Not sure what the market is missing or maybe what i am missing (besides a fearful market)
- Ding has purchased 40 million options ($5million) - Ding has got the independent geos report confirming the minimum 300mt of iron ore - on 24th Jul it is announced that Ian Burston converts 1.25mil 40 cent options which were to expire 31 dec 07 - on 2nd Jul is is announced that Tony Sage converts 1.5mil 40 cent options - Others have also converted - so something like over $3 million has been converted in the past couple of months - 1st jun it is announced that CFE will spin off Global Iron (will this be the new vehicle to spend some of the $250million of Ding's 70% investment?) - Is Ding the real deal? well read the following
+Ambitious plans afoot. We visited Delong last week following its 1Q07 results, recent share consolidation and convertible bond issue. Management provided updates on its capacity expansion as well as long-term goal of establishing itself as a top-20 steel manufacturer in China by 2010. Armed with a war chest of US$200m from its recent convertible bond issue, Delong is seeking acquisition targets. +New capacity on schedule. Delong’s available capacity was only 75% utilised in 1Q07 due to a month-long maintenance shutdown of its first production line. From 2Q07, Delong will have 2.4m mt of total capacity and an additional 0.6m mt by 4Q07. It aims to have 10m mt by 2010 via acquisitions and capacity upgrade. +Industry consolidation favours Delong, as it is China’s second lowest-cost steel producer with a production yield of 98.5%. Delong also leads by technical efficiency and a superior product mix of higher-grade, wider-width and thinner gauge products. Any consolidation would provide opportunities for Delong to acquire inefficient plants at lower prices. +Upgrade to Outperform from Neutral; target price increased to S$4.70. We are upgrading our earnings forecasts by 15.6%, 46.4% and 133.8% for FY07-09 to reflect Delong’s accelerated expansion. We upgrade the stock to Outperform with a new target price of S$4.70 following our earnings upgrade (previously S$3.40, adjusted for share consolidation). Our target represents a PEG of 0.25x over FY07-10 and 11.3x CY08 P/E.
- so he wants to aggressively establish himself as a top 20 manufacturer in China by 2010. He is the second lowest cost producer. He has US$200million is his war chest so CFE deal is already covered but i guess he will take debt and he wants to produce 10m tonnes by 2010, hence why he buying a guaranteed supply line called CAPE LAMBERT!
- $250mil buys 70% which in turn values the company at $350mil, currently MC is $112mil and SP is 0.43, do the sums (or for the disbelievers multiply by 3) but i will settle for 0.80+
- look for buyer depth buildup - look for the 30% deposit by the end of the month
CFE Price at posting:
0.0¢ Sentiment: None Disclosure: Held
(20min delay)