Hypothetical share purchases.

Discussion in 'Share Investing Strategies, Theories & Education' started by Steven Ryan, 18th Jun, 2015.

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  1. cdchi1

    cdchi1 Well-Known Member

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    Hi John

    Depends on your risk appetite. This company should be considered very high risk for two reasons:

    1. It has only one project (the rest have been recently vended into STA) and that project is located in Mozambique.

    2. It is priced as a developer rather than explorer, therefore has a significant expectation of success factored into shareprice. In other words, because of its substantial market cap, failure would result in a massive price correction, probably all the way back to my entry price in the teens. Thankfully they managed to raise over $200M in equity recently (a huge effort in this resources market) so at least the financing risk is a non-issue.

    This is very much one of those 'don't invest more than you can afford to lose' situations.

    2016 is a make or break year for the company. They need to start tying up more substantial sales contracts to meet their startup production target of 356k tpa. I am confident they will deliver.
     
  2. johnpendlebury

    johnpendlebury Well-Known Member

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    yeh, from my reading it seems like its a 10x or lose it all type investment

    Macqurie just took a large holding i believe
     
  3. Steven Ryan

    Steven Ryan Well-Known Member

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    Just wanted to make an update for one that'll get away.

    I mentioned in my original post I'd drop $1mil on the first company of Craig Venter's to go public.

    Well, Human Longevity Inc are about to wrap up Series B. So I'm putting that hypothetical $1,000,000 in now–before they're public. They're raising $300mil this round (series A was $70mil).

    See how we go.

    p.s. If anyone has 7-figures lying around, you have about 2 weeks left ;)
     
  4. cdchi1

    cdchi1 Well-Known Member

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    Well based on current company targeted production of 356 ktpa, and assuming a conservative $500 margin, a market cap of $2 bill is not a stretch as that's a SP target of around $8.65. So at a bare minimum worst case production situation, there is at least double upsie available.

    The blue sky comes from a variety of things:

    1. The go ahead with construction of a (or two) spherical graphite production facility. Spherical graphite is the kind used in EV batteries. This is effectively an input product then so much higher margins.

    2. Progression of vanadium production studies. SYRs ore also has substantial vanadium as a by product. And at a grade comparable to the currently biggest producing mine in the world (Glencore's Rhovan). At the moment the vanadium from initial production will report to tailings. This is a massive opportunity given it could potentially make the production cost of graphite effectively zero (ie after byproduct credits).

    3. Higher graphite selling price. The $1k I've used is pretty much for stock standard graphite, dig it out of the ground and sell it, maybe with some limited purity upgrading (the rice can then vary from $750 to $1.5k). This is mainly or industrial applications. However for emerging applications such as EV batteries, significant margin upscaling from processing of the graphite is possible.

    4. Accessing markets where graphite can substitute for other products. For example petroleum coke can be substituted with graphite but hasn't previously due to cost and volume availability. SYR's project solves both these since they can increase production by a huge amount and at a cut price. This is a secondary focus for them atm though since they have enough to go on with.

    Any of the above opportunities bring in the multiple upside potential for SYR. The graphite and vanadium opportunities in particular.

    If anyone is interested, I have a DCF excel calculator I created a couple years ago.Just PM email address.
     
  5. johnpendlebury

    johnpendlebury Well-Known Member

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    Generally speaking, how does one invest in a company like this prior to IPO? Unless you're a VC or something?
     
  6. johnpendlebury

    johnpendlebury Well-Known Member

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    Thanks for that.
     
  7. Steven Ryan

    Steven Ryan Well-Known Member

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    If you're an "accredited investor" (sophisticated investor in Australia) lots of doors open up for these kind of opportunities.
     
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  8. mrdobalina

    mrdobalina Well-Known Member

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    I understand they are developing a graphite and vanadium operation. Is this the best way to bet on the future of graphene? Or are they completely different?
     
  9. cdchi1

    cdchi1 Well-Known Member

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    mrdobalina

    From a graphite miner's perspective, it's not really relevant. Yes its great tech, but it will be many, many years before it accounts for any sizeable amount of graphite demand. There are several small listed companies with so called graphite projects that are harping on about graphene as a great source of demand for them specifically. It's all bulldust. If you want access to graphene upside, better to invest in companies that are actually developing graphene applications. I don't follow that area though so am not aware of any.
     
  10. johnpendlebury

    johnpendlebury Well-Known Member

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    I've been reading about this company. They look outstanding. Another Berkshire?
     
  11. The Falcon

    The Falcon Well-Known Member

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    Not quite. Fairfax makes some big macro bets in their investments which BRK doesn't, but they do mirror the BRK model in that they are at their core an insurance company that uses its float to buy businesses that become operating subsidiaries and also buys listed equities. BRK has really outgrown this and is a true conglomerate now however. This business is controlled by Prem Watsa who is prudent and honest, and like Buffett the business is a lifetime commitment for him. He's no Buffett, but he's pretty good imho. If you like this type of business have a close look at Markel Corporation (MKL), another insurer (specialty insurance) who's investment manager Tom Gayner has shot the lights out since about 1986. Just take a look at the SP chart (from $8 to $889 in 30 years....that's some compounding). I hold both BRK and MKL but have yet to add FFH.TO to my real portfolio. MKL is a little expensive at the moment (normally value these businesses in a price to book basis), not sure about FFH.TO and BRK is around fair value in a somewhat expensive market.
     
  12. johnpendlebury

    johnpendlebury Well-Known Member

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    Yeh seems like BRK is quite nicely priced at the moment in terms of book value.

    This macrobet Watsa has made with regard to deflation is interesting. Bit strange though, isn't he supposed to be heading up an insurance company and not a Hedge Fund?

    MKL might be a bit expensive, but I'm not overly fussy about paying a small premium for good quality businesses. Being overly stingy with price for great companies can lead to missing out on good gains.
     
  13. johnpendlebury

    johnpendlebury Well-Known Member

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    MKL has been amazing. And they've actually outperformed BRK over the last 15-20yrs or something in terms of growing book value!
     
  14. The Falcon

    The Falcon Well-Known Member

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    Yes true, but just bear in mind its near historical P/B valuation highs and, share price growth has come from P/B expansion. The will be a time to buy at lower P/B again. I wont top up until then.
     
  15. joel

    joel Well-Known Member

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    I don't want this thread to get lost so this should bump it up a bit.. also I should've listened to my own advice..

    SAR already over $1 and BPT 78c.

    Damn.
     
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  16. Abooking

    Abooking Well-Known Member

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    Come on... do you really think that Google will NOT be around in 10 years. Is that a joke. What is Googles nearest search engine competitor... Bing. Hardly a threat. What is googles advertising revenue competitor... Facebook. This is a potential threat but not one to cause google to not be around in 10 yrs. I think your statement is wrong.
     
  17. Azazel

    Azazel Well-Known Member

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    Who knows where technology will be in 10 years.
    How long ago were people using Tom Toms and Navmans? Practically antiques now.
     
  18. Steven Ryan

    Steven Ryan Well-Known Member

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    I expect Google will be around well beyond 2026 - they have visionary leadership, fingers in dozens of important pies, are buying up cutting edge companies across a slew of industries that will change the world and continue to innovate, experiment an explore.

    My statement, however, is correct. It is entirely possible Google will not be around in 10 years. :)
     
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  19. Abooking

    Abooking Well-Known Member

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    Dont leave your day job mate. Look up the quarterly figures of Alphabet and you will see that its one of the financially strongest companies in the world right now. It will outlive you and I.
     
  20. The Falcon

    The Falcon Well-Known Member

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    Steven is correct. While I agree that it is very unlikely that GOOG will not exist in 10 years it is entirely possible. A study of the history of markets will present numerous cases where the unthinkable has happened and the bluest of blue chips are decimated. Beware hubris and embrace humility when investing - one day it will save your skin.
     
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