The fact i have not posted on TGS does not mean i have gone hiding behind a rock. I am very, very comfortable with my decision to hold and even buy more TGS, if i was stuck holding a company which went broke it would be this one, why?
Because the return significantly outweighs the risk (IMO) and if i want to go out, id rather be it in this company. I am currently debating on whether i should purchase 1.4mil shares and bring my holding to 2mil, the only reason why i havent done so already is because i hold (SGH) which i think has the potential of a good turn around... the topic of SGH is a whole thread of its own..back to TGS...
Even at these miserable copper prices, TGS is making $US11.7mil p.a. (15.7mil AUD) as NPAT (without VAT refund). On a market cap of 41.5mil AUD. Effectively i am receiving 37.8% p.a. after tax return (15.7mil/41.5mil) when buying at a SP of 2.3c. (P/E multiple 2.6). THATS AT THESE COPPER PRICES!!!
Wanna know how much TGS will make if copper increases by only 10% (to 2.33lb)?. They make 27mil aud after tax, so if i purchased at 2.3c (market cap of 41.5mil) They make me 65% return after tax.. So what the market does is, they start buying up the SP, that 27mil profit will look a lot more reasonable at a market cap of say 270mil (P/E 10). Thus me buying in at this market cap i have the potential to receive x5 the current sp. (11c) only at an increase of 10% in copper and if the risk reduces. This is how sensitive TGS is to copper prices.
I have finished a masters degree in applied finance, i work in the finance industry and i have analysed hundreds of firms in my spare time, rarely do you find a company that is making money and is punished for it.
Dont get me wrong, TGS is in a whole lot of crap if copper prices fall below $2, which is what most of the investment banks are forecasting. By no means am i telling anyone to buy, this is a very risky stock and i do believe that only those who can afford to lose money are the ones who should be considering investing here.
That being said, most of you on this forum know me well, i purchased TGS in at 4c-5c when Macquarie was dumping. I was willing to bet against the investment banks. When the company refinanced (against all odds) and the SP rocketed to 9c, i sold..many of you did the same thing and were rewarded for it. So when the investment bankers say copper is falling sell your copper stocks, step back and tell them to f*ck off because its them that are buying behind the curtains, Goldman Sachs did that with iron ore and gold, you dont notice it unless you read the change in substantial holdings and google what they are saying. Dont be scared to take on the insto's.
If TGS receives the VAT some time soon (preferably in the next 3-6months) then they should have enough cash flow to pay off the loans installments at these prices. In the event that copper prices stay depressed for longer, TGS always has the ability to renegotiate the terms of the loan. For example by extending the maturity of their loan installments beyond 99months. Rather than paying 160mil/99 they can do something like 160mil/120. It means they can continue operating in the depressed environment, keep in mind that they will continue to pay the interest on the loan, thats not going anywhere.
One more thing before i go off for the night.. The other day i was reading through OZL presentation and i was curious to see how much copper they had in the ground (OZL is a 2bil copper/gold company). They had 200MT with Cu @0.42%, TGS has 71MT with Cu @1.3%, in essence TGS has better percentage of copper in the ground and more overall concentrate. And before you guys get all jumpy, i am aware that OZL makes most of its money from the gold in the ground, but it was still a very interesting fact.
So dont forget what you are buying and i apologise for the length of this post, hope some of you holding feel a little bit better.
hotcopper.com.au/threads/...ge-8?post_id=19005768#.V9BC41Rumcg
"Prognosen sind schwierig, besonders wenn sie die Zukunft betreffen."
Greeny
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