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By Tom Winnifrith on HotStockRockets | Monday 22 August 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.
You may remember that Tom Winnifrith had a chat with the new chairman of Obtala Resources (OBT), Miles Pelham back in late April. Tom caught up with Miles again today for a detailed phone catch up. The key take-aways are:
1. Miles expects both the agricultural produce side and timer to be cash generative and growing within six months. The focus is on growing both but especially timer.
2. Non core businesses such as South African retail are very much non core.
3. The recent senior management hires are working out well.
4. Miles will not issue stock in Obtala PLC at current levels as he regards that as dilutive. But he can sell stakes in SPVs at prices that reflect fair value not just what an AIM market maker things is a correct share price. And he is doing that to grow the forestry side rapidly. There is a real institutional appetite for such high yield asset backed SPVs.
5 Miles would expect to be able to demonstrate to investors a clear visibility of repeat reliable revenues and cashflows within a few months. The modelling of that is well underway.
Our take on this is that group NAV is easily in excess of 20p per share but quite possibly in excess of 30p. And there will be no placings for the PLC coming your way. The historic non delivery of Obtala and the lack of repeatable and visible free cashflows and profits mean that the shares will trade at a big discount but, at 10.5p the discount is just far too large.
Pelham is a quality act with a proven track record in finance. He will scale up this business. He has a material equity interest - bought with his own cash - and as he delivers on point 5 above this stock will be re-rated big time. We expect a material re-rate before Christmas.
Buy at up to 10.5p as a limit purchase price with a Christmas target of 15p plus to sell.
This article first appeared on Friday on HotStockRockets when the offer price was 9.5p - sorry it is paying customers first! To catch the next share tip from HotStockRockets out THIS FRIDAY for just £5 click HERE
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