed Gambia was worthless; and that the company would not do anything accretive with the cash – I still get 90c a share of value.
Next steps would be: 1) resolution on the Gambia (probably August sometime); then 2) clarity on near-term capital returns. Even if the Gambia is a total zero, I would view that as positive for closing the discount as it would obviate the need for any further discussion on what to do with the company/cash (ie they would simply move to wind up). I continue to expect a good chunk, if not nearly all, of the available cash in the company (close to 50c a share) to be returned via buyback/dividend in the next 3mos.
I have continued to add to my position, and now own ~3.9% of the company.