Sunday, August 30, 2015

Perfect storm for Aussie almond growers


Riverland farmer Simon Vause had only been dabbling in almonds when the drought hit South Australia a decade ago, but he took a leap of faith, pushed his naval orange trees over and replaced them with the popular nut.

His upheaval is paying off as ­almond growers in southeastern Australia experience near-perfect growing and trade conditions — they have full water allocations, the dollar is low, the dominant Californian industry is battling drought and prices are higher than ever.

“Having naval oranges at the start of the drought, we had low commodity prices, low water allocations and the high dollar, it was a nightmare,” Mr Vause said.

“But we’re right in the middle of a perfect storm now with lack of almond supply in the US, the low Australian dollar — it doesn’t get any better than that.”

Almond prices have more than doubled to $10 a kilogram since 2011, and Mr Vause is expecting the grower price to rise above $11 in the coming months.

This great news for our Australian almond grower, Select Harvests, which reported year end earnings last week.

Earnings were up 175% and cash flow was up 30%. The company harvested a record 14,500 metric tonnes of almonds versus 10,000MT last year. The management stated that the increased production and higher prices for almonds, along with constrained California supply contributed to the earnings gains. The company's full year results presentation is available here. I continue to like Select Harvests especially after the recent weakness in world stock markets. 

Bank of Cyprus reports earnings


The results show continued improvement of the bank's capital position. As the economy in Cyprus continues to show improvement the prospects at the bank should also strengthen. The thesis behind this speculation is a country like Cyprus going from bad to less than bad. As time goes by and the bank continues to show progress there should be a rerating in the market.

Speaking of the Cypriot economy, it has officially exited recession:

There is more good news on the economy front according to the Economics Research Centre of the University of Cyprus ar reported by Famagusta Gazette online. They have announced that the economic climate improved in August with the Economic Sentiment Indicator (CypERC) incresing by 6.6 points, compared with July 2015. The rise is mainly attributed to the strengthening of the economic confidence in services and among consumers, who are the two basic components of the CypERC. Last week Cyprus officially declared its economy to be out of recession, less than two and a half years after it was bailed out by the Eurogroup and the International Monetary Fund. Cyprus entered into an economic adjustment program when it signed a 10-billion-euro financial assistance accord in March 2013, after 11 consecutive quarters of recession that forced it out of international markets.

Sunday, August 16, 2015

Adding Alterra Energy to the investment portfolio

Alterra Power is a renewable energy company based in Canada. The company has interests in geothermal plants in Iceland, run of river hydro in Canada, and wind projects in Canada and the US. The company is cashflow positive and profitable and has several possible catalysts that could propel the stock higher.

Marin Katusa, who used to write the Casey Energy report, now offers his research for free and highlighted Alterra Power in his first newsletter. He is a major shareholder and has laid out the specifics on how this company will be looking to increase shareholder value.

In addition Frank Curzio recently did an interview with Ross Beatty, the CEO of Alterra Power. Mr. Beatty is known in Vancouver mining finance as "the broken slot machine' because of his consistent value creation for shareholders over the years in various companies (Pan American Silver, Lumina Copper).

What I find interesting about the Katusa write up is that like Katusa I also jumped the gun early when these renewable energy companies first came on the scene five years ago. I bought into the hype and lost my butt on Nevada Geothermal and Ram Power. Mr. Beatty also talks about how he learned some expensive lessons when he first got involved in renewable energy. However like any good businessman he learned from his mistakes and refined the Alterra model to where it is now. The company is growing with a portfolio of operating assets with guaranteed revenue streams. Alterra fits into the royalty model that I have been drifting to recently (Altius Minerals, Sandstorm Gold).

Alterra Power came out with earnings last week and the transcript of the conference call is worth reading. I thought this exchange on the Q&A was interesting:

Marin Katusa - KCR Fund

My final question is a reiteration from the last call. Just wondering if there has been anything on the board level regarding a dividend or what Ross' and the board's opinion is on that?

John Carson - Chief Executive Officer

Thanks for that, it's Carson, Marin. We constantly talk about when, not if we're going to be able to pay a dividend. We're looking at all sorts of different scenarios right now. I would say let's give us another quarter to come up with more definitive discussion about that subject.

A dividend announcement would lead to a revaluation upward in my view. I am adding Alterra Power to the investment section of my portfolio.

We cover over 5K calls/quarter

Fondul Proprietatea 2015 first half results


This the first half report for the FP closed end fund. It gives expanded detail on the various holdings of the fund. In depth review of the funds holdings are included. The discount to net asset value has opened up to around 32% recently however the fund manager continues to be committed to closing the gap via buybacks.

Sunday, August 9, 2015

Finally, nuclear is back in Japan


Kyushu Electric Power Co. is planning to restart the No. 1 reactor at its Sendai nuclear plant in Kagoshima Prefecture as early as Tuesday, sources said Friday.

That would make it the first reactor to be brought back online since the country’s new safety standards were introduced more than two years ago.

The last nuclear power reactor in operation in Japan was shuttered in September 2013. The new nuclear safety standards, introduced in July of that year, were compiled following the triple-meltdown crisis at Tokyo Electric Power Co.’s Fukushima No. 1 nuclear plant, which was damaged in the March 2011 earthquake and tsunami.

On Monday, Kyushu Electric will conduct a safety check of control rods that will be placed into the Sendai No. 1 reactor.

If no problems are found with the control rods, the utility, which serves Kyushu’s southwestern region, will reactivate the reactor, the sources said.

It has been a long time coming but rational observers knew it was going to happen eventually. Japan is running a serious trade deficit due to the importation of all the LNG and coal that has been needed to replace the nuclear generation that was offline. We should see a slow and steady amount of reactor restarts in Japan over the next couple of years. The rest of the world has continued building and commissioning reactors. The price of uranium has continued to languish and the entire uranium sector is washed out. I have called the bottom before and been wrong but the fact remains there will eventually be uranium shortages if the price of uranium stays at these low levels. the investment necessary to achieve a supply demand balance in uranium can only take place at higher uranium prices. patience is required. 

Cyprus economy to grow more than orignally forecast


Cyprus is expected to more than double its projected economic expansion this year due to a number of favorable factors, the Economic Research Center (ERC) of the University of Cyprus said in its August economic outlook review published Tuesday.

ERC said it expects the economy to grow by 1.1 percent at the end of 2015 after shooting up by 1.8 percent in the second half of the year.

The projected growth is more than double the 0.5 percent expansion forecast of the troika technocrats who concluded their seventh review of the Cypriot economy in mid-July.

Continued recovery in the Cypriot economy will lead to recovery in the prospects for The Bank of Cyprus. As the CEO of the bank recently said, the banks survival is certain now it is time to see what the bank is really worth. I continue to like the bank as an investment.

Sunday, August 2, 2015

Fondul Proprietatea completes fifth buyback program


Franklin Templeton Investment Management Ltd. United Kingdom Bucharest Branch (“the Fund Manager”), in its capacity as sole director and fund manager of Fondul Proprietatea S.A. (“the Fund”) hereby announces the completion of the fifth buy-back programme. The Fund Manager acquired 227,572,250 shares of the Fund (equivalent to 1.86% of the Fund’s subscribed share capital) through daily acquisitions on the Bucharest Stock Exchange. The total value of the buy-back programme was RON 193,470,259.59 (excluding brokerage fees and other acquisition related costs), and the weighted average price was approximately RON 0.8501 per share. The Fund Manager will request the shareholders’ approval for the cancellation of the shares repurchased during this buy-back programme at the future shareholders’ general meetings. The Fund Manager intends to continue with share buy-backs in accordance with the Fund’s Investment Policy Statement, and will start the sixth buy-back programme, approved by the shareholders on 27 April 2015, soon after the cancelation of the shares acquired during the fourth buy-back programme is endorsed by the FSA, which has already been requested.

I wrote up Fondul Proprietatea here. I really like this investment because the fund manager has a mandate to close the discount to net asset value via buybacks. The current discount is 31%. The fund manager, as announced,  will continue to buyback shares in order to close the gap. The great thing is that the NAV has actually risen over time as the fund manager takes various actions to increase the value of the various holdings of the fund. This fund has quite a bit of institutional sponsorship including a big position by Paul Singer. It trades in London so you would need an account with Interactive Brokers or someone similar who can trade this stock. I have been adding to my position as I like to buy a dollar for seventy cents. 

Monday, July 6, 2015

Fuel loading to begin at Japanese Reactor

Finally! Japan is commencing with fuel loading on the Sendai 1 reactor in anticipation of restart in a couple of months.

Nuclear fuel will be loaded at Sendai 1 tomorrow, marking a significant step on its road to becoming the first Japanese reactor to restart, later this year.
The two 890 MWe pressurized water reactors at Sendai were taken offline for periodic inspections in May and September 2011, respectively, and have remained so for almost four years while Japan has rebuilt its nuclear safety framework in response to the accident at Fukushima Daiichi.

This in itself will not make the uranium price go up but it is a change in sentiment and is the first step of returning to nuclear power in Japan. still long uranium through Uranium Participation Corp.