Thursday, February 4, 2016

Yoma Strategic Holdings reports earnings

Yoma Strategic Holdings is the Singapore based holding company that has its operations in Myanmar. It recently reported third quarter earnings:

Net Profit attributable to shareholders up 223% to S$25.2 million
Non-real estate business revenue grew by 260%                                                                   Telecom towers investment recorded significant fair value gain                                                       To open up to 12 KFC stores by March 2017, quadrupling current store count

The company has holdings in various businesses in Myanmar such as; real estate development, vehicle leasing, KFC franchisee, tourist operations, cell towers, etc.. The company will have lumpy sales and earnings because of the timing of real estate sales. Nevertheless, Myanmar has excellent prospects long term starting from a low base and having a young population.

Yoma has been in Myanmar for many years and is well connected inside the country. Because of this they will have first crack at working with multi national companies wanting to enter the Myanmar market. An example is the fact they are the New Holland tractor distributor and the KFC franchisee.

The thesis is simple; the economy will grow significantly over the next several decades and Yoma should capture a growing portion of that growth. Rinse and repeat. This is a long term investment you buy and put in a coffee can and open up 10 years later.

Wednesday, February 3, 2016

Good news from New York for Amaya (AYA)

After a 50% drop I said Amaya Gaming was my top stock for 2016.  Unfortunately the entire market has continued lower and Amaya has dropped like most stocks.

However, two recent news items have put some upward impetus back into Amaya's stock price. The first news item was the announcement that Amaya's CEO has offered to buy the entire company for $21.00 per share Canadian dollars.

This is not terrific news for us because that only comes out to about $15.25 per share in US dollars. I paid about $16.30 but several analysts think that the bid will have to be increased in order to entice enough shareholders to sell.

The other news is that a bill legalizing online poker in the state of New York advanced out of committee on Tuesday.

“The PPA thanks Chairman John Bonacic and the Committee for acting quickly to pass iPoker legislation through the Senate Committee on Racing, Gaming and Wagering," PPA executive director John Pappas said. “If passed into law, the bill would provide New Yorkers who play poker online with a safe and regulated environment, while bringing in revenue for the state. We encourage the Finance Committee to move quickly to usher the legislation through the Senate.”

There is a companion bill in the New York Assembly that also would lead to regulated online poker. The PPA said it “also urge[s] the Assembly to move forward” with the bill.
The New York online poker market could be worth more than $120 million in the first 12 months after launch, according to testimony at September’s hearing. Both proposals on the table are eyeing a tax rate of 15 percent on online poker operators, who would also have to pay $10 million for a 10-year license. Up to 10 licenses could be awarded.

The company has had some hiccups recently but it remains a cash generating machine and although it has a higher debt level than many would like to see I think it's leading market share advantage in online poker along with new initiatives in online casino's and sports book will lead to an upward re-valuation. 

Tuesday, February 2, 2016

More positive news on Cub Energy

A few days ago I wrote a post about how I had retaken a position in Ukrainian gas producer Cub Energy (KUB.V). More news has come out on Cub that makes this speculation even more lucrative.

One of the major assets of Cub is a 30% stake in a gas producing entity called Kub-Gas. The other 70% was owned by a company called Serinus Energy. Earlier this year Serinus decided to exit Ukraine and sell its 70% stake in Kub-Gas. Cub Energy has the right of first refusal on any sale meaning that Cub gets the first crack at buying the assets.

Cub did not have the money to buy the Serinus assets. A private gas producer in Ukraine called Burisma is going to buy the Serinus share of Kub-Gas. Cub Energy will forgo its claim on right of first refusal and will earn an additional 10% share of Kub-Gas at no cost. Cub can also earn an additional 2.5% within a year.

This is great for Cub as it did not have the money to purchase the 70% that Serinus was selling. This will also partner Cub with the largest privately owned gas company in Ukraine. With the reduction in royalty rates Burisma should be interested in accelerating the development of the Kub-Gas assets.

Here is the press release from Cub Energy.

This is all happening as the government in Ukraine is pushing for more development of the gas resources in Ukraine.

I have consistently advocated for Ukraine’s energy independence to be the main priority for state and executive authorities over the long run. In fact, it does not matter from whom we areimporting, since any dependence on imports will be harmful. The key is to either consume less or produce enough to cover our state’s needs, and perhaps even allow us to export.

Another strategic dimension is to increase energy efficiency and minimize corruption in energy markets. But all our strategies, plans, and steps should pursue the common goal - to ensure that the energy sector becomes a model for its national economic contributions, sustainable development, economic and environmental efficiency, responsible attitude to resources, and transparency of all payments.

In 2015, Ukraine adopted new energy laws and lowered royalty rates for oil and gas extraction, opening the space for the development of our energy sector. But, unfortunately, these efforts have not been enough. In this article, I will prioritize the 10 steps that we need to take over the next 12 months in order to continue developing the energy sector over the next 5 to 10 years.

This speculation just got better with this news and things continue to set up for a reversal of all the negatives we saw last year that drove down the price of this stock. I am accumulating shares.

Update: I misread the press earlier release on the earn in on Kub-Gas. It appears the first 5% can be earned by Cub Energy for no consideration. The other 5% of Kub-Gas can be earned "subject to certain benchmarks and optional payments." 

Friday, January 29, 2016

Review of one of the best blog posts ever on becoming wealthy

I have been writing quite bit on how one can become wealthy. I had intended on writing an article on stupid things people do to set themselves back and that prevent them from becoming wealthy.

However, I recently came across a post by Chris at the "Get a Life" website that really impressed me and that I think everyone could benefit from reading and understanding. The post is called "How to Ruin Your Life in Your 20"s" (Financial Death Sentences).

The article talks about ten poor decisions that people make that can torpedo your chances of becoming wealthy. After I read the article I realized that these were mostly common sense items that I though every one knew. I knew all of this only because I had a father, grandfather, and uncles that were old school real men who cared about me and did their duty by passing down wisdom that they had been taught. I then remembered that quite a few guys have come from single parent homes and/or dysfunctional homes and did not have the benefit of being taught this information.

The article really hits home with life truths and I really could not have written a better article on the subject. I do have a few comments and additions from my own experience.

#5 You acquire major debt from student loans

Unless you are trying to become a lawyer, doctor, engineer (which I consider advanced trades) you really are better off not even bothering with college. I know tons of guys in their twenties with a degree in business waiting tables.

One avenue often ignored is getting a trade. I have tried to convince several guys in their twenties to go get a HVAC ticket and hang out a shingle as an ac and furnace repair guy. This can be done in a year or two at community college even at night while you work during the day. I even offered to buy the van and tools for them after they get done. No takers as of yet but this is often an overlooked field and these guys can make $100,000 per year if they hustle just fixing ac's and furnaces. Hell they charge $125 bucks just to pull up in the driveway.

#8 You don't start young and you don't try

 "It may be in the future I may lose a battle, but I shall never lose a minute."-Napoleon

Back in Napoleon's day it was imperative to move your forces into position before your opponent could get settled. This would allow you to dictate the tempo and location of the attack thus forcing your opponent to always be reacting thus never able to take the initiative against you. You could not waste time on the battlefield in those days. You needed to move fast, get settled, and attack.

You cannot waste time. Time is the most valuable asset a young man has. Sitting in your parents basement playing Call of Duty lamenting on how bad the economy is strikes me as just stupid. I am 48 and have made quite a few mistakes. However, if I could go back thirty years with the knowledge that I have now and start over at 18 I could take over the world financially. Time and compounding are the keys to wealth. Don't waste time. All the information on starting businesses, building websites, at your fingertips on the web. Move it boy

The economy might not be good for wage slave schlubs but the world GDP is still $60 trillion every year. Get off you ass and go out into the world and capture some of that scratch. It ain't going to land in you basement while you lie on the couch watching Portlandia reruns.

#9 You don't own anything

Man this is the key right here. You have to own income producing assets; real estate, dividend paying stocks, businesses, websites that generate residual income etc..

This is where my advice comes in on saving and investing. The sooner you start the more time you have to compound and to grow these assets into other assets. You will also learn that the more assets and money you accumulate the more doors open to more and greater opportunity. Success attracts success.

In summary, a really great article that I think just about everyone can benefit from. It also illustrates the fact that all the information and brains in the world are virtually at every persons fingertips. You just need to seek it out. It is far easier to learn from others success and more importantly their mistakes than to make the mistakes yourself.

Wednesday, January 27, 2016

Lack of investment will lead to an oil price spike


The biggest result from the collapse in oil prices could be a future price spike.

Oil prices at $30 per barrel have put most producers under water. That has led to austere budgets and severe cuts to spending. Wood Mackenzie recently estimated that $380 billion in major oil projects have been delayed or cancelled since. That means that about 27 billion barrels that had been slated for production from those projects will now not be produced.

But more cuts are expected moving forward. “There has been a $1.8 trillion reduction in spending planned for 2015 to 2020 compared to what was expected in 2014,” historian and oil expert Daniel Yergin said at the World Economic Forum in Davos, according to the Telegraph.

As has been stated many times in the past; the cure for low prices is low prices. As the article goes onto to point, natural depletion of around 5% a year guarantees that at some point in the future, barring a recession, oil supply will be insufficient for demand and the price will rise. This is the way it always works in commodity markets. The idea that we are in a new era of low prices is ridiculous. The lack of investment is rational as virtually no one can make money at these prices so no investment in future production replacement will take place. patience and prudence will allow one to take advantage of the eventual price rise. Just as in nature the weak will be culled from the herd and the remaining companies left standing will provide for excellent returns when the cycle turns up as it must.

Monday, January 25, 2016

68% of Americans severely damage their credit rating before age 30


Have you made mistakes regarding your credit in the past? That could haunt you ... for a long time.

A whopping 68 percent of Americans make at least one major financial mistake, or "credit fumble," before turning 30, leading to a negative mark on their credit report, according to a Credit Karma survey.

These mistakes include overspending on credit cards, missing payments, defaulting on a loan or having an account sent into collections, the survey found.

The greater the offense, the longer it will reflect on your credit report, said Bethy Hardeman, chief consumer advocate at Credit Karma.

This is incredible and is a great insight into the minds of most people. In this society you must guard your credit rating. Unless you are cash and carry most big purchases i.e. cars and houses are purchased with credit. The only way to get the lowest interest rates is to have a high credit rating. If you are in debt and struggling to get things under control you need to read my posts on debt elimination. 

Sunday, January 24, 2016

I am back in Cub Energy (KUB.V)

Cub Energy was my stock of the year a couple of years ago. The company is a gas producer in Ukraine. At the time that I bought it the company was seeing higher volumes from its drilling program. The increased production was in the context of a very high gas price of around $11.00 a million cubic feet. That compares with around $2.00 per mcf that companies in the US receive for gas.

Everything looked good and then Ukraine had the maiden revolution and Russia ended up taking over Crimea. This scared a lot of money out of Ukraine and Cub Energy suffered as well. To further compound issues Russian speaking separatists in Eastern Ukraine declared their independence which led to a state of warfare.

This had a two part effect as half of Cub Energy's properties are in eastern Ukraine but not in the actual conflict zone. In addition, the government of Ukraine, in a stupid attempt to raise revenue for the war, increased oil and gas royalties to 55%. This basically choked off any further investment by any oil and gas explorers in Ukraine. Cub reacted by securing all exploration efforts to conserve cash as it would uneconomical to explore with these onerous royalty rates.

The war, along with the already developing economic issues that Ukraine was experiencing basically led to a near depression in the economy and a collapse of the Ukrainian currency, the hyrvna. This forced the government in Ukraine to seek financial assistance from the IMF. As a condition of the assistance that the IMF agreed to it also forced pro-market reforms on the Ukraine government. One of these was the lowering of oil and gas royalties back to there pre-conflict rate of 29% as stated in this Cub Energy press release.

On Thursday, December 31, 2015, Ukraine President Petro Poroshenko signed a new law reversing the increase of royalties on natural gas production put into place 16 months ago on August 1, 2014. Effective January 1, 2016, royalty rates are reduced from 55% to 29% for wells drilled at depths up to five kilometers. For well depths greater than five kilometers, the royalty rate is decreased from 28% to 14%.


CEO of Cub said: “We have waited patiently for royalty rates to decrease to allow us return to higher netbacks and redeploy capital into our Ukraine assets.”

So the original thesis comes back into play from when I first owned it. The company has properties that have identified gas reserves. The question now is will the company have the resources to restart its work programs and increase production. The other question is will the recent abatement in hostilities in the east stay that way. It appears that since Syria and ISIS have taken over the news that Ukraine has fell off the front page of the newspaper. 

In addition the economy in Ukraine sucks due to the war and the issues with Crimea along with mismanagement and corruption. The government in Kiev is feeling the pressure and needs to show progress on the economy. I think this could cut either way. The reforms could move forward albeit slowly or the government in Kiev could go full retard again and start up hostilities in the east. 

Cub has shown in the past that it can advance its projects amid all of the issues. The big obstacle of getting royalties down is now out of the way. It now remains to be seen if they can get capital deployed and get production up. 

This is an interesting speculation with the shares at three cents. The stock traded in the $.30 cent range two years ago before all this bad news hit. I think that it get back to $.15 in the next 12-18 months if things go right for them. This is a high risk high reward speculation with quite a few moving parts and is not for the faint of heart. However we have a catalyst for a re-rating of the stock upward. 

Friday, January 22, 2016

Energy storage, another big catalyst for lithium


That is according to a new report published today by the Renewable Energy Agency (REA) and consultancy KPMG, which found that by around 2017 the cost of lithium ion storage technology will have fallen low enough for early adopter households and businesses to retrofit it onto existing energy generation systems.


REA chief executive Nina Skorupska said 2016 is set to be a "breakthrough year" for energy storage and demand response systems. "This report shows that storage is already upon us and whilst traditional fuels like nuclear and gas are needing increasing help from the government, the cost of renewable technologies are coming down and many companies are looking forward to the post-subsidy business model," she said in a statement.


The report comes on the same day as new analysis from the World Energy Council (WEC) predicted storage costs will fall as much as 70 per cent over the next 15 years. However, it found that there is still too much focus on the investment cost of energy storage, which is leading to the perception storage technology is more expensive than it actually is.

Prices for lithium are surging. I am still liking Orocobre. The company announced yesterday that they did a secondary offering that raised $85 million Australian dollars. That should be sufficient to carry them through until production reaches break even. The company is near break even on production and has shown steady monthly progress regarding production gains. 

Wednesday, January 20, 2016

Rangeley Capital podcast about Fondul Proprietatea


This is a podcast about the huge discount to net asset value that exists on closed end fund Fondul Proprietatea by the guys over at Rangeley Capital. Chris DeMuth and Andrew Walker are really smart guys and if you are interested in deep value contrarian investments than I suggest you subscribe to their podcast.

Regarding Fondul the discount to net asset value has grown to 40% mostly due to the weakness in world markets. I would note that the fund manager has suspended the sixth buyback and is going to be proceeding with a tender offer to hopefully accelerate the closing of the discount.

I have been a buyer in recent days.

Monday, January 18, 2016

How Madalena Energy is worth $.70 per share


• YPF announced two JV agreements with American Energy Partners to invest US$506 mm total targeting Vaca Muerta shale in Neuquén basin in Argentina

• On Bajada de Anelo block (nearby MVN’s Coiron Amargo block) AEP will initially fund 39.4% of US$447 mm JV pilot to earn 25% interest with option to increase funding to 72.6% to earn 50% W.I.

• Based Bajada de Anelo JV metrics, this would imply MVN’s Coiron Amargo block is valued at ~175 mm ($0.32/sh)

• On Cerro Arena block (nearby MVN’s Cortadera block) AEP will fund 100% of $60 mm JV to earn 45% interest in 92, 665 acre block

• Based on Cerro Arena block JF metrics, this would imply MVN’s Cortadera block is valued at ~$140 mm ($0.26/sh)

• Positive news which shows vote of confidence in Argentina’s newly elected government

The link is to a Facebook page that follows Madalena Energy. If you have an interest in this company I would suggest you follow that page. It is maintained by Maglan Capital which has a large position in the stock. When oil prices come back Argentina is going to be a big winner. Lots of money and expertise flowing into their oil patch even at these depressed prices. 
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