D2O

1.41%

$1.40 duxton water limited

Ann: Monthly Update - July 2019, page-9

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Goldwater

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20/08/19

12:49

Post #: 40055872
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Originally posted by Transversal ↑

@F01

Thanks for the additional colour.

The problem I have with this type of business model is that it seems to rely too much on long-term NAV growth, driven primarily by the underlying commodity price, in order to produce a total return that is satisfactory on a risk-adjusted basis.

In other words, I would personally want a long-term IRR of at least 10% pa in order to feel compensated for commodity price volatility, political risk, etc.So, if the "intrinsic" long-term IRR is around 6% pa (which becomes more like 5% pa once the 0.85% pa fixed management fee is factored in), roughly half of the desired total return would have to come from NAV appreciation.

And if that NAV appreciation is primarily a function of something as hard to predict as the weather, then I don’t feel particularly comfortable owning the asset at today’s price. [*]

Of course, NAV can grow as a consequence of new water entitlement purchases as well, but that would require issuing new equity (in a debt-free model, which I do consider appropriate given the nature of the underlying assets), so I prefer thinking on a constant-assets basis.

I hear your argument about the discount to NAV representing a form of protection, but that NAV is reflective of several interim revaluations. On a cost basis, that protection is no longer there, if I am not mistaken.

To conclude, I think I’ll personally pass for now, but thanks for bringing this company to my attention; I’ll keep it on my watch list.

T

[*]: I appreciate how the consensus view on global warming can play a role, in making this business a sellable story. Based on my very limited knowledge, though, it is exceedingly difficult even for scientists to model climate change in a dependable way. So, again, if the intrinsic IRR (before NAV appreciation) is not high enough to make the investment worthwhile by itself, I personally see the climate dependency as a nuisance, rather than as something that adds to the investment appeal.

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You might find this interesting.

https://www.savingthegrace.com/blog...ng-in-water-put-your-money-where-the-water-is

D2O Price at posting: $1.35 Sentiment: Buy Disclosure: Held
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(20min delay)
Last $1.40		Change -0.020(1.41%)		Mkt cap ! $218.6M

Open	High	Low	Value	Volume
$1.42	$1.43	$1.40	$95.77K	67.93K

Buyers (Bids)

No.	Vol.	Price($)
2	10905	$1.40

Sellers (Offers)

Price($)	Vol.	No.
$1.42	9378	1

View Market Depth

No.	Vol.	Price($)
2	10905	1.400
1	2181	1.375
1	7500	1.370
1	3346	1.355
3	3451	1.350

Price($)	Vol.	No.
1.420	9378	1
1.435	12090	2
1.445	9994	1
1.470	1401	1
1.490	44900	3

Last trade - 16.10pm 27/09/2024 (20 minute delay)

D2O (ASX) Chart

Ann: Monthly Update - July 2019, page-9

KalGold rolls out detailed aeromagnetic survey across Pinjin project

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Ann: Monthly Update - July 2019, page-9

Top Stories

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The winners & losers on market if negative gearing were gone

HotCopper users muse on De Grey's denial of Agnico Eagle takeover bid – but who are Agnico?

5.6g/t gold intercept at Serbia's Rogozna supports Strickland's hopes for high-grade core

Week 39 Wrap: What HotCopper’s watching; China’s new stimmy moves boost metals; Oz CPI drop

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The market's shrugged at China's stimulus measures all year. Why is this one different?

Featured News

Buyers (Bids)

Sellers (Offers)

Featured News