Stocks Mentioned: Matson (MATX), Marathon Gold (MOZ.TO), Skeena Resources (SKE.TO), Danaos Corporation (DAC), Global Ship Lease (GSL), Adventus Mining (ADZN.V), Integra Resources (ITRG)
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August 03 2022
Matson (MATX) reported Q2 EPS of $9.49, as compared to $3.71 for the same quarter last year. However, shares got slammed yesterday because the company warned of declining freight rates.
"However, in recent weeks we have seen a gradual decline in the Transpacific freight rate environment off the highs experienced earlier this year. This indicates that rates have likely peaked for now, and, at this time, we expect an orderly marketplace for the remainder of the year with our vessels continuing to operate at or near capacity and earning a significant rate premium to the market because of our differentiated, fast ocean services."
The Hawaii market softened as well, with volume down 1.5% yoy.
As with the sell-off in April, I see no reason to panic based on the price action. I'm not adding, but I'm not selling a 2 PE stock just because an earnings decline will cause it to become a 2.5 PE stock. At these valuations, earnings, dividends and share buybacks are your friend. Forget the trend.
Sell Marathon Gold (MOZ.TO). The current rebound in gold presents a better exit point. I've been waiting on a takeover offer ever since I put this trade on and no luck so far. Best to take the loss and deploy capital elsewhere. Based on entry at C$3.06 on 10/1/2021 and exit at C$1.7 today, the trade lost 44.4%.
I'm waiting for Skeena Resources (SKE, SKE.TO) to release its Feasibility Study on Eskay Creek, originally scheduled to be published in June. I believe the FS will demonstrate compelling economics even during these inflationary times. The 2021 PFS called for initial capex of C$488 million for an after-tax NPV of C$1635 million and after-tax IRR of 62% assuming US$1700/oz gold and US$24/oz silver. The by-product All-In Sustaining Cost (AISC) was a stunningly low US$138/oz and cash cost was $84/oz. The margins are clearly high enough to withstand a capex and opex blowout. Skeena is the last of the gold exploration stocks still in the portfolio. Let's give the company a couple of weeks to put out the FS numbers, failing which I'll get rid of it.
August 04 2022
Matson (MATX) CEO Matt Cox sold 5000 shares at $79.82. Given he still holds 252,802 shares I don't see any red flag here.
August 05 2022
When stocks are objectively cheap, corporation action tends to correct for it. This should be a catalyst for other containership lessors, notably DAC and GSL.
Shareholder dilution continues at Adventus Mining (ADZN.V). The company issued 13.5 million 3-year share purchase warrants to Trafigura priced at C$0.513, potentially equating to C$7 million worth of dilution if exercised, and on this basis, Trafigura currently owns approximately 8% of Adventus. The company is also selling an additional C$10 million worth of stock to Trafigura, taking the dilution up a notch by directly bloating the shares outstanding. Current market cap: C$72 million.
As much as I like value trades, cheap stocks are cheap for a reason. When it comes to gold explorers, it's mostly because they just keep diluting existing shareholders, making sure that the perceived value disconnect disappears.
We saw the same thing play out at Integra Resources (ITRG):
August 06 2022