Quantel and the Quantel warrant.
Quantel has been one of my favourite investments for a couple of years. Right now, my investment in this company is entirely via the Quantel warrant QUABR (FR0010021485).
In addition to the exciting move into fiber lasers, here are some points about Quantel:
o) Quantel has normal operations in two sectors, industrial applications and health/dermatology/opthamology. Quantel has also snagged a couple of big contracts (one, now terminated, was with the U.S. military).
o) The latest big contract is for the Megajoule project, developed by the French atomic energy commission. This project, similar to a U.S. project at Livermore Labs, will essentially explode tiny H-bombs using focused laser light and permit the military to continue developing H-bomb design despite the nuclear test ban. It is a very large contract:
| quantel.fr
| dops.dk
In the latter reference, the small article about Quantel is on p. 6. The Megajoule project should be finished in 2010. The contract, for 730M€, is nearly equal to Quantel's entire 2004 annual revenue. Although Quantel had already won a small contract for part of the project, it's win for the entire project was surprising, because Thales (a large French armament contractor) was tipped to win.
o) Quantel developed a new application for lasers in dermatology with a very large potential market, the treatment of acne (which affects "40% of teenagers") :
| crutchfielddermatology.com
| quantel-medical.fr
Quantel got its first application in this area approved by the U.S. FDA near the end of 2003:
| biospace.com
o) The competition in the U.S. (by far the most important market for lasers in dermatology) is very stiff, with many competitors:
| miinews.com
| aslms.org
After some problems, it appears to me that Quantel finally has a good distributor, which provides training, equipment and packages to doctors:
| medsurgeadvances.com
Quantel also owns a growing U.S. laser company, Big Sky in Montana:
| bigskylaser.com
| bigskylaser.com
This article, though somewhat dated, gives a favourable image of Quantel's owner/boss, and it is in English:
| optics.org
The warrant which I own has a strike price of 7.60€ and normally runs until Oct 23 2008. However, the company could call in the warrants after Oct 23 2006 if the stock price is greater than 9.88€. The French Bourse now requires that such a clause be included in all warrants, ostensibly to protect stockholders (so that warrant-holders cannot buy stock cheaply after a big price runup in the stock price). However, companies are not obligated to call in the warrants early (i.e., to exercise what the French call the "clause de forçage.") Moreover, no French company has yet called in its warrants early. Insiders and managers typically fill their pockets with these warrants, and it is not in their interest to do so. Nonetheless, French investors typically accord no time value to a warrant once its "clause de forçage" comes theoretically in force. But the warrants may still confer signficant leverage.
The Quantel warrant is rather illiquid, and it trades only at set times during the day (not continuously). It typically has very little time value, and often has traded for 10% or more below its intrinsic value! Go figure ...
Quantel discussion forums (in French) are here:
| boursorama.com
| boursorama.com
This Quantel warrant was one of my picks in a French stock picking contest. I am "alatan," recently placing 10th to 15th here (in the list in the right-hand column, showing choices and 2006 performance):
| jmpacquet.free.fr
This contest could be interesting for those looking for investment ideas in France. Here is a list of the participants' choices, with year-to-date performance and popularity of each stock:
| jmpacquet.free.fr
Interestingly enough, past contest results indicate that the most popular choices are not the best ones. Most participants come from a couple of French discussion forums on small caps.
Among my choices in this game, I would still recommend Completel (CPT, NL0000262822, CLTLF.pk). Completel is not cheap. But it is developing a large fiber optic network in France and selling IP and phone services to businesses. Completel should benefit from the transition to VOIP, as well as being able to undersell France Telecom. Soitec (SOI, FR0004025062, SOTTF.pk) may still be a good buy, although it has doubled this year. It manuctures the special silicon wafers used by AMD (among others). Quantel and Soitec represent the best of French high tech and R&D.
I would also strongly recommend Orco (ORC, LU0122624777, ORPGF.pk) or one of the two Orco warrants. The best warrant is probably ORCBR(LU0234878881) -- it runs to 2012, with a "clause de forçage" that could apply after nov 2007. Orco is a very dynamic property developer in Eastern Europe. It is well rounded, dealing in office space, residential development, shopping centers, and vacation resorts. Here are a few articles about Orco in English:
| boursorama.fr
| cbw.cz
| boursorama.com
| praguepost.com
All the above articles are indeed in English (even if the forum postings begin in French). The fourth is about Orco's founder's wife, and helps explain the family links with Eastern Europe. Here is the presentation of Orco's latest results (and NO the pdf.pdf not a typo ... at least, not until the ccompany corrects the name):
| orcogroup.com
Despite the above discussion, I should say that probably 75-80% of my investments are in raw materials and energy: uranium, base metals and "would-be miners," some silver, revolutionary energy technologies, O&G ... mainly Canadian companies. I have somewhere between 50 and 100 companies in my portfolio.
Alan |
