they don't come much cheaper than this

I can’t get over how cheap this one seems at this time. It has fallen like a stone and other than CmonCDR and me, there doesn't seem to be many prepared to have a punt. So I thought I would just summarise why I am here and still punting away. I am the current buyer at 6.8cents and have continued to buy since my last post.

Just reiterating a few of the value figures on this one: The latest net assets are $736.4 million compared to a current market cap of $41.64 million. This represents a price to book ratio of 5.6% - the lowest figure (excluding negatives of course) of all stocks on the ASX with current assets exceeding $1 billion. Comsec has the facility where you can list all such stocks with 0 < book value < 1 and current assets > $1b. Just for interest the first five stocks listed for this query are PPX, GNS, API, BSL and OST.

It should not be ignored that Paperlinx has access to an off-balance sheet amount of $276.5 million from Paperlinx SPS in a preference style arrangement where the “loan” is not on call as it would be with a bank. Paperlinx recently paid the six monthly dividend on this preference stock totalling an amount of $10.64 million. This dividend is at the discretion of the directors and the PPX lenders so it is somewhat surprising that the last two dividends have been paid when the market is effectively saying that Paperlinx is broke.

The operating cash flow for 2010/2011 was $54.6 million which exceeds the market cap by more than 30 percent.

Benjamin Graham used to apply a “quick asset” approach where he sought shares where the current assets minus all liabilities exceeded the market cap. In recent times not many listed companies meet this formula. This approach ignores all non-current assets and just concentrates on what could be raised quickly in times of trouble. In this case the quick assets total $346.7 million compared again to that paltry $41.64 million market cap. Even if we subtract the full $276.5 million coming from the preference shares (PXUPA) we would be left with quick assets of 70.2 million – way more than the market cap.

The instos won't touch a stock like this because it makes them look like idiots if they fail. There is no question that few small shareholders do their own work and even when they do, they generally don’t have the confidence to back their judgment so they all run to the same side of the boat (as opposed to Cmon and my approach of charging at the canyon as Evel used to do). This one sided withdrawal has been happening for a long time at PPX. Four years ago, this stock was selling at over $4. Today it is 6.9 cents. If shareholders ever decide to run the other way, the potential rise in this stock far outways the risk in my view. We talk from time to time about ten baggers and this one has to be in there with a chance. The recent sharp fall in the Aussie dollar can only help. PPX wrote off $15.4 million in 2010/11 on a currency option. The recent fall in currency suggests that a write back on this option should be on the cards this year.

When I look at the balance sheet and the fact that it recently paid out $10.64 million in dividends to the PXUPA shareholders when it didn't have to, I can’t see that it is going broke any time soon.

You can get onto the top 20 of this one for $69,000 yet the annual revenues were $4.5 billion in 2010/2011. So I am on my bike and heading for the edge again chanting my favourite war cry "this is nothing compared to what the ex cost me".

GPASAS