RE:RE:RE:RE:RE:RE:RE:The Rules Don't ChangeSo you wish to politely school me on underlying value being opprtunity. May I be so bold as to remind you about SNS, which you bought north of 40 cents, now trades at 5 cents and has not been above 10 cents in the last two or three years. The only other stock that I see you having posted extensively on, outside of HR and PMZ.
Not sure how many years you are prrepared to wait for a return but I think I am pretty happy with my own capital allocation and risk managment methodolgies thanks.
This is what you wrote about SNS
RE:RE:Bought More Here
My understanding was that 150k tons/q would be light work for Zig and the question was where do we go after that... it's been years and he has yet to execute. if zig can't figure it out by year-end, i'd rather we get acquired once the contract ends. if sand supply is that tight, i can see a little sand company get acquired by someone wanting to secure supply.
Dexo89 wrote: me too. Nearly as many tons sold in fy 2021 as in fy 2018, despite rig count at less than half. Should exceed 2018 volume and revenue in fy 2022. Thoughts on expiring supply contract at the end of this year?
Let's be honest
As I write this the share price is at 8.5 cents - that puts the market cap at just under 6 million CAD (at this level no options or warrants are in-the-money and therefore would not be dilutive on a liquidation basis).
Is this company worth 6 million CAD? Is this sell off due to investor panic, realization of tax losses, or is there something more ominous at play - is this selling by individuals who know something that we do not?
I can't answer the latter, but after these past two months, speaking for myself, it's hard not to feel like we're slowly getting fuucked over by someone or a group of people who know something we do not..
Even that considered, is this company only worth 6 million CAD!? Assuming the business is no longer feasible, tax losses cannot be utilized, prepaids and deposits cannot be refunded - the company had 4.1M in cash, 3.9M in A/R, 1.7M in inventory and 0.4M in Comstock (based on current SP less a blockage discount) - that is assets of 10.1M USD not including PPE, less all debt of 6.2 USD gives net assets before factoring in PPE of 3.9M USD or 5M CAD.
I can't accurately determine the FMV of SNS's PPE, but PPE has a book value of 15.5M USD. Is PPE worth more than BV (definitely possible) or less, how much is the land and buildings worth, machinery and equipment, sand property - I don't know. But it's hard to imagine it's not worth at least 1M CAD. In contrast, assuming PPE is worth at least it's book value, that would be 20M CAD plus 5M CAD (above), which totals 25M CAD or about 28 cents.
To view this in the way the Buffet has disclosed he views companies - would you simply buy the entire company for 6M CAD - knowing that you could simply liquidate liquid current assets and pay off all debt and only need to sell PPE for 1M CAD to breakeven - the answer is yes.
The only way this analysis does not hold true is if the balance sheet has significantly changed in 4.5 months. Although this is possible, it's highly improbable - at tons sold between 65k and 90k, I believe SNS will at least breakeven this past quarter (perhaps a small loss or gain), meaning net assets will remain relatively the same.
Let's be honest, I thought a
conservative liquidation value was 15-20 cents. At that level I did not think there was any downside left, let alone falling all the way down to 8 cents. Let's be honest, I don’t think that a liquidation value is even appropriate as this company generated EBITDA of 3M in a quarter! Let’s be honest, the next conference call and the answers Zig provides to the numerous of questions weighing on the minds of shareholders will dictate whether or not SNS will bounce back.. Let's be honest, at this price, there is huge upside, but let's also be honest, I nor anyone believes there is no longer 'no downside' - if SNS has showed be anything it's even a healthy company on paper can fall to levels unjustifiable
Frankie10 wrote: Re: ""Underlying value" that is never reflected in the share price is not a compelling arguement to base investments on." - - sir, I would like to politely disagree... the delta between value and price is oppertunity and is fundamental to effective risk management and capital allocation. I wish you all the best.