Did a little technical analysis after regretting having bought back in at what seemed to be a firesale price. RRL now a disaster. Looks like the SP could easily drop to $2.10 in the next few days.
Fundamental analysis:-
For most companies, in decreasing order of essentialness:- - Employee salaries and directors fees - Taxes - Dividends
For RRL, with Tropicana the directors have ensured that they will be paid for years to come without even having to do much work and even if McPhillamys has to be aborted. With RRL's now well-established policy of reducing dividends, there must be many who are now jumping ship to potentially more attractive alternatives even though RRL is not actually sinking (apart from its SP).
Current SP seems to represent zero value for McPhillamys. On the positive side, there are always good reasons to hold any profitable gold producer that has been sold off. The momentum of the fall has probably triggered many stoploss sales. Although RRL now already looks oversold at $2.20, $2.10 may be a good match for a total annual dividend of $0.06 fully franked. IMO, the SP will probably bounce if it gets that low.
RRL Price at posting:
$2.21 Sentiment: Buy Disclosure: Held
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