AGS & AIK

AGS – I have made it known on the blog that I have a healthy respect for the investment ideas of Gabriel Radzyminski at Sandon Capital, who is also involved at MVT which I own.A couple of regrets I have this year is firstly not making as much as I should have on BSL. I liked the presentation Sandon did on BSL and bought in the low $3 per share, and from memory made a quick 50% or so. It has since hit $9 this year! It may help explain why sometimes I have commented with stocks that may have plenty of upside potential I will consider using trailing stops to help keep me in situations like this, and end up selling on the way down rather than up. Another detailed research piece I liked from them was FWD, and I regret not buying around the 1.40 mark I could have easily got set. Perhaps I got a bit cute because I noted Sandon did their buying in the 1.20s. Anyway I noticed recently they took a small position for them, but a substantial stake in the company of AGS. I have made good returns following them in other shell type companies in the last year in CHZ & ACL.

MEL seems to be performing ok of late, and one thing I would note is these cases where you can potentially receive capital returns back quickly are extra valuable in a low interest rate environment. If you believe stock markets are overvalued it may also be a smart way to eek out returns to keep your performance up if the markets have a “melt up” rally that I hear being talked more about lately. I am guessing this is what Sandon may also be thinking here.

AGS paid out a 12 cent capital return about a year ago and at the time pointed that after a year and we get into the new tax year another capital return could well be on the cards. I was able to buy some shares mostly at 4.4 cents but obviously in these situations getting set can be difficult. At this level it is over a 25% discount to estimated cash backing. I thought it is worth mentioning though because as I just pointed out, where value is hard to come by and interest rates are low these situations may be worth hunting down more. Sometimes the holdings you can acquire maybe small but if you find a few of them then looking at the strategy as a group it may be worthwhile. Diversifying in a few may also help, some you may get unlucky with management wasting the cash and some you may get lucky with a backdoor listing into a hot sector.

As always with these situations the share register is the key, and here we have Ian Gandel controlling around 25%. I get some comfort from the fact around a year ago he exercised some options at 15 cents. So getting a nice return on that is probably on his radar. He would have already returned 12 cents in the last capital return and I am not sure he wants to waste the remaining cash NTA of 5.9 cents on punting on new activities. Obviously a lot of comfort I also get is Gabriel Radzyminski is a specialist at these situations. I can see a fair chunk of the 5.9 cents coming back to me hopefully by capital return in the not too distant future. After that hopefully there is some icing on the cake with the shell, where Sandon has spotted an opportunity for the tax losses to be rolled into another listing somehow. They are good at uncovering opportunities others miss with these shells, I remember with ACL earlier in the year they kept buying for a while knowing about a sizeable tax refund due that others seem to miss. I have seen other examples also with their work.

AIK – The stock was up sharply this month and pending soon was the 3rd capital raising I will be participating in. So to avoid being diluted I have found myself having a much larger stake than planned. On that basis I thought it prudent to sell some of my position at 15 cents recently. I will of course be subscribing for shares in the capital raising approaching at 11 cents. There were rights issues in the past where I remember only paying 10 cents or maybe even less within the last 18 months or so, it has certainly paid to subscribe for the rights each time. It may seem this one is a heavy discount to the recent trading at 15 cents, I personally feel they could have got the new shares away at higher prices. It might be some games played by some of the larger shareholders. That is, if you have no issues subscribing for more shares it could work in your favour if other shareholders find it difficult to increase their weight in the stock. Possibly your ownership can creep up the register as the others get diluted.

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