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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (52026)	8/7/2013 9:29:10 PM
From: Spekulatius	Read Replies (1) \| Respond to of 78614

I don't think IPI is a food buy. hile it may be trading at book value it is a high cost producer with a cash cost of ~200$ton (or 200$/tonnes). Uralkali's cash costs are 62$/tonne, POT is at ~120$/tonne and Kali+Salz at close to 200$/tonne. I think MOS cost is in between POT and Kali+Salz (haven't checked). The cost of building a new mine in Canada (with supposedly low costs, similar to POT , I assume) is roughly 1700$/tonne for BHP gigantic project and a little more than 2000$/tonne for Kali+Salz Postash One project. you can calculate that at 300$/tonne net sales price and 120$/tonne cash production cost (like POT) those projects will generate way less than 10%ROA, which very likely makes them non-economic Even at 400$/tonne, the ROA won't look great, so I think many of these expansion projects will end up getting cancelled. Going back to IPI, I think this company barely will break even at 300$/tonne (cash cost does not include depreciation, overhead and other costs!) and the stock will look awfully high valued. In fact I would say that POT and MOS at 300$/tonne pricing will be overvalued, although they will till be profitable.

To: E_K_S who wrote (52026)	8/7/2013 9:55:58 PM
From: Spekulatius	Respond to of 78614

I don't think IPI is a food buy. hile it may be trading at book value it is a high cost producer with a cash cost of ~220$ton (or 200$/tonne). Uralkali's cash costs are 62$/tonne, POT is at ~120$/tonne and Kali+Salz at close to 200$/tonne. I think MOS cost is in between POT and Kali+Salz (haven't checked). The cost of building a new mine in Canada (with supposedly low costs, similar to POT , I assume) is roughly 1700$/tonne for BHP gigantic project and a little more than 2000$/tonne for Kali+Salz Potash One project. you can calculate that at 300$/tonne net sales price and 120$/tonne cash production cost (like POT) those projects will generate way less than 10%ROA, which very likely makes them non-economic Even at 400$/tonne, the ROA won't look great, so I think many of these expansion projects will end up getting cancelled. Going back to IPI, I think this company barely will break even at 300$/tonne (cash cost does not include depreciation, overhead and other costs!) and the stock will look awfully high valued. In fact I would say that POT and MOS at 300$/tonne pricing will be overvalued, although they will till be profitable.

To: E_K_S who wrote (52026)	8/8/2013 4:58:55 PM
From: IndependentValue	1 Recommendation Recommended By E_K_S Respond to of 78614

I stand corrected - I can access the interactive bar chart showing the outcomes from various valuation models, interesting and useful. This is indeed an excellent thread for serious investors and students of investing that refuse to be distracted by Wall Street/mainstream financial media. I have read right back over historic posts on this thread to 1996, and have learned much from this review. I am excited now to be a participant to the discussions here and hope to continue to learn and share ideas with others. With regard to overlooked items, some common and crucial items include pension deficits, operating lease obligations and other off-balance sheet items, not too mention the all too common add back of gross cash in to adjust from enterprise value to equity value, rather than the excess cash only. No one seems to consider that not all cash is attributable to equity holders - only excess cash can be claimed by the equity. Valuation really should always consider the value of the entire business, which a sophisticated acquirer would be willing to pay, and not simply slapping a current multiple on recent reported EPS - this is the CNBC method to valuation and it is MISLEADING! I've recently been analysing what I believe to be an excellent, undervalued business with favourable prospects and have carefully thought through all these commonly overlooked adjustments in arriving at the equity value, and I hope to share this analysis shortly once I complete it.