CSE

CSE is pretty much a company that owns shares in SYR. To keep things more simple and save me time I won’t elaborate yet on SYR itself as I confess I am no expert there. The key attractive point about CSE was it traded at a significant discount to this holding.

On top of that they have obtained taxation advice in the past for if they were to sell the stake they would be able to distribute the funds via a fully franked dividend, very attractive to SMSF funds. Also thirdly the substantial shareholders of CSE are Keybridge capital who I am sure want to exit via this way and will try and steer CSE in that direction. When I purchased CSE at 25 cents in November last year the discount to the SYR holding was around 20%. (Note this was an estimate if we deduct the company tax CSE would have to pay by selling SYR because their cost base was quite low). Of course that 20% becomes a lot more valuable then for shareholders if they then get the return largely from a fully franked dividend. Whilst I didn’t have an extremely strong opinion on SYR at the time I did see resource stocks as oversold and capable of a rebound. This week I measured the discount at virtually nothing. (Once again allowing for tax paid by CSE if they sell their stake). Also SYR shares rose quite a bit in that time and I sold my CSE shares at 37.5 this week making it a very successful short term trade (50 % in a bit over 5 months). I do wonder whether the discount closing  is a sign someone might know of them being close to selling their large stake, if so CSE shares can go higher even if SYR is flat. I do at least retain some indirect exposure to gains in CSE via holdings I have in HHY and KBC (both are invested in CSE). However I can easily see the discount widening to above 20% again or perhaps SYR falling as holders take profit, so I certainly am watching CSE for a potential re-entry later on.

Hope all of the above makes sense!

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