We have had a cracking week - we finally got MMP approval, which essentially means we are now legit (not like I had any doubt). We have managed to go from about 4c to 1.3c back to 4c in a couple of weeks. In case you missed it, the majority of the market is down 40-50% and yet CXO has re-rated. We have had SP increases of nearly 300% from our lows - it would otherwise be easy to miss our rerate given the broader market turmoil, but it has happened. We now have some evidence (early I'll admit) of support at 3.7c, and no real signs of resistance yet - we are primed for another announcement. I'm not sure we will see one soon, but if we do, by crickey, we could get some more movement upward. I was pondering just now after reading some of the other comments on the forum, that CXO is currently in the enviable position of being able to price in future earnings. The issue with the majority of the market at the moment is that we have no idea of what future earnings will actually look like. As @Brumbie stated, they are reconsidering their travel plans for the next 12-18 months, and I can almost guarantee that anyone considering a cruise has a much longer time frame before they get on a ship. This virus has exposed that particular industry as being a petri dish of infection, and it will take some time for the general public to forget this image. CXO on the other hand has basically been able to lock in confirmed profits (110 mil US per year) from 2021 onwards. This right now can be costed, and with potential new announcements that may push the number of years this amount can be produced for, we are likely to see further price increases. We may even see a higher annual revenue amount with increased recoveries and additions like fines to come. With all the market turmoil, we are one of the few companies that can demonstrate future earnings - how many companies can do the same?
I wish I could have bought more at 1.3c, but I decided to sit on the sidelines until all this settles down. I think we still have a ways to go there though, as I stated in my last post, the Chinese market went from highs to lows, back to highs again and then the economic impacts pushed it back to the lows again. Our economy (and the market) seems to be being fuelled by the stimulus packages at present, and I doubt that industry will bounce fully back by the time we get to the back end of the stimulus package. We will see the economic impacts start to flow through the economy over the next few months which will impact every company and their profit guidance - this will likely drop (IMO) the market again, which will take much longer to get out of.
So back to CXO. We are in the box seat. There is no need to recalculate our earnings, because it is zero right now, and it was always going to be zero right now - but it is now much easier to reliably predict our future earnings (because of approval) and we are fortunate that our future earnings are outside of the 'damage window' of COVID-19. This makes it easier to achieve gains in the SP because the market will throw money at what is 'known' or predictable - it is possible that we might have jagged prime position.
It is almost laughable that we have all been losing while the market has been booming over the last few years (because the rest of the market could be costed) but now that the rest of the market is in turmoil, CXO is one of the few that can now be costed with some reliability. We just need some finance and we are away. Pretty exciting time to hold for us me thinks.
I do not want to make light of the deaths this virus has claimed because it is terrible, but purely from a financial viability perspective, we have exceptional potential. I will be putting managements next few moves under a microscope. Despite some of my criticism over the past couple of years (and in person at the AGM) due to the general lack of communication, they are delivering. Lets see if they can keep it up with the next milestone.....finance (get it done Malcom and Simon)
As I said at the outset, Happy Easter CXO'ers.
CXO Price at posting:
4.0¢ Sentiment: Hold Disclosure: Held
