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  • eResearch Corporation

    StockPotentials March 26, 2010 . . . . . . 3


    Price (March 26, 2010) $0.40

    52-Week High-Low $0.52 - $0.18

    Shares O/S 87.5 million

    Market Cap $35.0 million

    50-day Average Volume 126,200

    200-day Average Volume 234,600

    Year-End January 31

    Symbol TSX: AAB


    Financial Data

    eResearch Analysts: Bill Campbell, B.Comm.

    Bob Weir, B.Sc., B.Comm., CFA

    eResearch Corporation

    56 Temperance Street, Suite 501

    Toronto, ON M5H 3V5

    Telephone: 416-643-7650

    Toll Free: 877-856-0765

    Note: This report was prepared with public information only.



    Aberdeen International Inc. (Aberdeen or the

    Company) is a Toronto-based, global investment and

    merchant banking company focused on small capitalization

    companies in the mining, energy, and agricultural

    commodities sectors.

    The Company seeks to acquire equity participation in pre-

    IPO and early-stage resource companies where it can

    provide value-added managerial and board-level advisory

    services as well as financial support.

    Aberdeens goal is to generate triple-digit returns on its

    investments over an 18-to-24-month holding period. The

    Companys management team has raised over $1 billion in

    the past five years.


    Strengths Management team and board of directors have extensive

    mining experience;

    Proven ability to raise funds; and

    Diversified portfolio of attractive investments.

    Challenges Political risk in some areas in which the Company


    Investment portfolio geared to volatile mining sector; and

    Share trading fairly illiquid.

  • Aberdeen International Inc. eResearch StockPotentials

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    Aberdeen had originally operated as a Canadian exploration and royalty company. However, in July 2007, it

    completed a Change of Business transaction into a publicly-traded global resource investment and merchant

    banking company. In anticipation of its Change of Business, the Company raised $60 million through a private

    placement in June 2007.


    The Companys investment portfolio continued to grow through the fourth quarter of fiscal 2010 (three months

    ended January 31, 2010). As at January 31, 2010, its total value was $0.78 per share compared with $0.66 per

    share at the end of October 2009 and $0.40 per share at the end of fiscal 2009. A summary of the Companys

    holdings is shown below:

    Investment Holdings (January 31, 2010)


    Symbol millions

    Crocodile Gold Corp.

    TSX: CRK $12.0

    Sulliden Gold Corporation Ltd. TSX: SUE $7.3

    Avion Gold Corporation TSX-V: AVR $5.4



    Total Publicly-Traded




    Non-Trading Warrants Crocodile Gold Corp.


    Allana Potash Corp.


    Dacha capital Inc.




    Total Warrants


    Loans Receivable






    Source: Company

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    The following table indicates the Companys net asset value (NAV) since its conversion to an investment

    and merchant banking company in the third quarter of fiscal 2008.

    As shown in the table above, the Companys NAV grew rapidly from the third quarter of fiscal 2008 to the end

    of the second quarter of fiscal 2009, before declining significantly in response to the collapse in equity markets

    and virtual elimination of credit for mining development.

    With the recovery in equity markets in 2009, increased availability of credit, improved economic prospects in

    many areas and an astute investment performance, management achieved a strong recovery in the Companys

    NAV to its pre-market crash level (on a per share basis) by the end of the third quarter of fiscal 2010 (October

    31, 2009).


    The Company engaged a leading South African law firm and, in July 2009, filed a claim against Simmer and

    Jack Mines, Limited and First Uranium Corporation in connection with a US$10 million loan and gold royalty

    agreement which it had made with Simmer in late 2006. Simmer filed a statement of defence in November

    2009. The Company anticipates that court proceedings will begin before the end of its current fiscal year.


    (1) Q3/F2010 versus Q3/F2009

    For the third quarter of fiscal 2010, the Company reported earnings of $0.06 per share compared with a loss of

    $0.46 per share for the same period in fiscal 2009. The dramatic improvement reflected improved conditions in

    the mining industry in the latest period, which enabled the Company to achieve an unrealized gain on its

    investments of approximately $13 million compared with an unrealized loss of $47.6 million in the year-earlier

    quarter. The Company also benefited from a decline in the unrealized loss on its Simmer and Jack royalty and

    loan to $0.4 million compared with $19.2 million in the third quarter of fiscal 2009.

    The Company is financially strong with working capital of $71.7 million and no long-term debt as at October

    30, 2009 .

    Salient statistics are shown on the following page.

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    ($000s) Q3/F2010 Q3/F2009

    Net Investment Gains

    9,395 (49,473)

    Other Revenue

    (1,103) (16,761)

    Total Revenue

    8,292 (66,234)

    Pretax Income

    7,886 (64,082)

    Pretax Margin

    95.1% na

    Net Income

    5,098 (44,639)

    Net Margin

    61.5% na


    $0.06 -$0.46

    Shares OS (million)

    87.5 97.6

    (2) 9Months/F2010 versus 9Months/F2009

    For the first three quarters of fiscal 2010, Aberdeen reported earnings of $0.09 per share compared with a loss

    of $0.31 per share for the first nine months of fiscal 2009. As was the case in the third quarter, the improved

    results reflected the benefit of unrealized gains on investments in the latest period of $28.2 million compared

    with an unrealized loss on investments of $40.9 million in the year earlier period. The unrealized loss on the

    Simmer and Jack royalty and loan declined to $8.5 million in the latest period from $16.4 million in the fiscal

    2009 period.

    ($000s) 9Mos/F2010 9Mos/F2009

    Net Investment Gains

    23,509 (35,617)

    Other Revenue

    (7,607) (8,288)

    Total Revenue

    15,902 (43,905)

    Pretax Income

    13,202 (44,039)

    Pretax Margin

    83.0% na

    Net Income

    8,593 (31,217)

    Net Margin

    54.0% na


    $0.09 -$0.31

    Shares OS (million)

    90.5 100.7

  • Aberdeen International Inc. eResearch StockPotentials

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    Following the significant rebound in commodity prices which took place in 2009 and an increased availability

    of financing for mining companies, prospects for the global mining industry are now on a sounder footing.

    Although commodity prices are not expected to rise significantly in 2010 as they did in 2009, they should

    continue to have moderate growth, fuelled by continued strong demand from China and sustained recovery in

    industrial countries. In this environment, we expect that the demand for financing of new mining projects will

    continue to grow, providing opportunities for Aberdeen International to provide funding for new small-cap

    resource companies.

    In a recent presentation, the Company indicated that the value of deals being evaluated for near-term

    investment was approximately $5 million. In addition, the Company will benefit from further significant

    growth of its existing investment portfolio. Based on consensus estimates of the 12-month target prices of its

    three major holdings - Crocodile Gold, Sulliden Gold, and Avion Gold the Companys share positions in

    these companies would provide gains of at least $20 million over the period. This excludes the impact of any

    warrants that Aberdeen has in these companies.


    We have chosen two merchant bank/mining investment companies to provide comparable valuations for

    Aberdeen. They are Endeavour Financial Group and Pinetree Capital Ltd.

    As shown in the table below, these companies are trading at an average 29% discount to their net asset value

    and at 1.2 times trailing 12-month earnings. Aberdeen is trading at a 63% discount to its net asset value and at

    1.1 times trailing 12-month earnings. As investors become more aware of Aberdeen over time, we believe that

    its discount will narrow, providing significant capital appreciation potential.