Thanks. It looks like Eleanor's cash flow forecast was $0.80, versus actual of $0.85 (Per HHL.A's press release), which is a $0.05 difference, not $0.10.
It's unusual that she's quoting CFPS basic, since most analysts quote fully diluted, which in this case is $0.75 (weighted average). CFPS FD for the quarter (using shares o/s at the end of the period) are $0.59.
So that's quite a difference, but I guess not unusual since they've issued in excess of 34MM shares this year at prices substantially below the $6+ the stock is currently trading at.
I calculate the stock is trading at a Price to cash flow ratio of approx. 2.2 times the annualized current quarter (cash flow free). Given that stocks such as Talisman, which has had phenomenal growth, is trading at a price to cash flow multiple of 3 times, the current ratio for Hurricane seems reasonable if not generous in today's market. They may benefit from sector rotation. TLM is suffering from the campaign against the company for their involvement in Sudan, yet Sudan only adds about $1/share in annual cash flow out of $16 -$17. All of Hurricane's cash flow is from Kazakhstan.
The political and operating risk in Kazakhstan is large. The government there may prove to be more unstable after the recent leak of documents showing it's members to have been bribe takers - ie/ a policitical backlash could occur. The gov't there has shown that it is willing to practice a nationalistic policy as recently as May of this year, with the pressure on and subsequent absorption of the Belgian energy firm Tractebel. In addition, Kazakhstan is very much subject to the influence of Russia, which I would not consider a positive given the instability there.
The company received $10.55/bbl for oil sales in the second quarter, so they're obviously still having difficulties with pricing. On a financial basis, the $173MM writedown in 1998 and the recovery from bankruptcy would normally be a multiple crusher. Certainly, new management helps. However, at this stage, they don't warrant a huge multiple.
The Stockhouse article mentioned that London based Charlie Sharp calculated the net asset value at $14.08 per share. This is also the number I calculated using the December 31, 1999 numbers at a 20% discount. This, however, is an old number. The company has issued in excess of 34 million shares since year end (+ 77%), prices have changed (used in the reserve report:$8.07/Bbl, currently receiving in Q2~$10.55), debt has changed, don't know the affect of the purchase of the refinery, reserves are noted as having increased but how are they assessed? - volumetrics, decline analysis? I haven't seen updates on these items in public documents.
Re Analysts: CreditFinance underwrote Hurricane's last financing, along with Canaccord.
Hurricane is interesting, but have no doubt, there is a lot of risk to investing in this company.
Regards, t. |
