808 replies to this topic

[BoerieBuffet]

Some more seats filling up around the table ready for the free lunch buffet.... Investec and Kagiso Asset Management seem to be hungry....

[SB45]

The market might be tough but I am starting to think that these lower lows by Aveng are a reflection of how the company is being run, very high revenues but no profits. To me this speaks to execution of projects at hand, and does not give any confidence going forward, with new projects, any thoughts on what the upside might be?

[Jack5]

The problem with Aveng at the moment is that both its major markets (SA and Australia) are commodities driven. So with the slump in commodity prices both will cut back on infrastructures spending. This is why the order books are not looking great.

 

Unfortunately until commodities start improving, Aveng's revenues will be under pressure. And even if they do improve it will take time for the economies to recover enough to start spending again. Even with a positive NAV, if the company keeps making losses this NAV will quickly decrease and be forced to sell of assets just to stay in business.

 

I think Aveng is a solid company and should survive this down turn, but I fear it will be a really long time before the price starts to recover.

[BoerieBuffet]

What does the market know that I don't? Anyone know what is happening with Aveng, Mid Cap to Small Cap, what's next penny share?

 

Ben Graham might have had the answer when he said:

 

"Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market‘s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest on him."

 

TL;DR: The market usually doesn't know much, it just follows emotional flocking  , but remember  "Markets can remain irrational a lot longer than you and I can remain solvent."

[SB45]

What does the market know that I don't? Anyone know what is happening with Aveng, Mid Cap to Small Cap, what's next penny share?

[Dust]

Granted, if you got in high, the ride would have been rough. But at this point, it seems the share has been punished too much, and there is significant upside potential. I'm not referring to the NAV in totality of R30+, because that can be a pointless exercise. But if all their liabilities are settled there is still a big safety margin of current assets to burn through, and then the rest of the NAV (essentially fixed assets) becomes a bonus safety net as portions of it is converted into current (selling properties etc.). 

 

So essentially their future order book would have to remain suppressed for quite a long time to validate such a low valuation. And if that happened, it would be sector wide, and all the SA construction firms would be in trouble, and they don't even have these safety nets that Aveng has, yet they have much higher valuations. 

 

The usual risk - reward scenario, except the market isn't pricing in the safety margin.  

 

Agreed. I'm in this one for the longer term (deep value). Until the market gains more certainty the upside will be limited -mispriced this share will be. I'm on R4.50 cost.

[BoerieBuffet]

I have a small pocket of shares of this one... really not been a good ride. NAV is not the problem, currently the order book (future earnings) is shrinking quite fast and the company faces a lot of litigation.

 

Granted, if you got in high, the ride would have been rough. But at this point, it seems the share has been punished too much, and there is significant upside potential. I'm not referring to the NAV in totality of R30+, because that can be a pointless exercise. But if all their liabilities are settled there is still a big safety margin of current assets to burn through, and then the rest of the NAV (essentially fixed assets) becomes a bonus safety net as portions of it is converted into current (selling properties etc.). 

 

So essentially their future order book would have to remain suppressed for quite a long time to validate such a low valuation. And if that happened, it would be sector wide, and all the SA construction firms would be in trouble, and they don't even have these safety nets that Aveng has, yet they have much higher valuations. 

 

The usual risk - reward scenario, except the market isn't pricing in the safety margin.  

Edited by BoerieBuffet, 12 November 2015 - 09:48 AM.

[Dust]

I have a small pocket of shares of this one... really not been a good ride. NAV is not the problem, currently the order book (future earnings) is shrinking quite fast and the company faces a lot of litigation.

[BoerieBuffet]

It's hard to find on the JSE (or anywhere!) these days, but seems the market is offering us a free lunch. Aveng trading below R3. From my calculations the current assets minus ALL liabilities per share is equal to just below R8...for which you could have paid only R2.93 today... but that is not all (like in any good infomercial)... you also get ALL the Fixed assets of SA's largest construction company for free!? Talk about paying for one slice of bread and getting a 5 star 3 course meal for the whole family     

 

*Disclaimer: If my calculations are wrong, I blame the calculator!