Eco Investor Update
A Weekly News Update for Environmental Investors
June 2012 - No 83
Profit taking may be behind the two managers of the fund, AMP and Macquarie, both reducing their stakes. AMP has gone from 9.48 to 8.24 per cent, and Macquarie is no longer a substantial shareholder. Both appear to have been involved in share lending. (ASX: DUE)
Sims Metal Management
Not surprisingly, the company has continued with its share buyback and has now acquired 2.8 million shares for $36.2 million.
Ord Minnett Private Client Research issued a note saying that Sims' 2012 forecast adjusted net profit of less than 85 per cent of the previous corresponding period implies a profit of less than $164 million or less than $139 million on a fully normalized basis.
"Our standing FY12 adjusted net profit (on a SGM like for like basis) is $103 million, which is 53 per cent of PCP. We remain comfortable with our forecasts and feel last week's disclosure is merely catch up for what was apparent from recent US peer Schnitzer's releases," it said.
"The specifics of the guidance provided are as follows: Full year 2011 is statutory net profit after tax $192 million. First half FY12 adjusted net profit after tax for the purposes of the comparison is $38 million (statutory first half FY12 NPAT -$556 million, add back $594 million impairments post tax). Our adjusted statutory second half FY12 forecast including the ARA sale is $65 million. This all means that our FY12 forecast (adjusted like-for-like with SGM guidance) is $103 million 53 per cent of the previous corresponding period.
"We made material second half FY12 and FY13 downgrades to our numbers just over a week ago after US peer Schnitzer's margin guidance. From what we can determine according to Bloomberg, median consensus is at $150 million (adjusted for ARA sale and first half adjustments) only 78 per cent of the previous corresponding period.
Consensus was lagging. We think the information provided by SGM is confirmation of what was apparent from recent Schnitzer commentary. Nothing in the announcement changes our investment thesis. It is clearly still tough times for US recycling and macro sentiment is not helping a leveraged play like SGM currently.
"The current share price range factors in current margin environment into perpetuity whereas our net asset value of $21 per share assumes an eventual recovery to around 2x the current margin environment which is a little lower than historical averages. We retain our Hold recommendation," said Ord Minnett, which added that risk is high. (ASX: SGM)
Managing director and chief executive, Mark Ryan said the decision follows a recommendation from the independent Marine Farm Planning Review Panel. "Industry has worked closely with the State Government and the West Coast Council for the past two years, exploring opportunities for expansion of our industry on the west coast," he said.
"I am very pleased that the Environmental Impact Statement that supported the expansion satisfied the panel. The EIS is underpinned by significant scientific data, sampling, modeling and local community consultation."
Mr Ryan said Tassal had a well-resourced environmental and sustainability team that worked closely with regulatory bodies to ensure all activities were compliant and met and exceeded best practice environmental management and legal requirements.
"We are focused on addressing environmental and social issues and participate in ongoing and meaningful communication with stakeholders," he said.
"Today's announcement is a significant one for the industry, the west coast and the broader Tasmanian economy. As an industry we are continuing to experience strong sales growth. Our sustainable practices will underpin and support production growth to meet this demand."
However, Mr Ryan gave no details about Tassal's plans. (ASX: TGR)
Unlisted Property Funds
Aspen Parks Property Fund
The awards acknowledge the water saving efforts of Water Corporation customers, and was awarded to Cooke Point Holiday Park for implementing best practice irrigation plans and installing water saving shower heads throughout the property.
Aspen Parks said the award highlights its "commitment to providing environmental, community and sustainability initiatives, in conjunction with market leading accommodation options."
Partners for Growth provides funding solutions with a focus on companies in the technology and life sciences sectors. In cleantech, it has invested in Australian wind energy company, Windlab Systems.
The convertible notes have a term of 36 months, a conversion price of 5.3 cents, an interest rate of 9.75 per cent per annum and attaching warrants to 25 per cent of the convertible notes issue, exercisable at the same price and valid for five years.
CBD will use the proceeds in its Australian and international solar businesses, to progress wind farm development in Australia, contribute to the costs of the merger with Westinghouse Solar and the NASDAQ listing, which is expected to be completed in the last quarter. and maximize use of a US$25 million construction finance facility for solar projects in Europe.
Managing director, Gerry McGowan, said that in solar the funds will help expand CBD's restructured residential solar businesses which is showing increasing signs of growth, and progress opportunities in the commercial solar market in Australia, Europe and the US.
The conversion of the convertible motes and exercise of the warrants needs shareholder approval. (ASX: CBD)
The transaction, which includes the grant of an easement over a neighboring property, is due to settle on 15 June 2012.
The EP 389 Joint Venture intends to accept the offer of the grant of the Pipeline Licence that has been offered by the State Government Department of Mines and Petroleum (DMP) after the settlement.
The partners said they look forward to the formal grant of the Pipeline Licence and to the anticipated commencement of earthworks and construction of the Plant in July-August 2012. (ASX: EPW)
Micro Cap Companies
The share options had an exercise price of 20 cents and expired on 30 June 2012. The notes had a conversion price 20 cents per share. (ASX: AEI)
In a business update, chairman Peter McCoy said the company has been in discussions with a number of industry groups about the commercialization rights to the Green Plumbers brand in North America and other countries.
It is apparent that the Industry Group is not looking to proceed with the fully integrated commercialization model and may be restricted to certain branding rights, he said. The board believes it is critically important for the success of the integrated model that a strong working relationship is established with the Industry Group, from a training, membership and standards perspective.
Discussions are also taking place with US based manufactures and distributors and contractors about other aspects of the commercialization model which will include certain rights for the brand, particularly for project/product branding. It is expected these will be complete before 30 June, he said. (ASX: GNV)
In an update on the same day Intec said it had completed the removal of all electric arc furnace (EAF) dust from the Victorian stockpile site. The Victorian EAF dust stockpile, about 28,000 tonnes, was blended with zinc-bearing slag material sourced from Zeehan and exported as a low-grade zinc concentrate.
Depending on the results of the environmental audit in late June/ early July, the company said it will seek the release of its $3.388 million security bond for the stockpile site.
In relation to the remaining security bond of $330,000 for the previous Hellyer EAF dust stockpile site in Tasmania, Intec has submitted a site assessment report to EPA Tasmania and is hopeful of receiving the security bond this quarter.
In other activities, Intec has received informal advice from GB Galvanizing that it will not commit to Phase 3 of the Spent Pickle Liquor Recycling Project due to inadequate financial returns.
Intec is assessing its Intec Gold Process (IGP) with an international party; and is also examining alternative mechanisms for realizing value from its rare earth recycling technology and intellectual property portfolio.
Managing director Kieran Rodgers said the company continues to reduce its cost base. The expected receipt of $3.718 million from the release of security bonds will stabilize the company's financial position and enhance its ability to investigate acquisition opportunities, preferably associated with an Intec Process technology. (ASX: INT)
Po Valley Energy
"The board is very confident of the value embedded in the company," he said. "Our challenge is to unlock this value and see this reflected fully in our share price by accelerating our development pipeline more quickly than our internal cashflow will allow. To this end the board has been actively seeking strategic partnerships or farm-in partners. Some farm-in discussions are currently at an advanced stage of negotiation."
The company expects first half earnings (EBITDA) to be over 2 million. "This will facilitate a reduction in debt in the second half and continued geological investigation of the better new prospects in our portfolio."
"There is no doubt that the European debt crisis and investor concerns about the Eurozone have weighed upon Po Valley's attractiveness to investors and upon our share price," he said. "I would like to note that recent changes on the general Italian business environment introduced by Mr Monti's new government hold out the prospect of improvements in the business and regulatory environment that may be advantageous to our company." (ASX: PVE)
The company said it will review the allocation of resources among its assets to focus on achieving near term production and revenue at key projects. These are: PEDL 133 (Airth, Scotland), Liulin (Shaanxi, China), PEL 458 (Newcastle, Australia), Sangatta West (East Kalimantan, Indonesia). Tanjung Enim (South Sumatra, Indonesia), and coal mine methane projects in India.
The Singapore listing of DEI was to achieve a valuation in line with the valuation metrics for similar businesses internationally. The board does not believe a current listing would achieve that in the current poor equity market conditions and the substantial decline in Dart's share price over the past 12 months. (ASX: DTE)
The spodumene was surplus to the immediate requirements of Galaxy's Jiangsu Lithium Carbonate Plant in China. Spodumene concentrate from Mt Cattlin is normally reserved for the Jiangsu Plant, which commenced production in March.
Galaxy also sells small amounts of tantalum by-product from Mt Cattlin to Global Advanced Metals under a long term contract.
The commercial spodumene sale follows the sale of the first batch of lithium carbonate from the Jiangsu Plant the previous week. (ASX: GXY)
Micro Cap Companies
Carnegie Wave Energy
Investors need to ask themselves whether the fall is related to Carnegie's recent equity funding arrangement with the Australian Special Opportunity Fund. On 29 May Carnegie issued 4,411,765 shares to the fund at 3.4 cents each.
At the same time Carnegie notified the ASX about the issue. The Secondary Trading Exemption restricts the sale of securities issued without disclosure unless the sale is exempt under section 708 or 708A. By giving notice, sale of the shares fell within the exemption in section 708A(5) of the Act, said Carnegie. That means the fund was free to sell the shares.
As previously reported by Eco Investor, the Australian Special Opportunity Fund, LLP is managed by The Lind Partners, LLC, a New York-based asset management firm that was founded by Jeff Easton. Mr Easton was also a co-founder of SpringTree Global Investors, LLC, which manages the Springtree Special Opportunities Fund that is known for funding deals where it supplies equity and quickly sell the shares, which drives down the share price.
Efforts by Eco Investor to contact Carnegie to inquire about whether the Australian Special Opportunity Fund will employ this technique with Carnegie have not been successful to date.
The 4.4 million shares would have raised $150,000. The Fund is limited to converting no more than 0.4 per cent of Carnegie's market capitalization per month. After the issue, and at 3.5 cents, Carnegie's market cap is $35.25 million. 0.4 per cent of that is $145,000. At 4 cents its market cap would be $41.43 million and 0.4 per cent would be $165,700 in shares.
A week earlier Renewable Energy Holdings Inc reduced its interest in Carnegie Wave Energy from 19.5 to 18.5 per cent. The sale of 10.3 million shares may also have put downward pressure on the share price, as may have the issue of an initial 9.9 million shares to the Australian Special Opportunity Fund on 1 May. (ASX: CWE)
A few days earlier the company raised $200,000 by issuing 10 million shares at 2 cents each to an unnamed sophisticated investor. However, a 12 month voluntary holding lock has been placed on the shares. (ASX: CAQ)
Operationally, MediVac's SunnyWipes Antimicrobial Hand Gel has been accepted by NSW Health in its Hand Hygiene tender. Executive chairman Paul McPherson said the long awaited announcement means that with Sunnywipes' recently-appointed distributors including Bunzl Outsourcing Services the company can actively target the government healthcare market in NSW. He said the successful use of SunnyWipes Antimicrobial Hand Gel by paramedics in the NSW Ambulance Services greatly assisted the outcome.
SunnyWipes can also now target the sector with its TGA-registered General Virucidal and Antimicrobial Wipes range. NSW Health facilities are free to purchase from their preferred supplier in this category. (ASX: MDV)
Peter Henderson, managing director and chief executive officer, said development of Metgasco's proposed gas business in the Northern Rivers region could create significant employment opportunities and strengthen the economic sustainability of energy dependent local businesses.
The Economic Impact was prepared by Lawrence Consulting, and says a fully developed Metgasco business model would result in $1.4 billion of direct expenditure over 20 years; $2.1 billion of total expenditure over 20 years; 400 full time equivalent (FTE) direct construction jobs; 270 FTE direct operations jobs; 1,000 FTE total construction jobs; and 950 FTE total operations jobs.
"This positive economic impact will be achieved with adherence to a strong regulatory regime which complements existing industry standards, ensuring that safe environmental practices are maintained," said Mr Henderson. (ASX: MEL)
Water Resources Group
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