I would agree, on a technical vievpoint that SRL is oversold -...

I would agree, on a technical vievpoint that SRL is oversold - but then what isn't? However, to dive in now you have to look at the very-near-term risks of a string of mine closures - Tritton, Whim Creek are both higher-cost producers than CUO's Lady Annie, so you'd assume if CUO is in administration SRL is copping massive, unsustainable losses and absorbing them from the padding SARL's dividends give them. They present a calm face to the world, but underneath the ice there's a slaughter...

So, realistically, no matter how oversold, when the reality leaks out, my guess is further knee-jerk falls.

Another problem is the coal contract prices falling, that will slaughter the company.

Further, if we accept Euroz's thesis that you can value SRL on a net asset backing model, then you have to look around at the other companies who have net asset backing as their major source of share price support - the listed property trusts. Its the same kind of idea; you have an asset worth X, you have Y shares, it is worth X/Y per share to shareholders in SRL.

Given most LPT's are trading at steep discounts - up to 95% - to their nett asset backing and nett tangible asset backing, then why not SRL? Remember, the SARL shares are NOT easily disposed of because Straits is a major shareholders in SARL and how do you dump 44% of the company on-market quickly to realise the full value without destroying the value? You just damn well cannot.

So, sorry to say, but the market is right. In fact, if you were to consider this a LPT, its actually expensive, given the astronomical gearing to nett asset backing you see in terms of look-through leverage (55% of SARL's market cap).

When a broker actually fesses up to the tactical and strategic implications of the structure of the asset in question, and risks in a collapse in the metals business fully - someone extremely pessimistic who totally disbelieves the bulldust management feeds you (ie; I just got toasted at CUO, I'm bitter) then you might have "advice" worth a lick of spit.

Right now you have idiots - unashamedly I say this, they are welcome to email me to harrangue me about this opinion - with simplistic models born five years ago, last updated in May 2007, working in a reality which is dead, buried and rotted.

And so what, finally, if the thing is oversold - this is a damn bear market/recession/depression scenario. Resources armageddon. Nothing is oversold.