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By HotStockRockets | Saturday 20 February 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Obtala Resources (OBT) has announced it has entered into agreements to secure an investment of approximately $3 million for its forestry division in return for minority interests and certain off-take rights over specified forest concessions in Mozambique.
The company emphasises that the deal;
“… allows us to materially progress our forestry business in Mozambique. It ensures that Obtala retains a strong balance sheet without the requirement to issue equity or relinquish material interests in the forestry business which we value highly. We now look forward to bringing forward revenues through access to new international export markets that were not previously open to us.”
Hmmm – this though compares to a 15th June 'Timber Strategy Update' that “the board of Obtala has also agreed a strategy to divest the forestry division thereby recognizing its true value”, a 15th October update that “the board of Obtala has commenced a process to list the forestry division… believe it is in the best interest of Obtala shareholders to ‘spin out’ the forestry division in order for the significant inherent value to be recognised and to attract investors focused on the forestry sector” and a 2nd December update that “the company continues with the previously stated intent to maximise value of the timber assets through a process of re-structuring”.
After these and the numbers bandied about, does the transaction now announced (also including that a listing is now anticipated to be “a longer term objective than initially envisaged”) really maximise value?
The market has given its view – with the shares down more than 5.5% at 6.25p to sell. Obtala concludes “our immediate priority is to progress our business plans on both the forestry and agriculture businesses and to ensure that shareholders and stakeholders in the company are rewarded”.
Some folks have taken the view that the $3 million is for a stake in the entire forestry portfolio. The market has misread it. It is for just a fraction and that demonstrates why the share price fails to reflect the full asset backing at Obtala. Having chatted to management we expect more news on this soon. Average down and buy.
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