Beyond The Fringe

Is the nadir yet to come in our feverish bourse? The AllOrds has caught a severe case of pneumonia from the ailing US economy - yet we think a large part of this malaise may be due to perception rather than reality, apart from our banks who stupidly spread their assets into US home loan Ponzi schemes.

The demands on our minerals and other resources by China and India may keep us from too much pain as the Dow Jones slides into a coma, and perhaps our perceptions haven’t caught up yet with reality. Meanwhile the swarming sharks gobble our treasure at bargain basement prices. We hope Australians see the opportunities also, otherwise the farm will end up just about totally overseas owned at the rate it’s going.

Of interest, we see that alternative energy stocks are doing quite well despite the plunge - CXY and COZ may well do superbly with the inevitable recovery. Novera on the AIM market has just had a takeover offer for twice what we paid for it - this company reclaims methane from landfills in Europe. BPO has slid just 1 cent since our last purchase and the future looks rosy with proposed production of organic termicide Termilone to begin in 2010.

As we are counter-cyclical by nature, we reckon 2009 is the time to buy, buy, buy - wisely, with a view to the sort of world which may emerge after the current depression subsides.

Last week, our little water recycling star performer Envirozel (EVZ), which we recommended in September last year as a solid buy at 19c, revealed its latest acquisition - Young steel construction private company, National Engineering - yet another stable, thriving business with an attractive operational record. National’s revenue contributions will bring EVZ to within $30m of its projected target of $100m per year revenue.

Following the announcement, EVZ Executive Chairman, Gordon McKern gave a most encouraging, almost fatherly presentation on Boardroom Radio.

Some of the points he made were:

• National Engineering is different from the previous two acquisitions as the vendors were not running the business. Positively, there’s a very competent general manager at National Engineering who is staying on.
• National doesn’t compete with existing EVZ businesses - and other EVZ businesses have a need for structural steel which National can provide.
• National’s location in Young, NSW now gives EVZ a geographic reach as far as Queensland.
• EVZ is maintaining its performance. 3.5 average adjusted EBIT purchase price will be paid for National - more or less on par with the other two. The purchase will be made with a combination of debt and cash - and there’s room for more leverage on the balance sheet. Commonwealth Bank is very supportive.
• Revenue is on track for $70m - 75m - Gordon suggested they will achieve $100m well before the end of 2007.
• At Young for ASX ann, Gordon addressed the National employees, offered employment, explained the deal to the workers - employees were very buoyant about the new owner.
• Gordon highlighted that one of EVZ’s main assets is now 370 employees, every one of them a skilled operator, - to him, the crux of the whole game.

We love his attitude, and his thoughtful, pragmatic approach to EVZ’s strategic acquisitions. Will the next acquisition be in Queensland?

EVZ closed on Friday at 59.5c - the new floor may become 56c. With bipartisan support for water efficiency measures, EVZ is in an excellent position to benefit from additional infrastructure investment. Wise Owl has an 80c price target in 2007 - it may even do better after its half yearly in our opinion, if it can increase the number of contracts it presently enjoys. We don’t see why it won’t, and will be watching it closely for more accumulation during the imminent tax loss scramble season.

As we forecast, Kevvie won the day by a handful of votes to allow U mining in states that want to permit it, while maintaining a ban on nuclear power stations. Perfect for us and our SA and NT U investments, and not so pleasant for all those holding shares with U interests in any other state perhaps. Monday’s stockmarket opening will be very interesting indeed!

Lady Downer pranced out with his rodent master’s logical wedgie, moaning that

The Labor Party’s position on uranium is a classic case of hypocritical opportunism in politics and cynical opportunism.

As a past master of both the above, Lady Downer would of course know. The posturing twit went on to bleat piously that

We think that nuclear power makes a very valuable contribution to reducing greenhouse emissions and climate change is a serious issue, we have to find serious solutions to that problem.

Lady Downer promised to take Rudd and Rann on a junket to vist a Chinese nuclear power station so they can see where Whorestralian U ends up.

At the ALP conference, Rudd floated the generous idea of loans to Joe Blow to introduce water and energy efficiency solutions into their homes - this could be good news also for EVZ. Clean coal was on the agenda as well, with the ALP promising large sums for investment in tech. Will CXY benefit as it should?

Kevvy has a new site up for airing the outcomes, transcripts and vids from the ALP’s National Summit on Climate Change. Sadly, there’s no facility for interaction, no forums, no blogs. Despite their apparent fascination for broadband tech, as media whiz Trevor Cook points out, Kevvy’s team is behind the net-times!

Nevertheless there’s some interesting-looking downloads on carbon trading at which we’ll have a closer look soon. As yet we can’t spot anything on U, though there’s clean coal info.

We wonder how many Laborites will be inspired enough to put their money for the first time into the enticing range of cleaner energy tech stocks on the market.

Time to assess the treasure in preparation for reorganisation in view of serious impending opportunities. SNU floats on Tuesday, and we’ll be trying to buy as many as we can cheaply. We feel multiple bids might be in order to maximise our chances of increasing our holding as swiftly as possible. Seems as if most SAU holders, like us, had their requests for entitlements cut back, so we project a massive immediate demand. SAU is now a 3 bagger¹ for us, and it should follow the lead set by SNU.

We will also be taking advantage of our 2 for 5 new share offer to top up our lovely AVX holding. AVX, currently a 6 bagger plus for us, may well be able to fasttrack their Phase 111 trials given their HIV drug’s incredible success in previous trials to date. Then there’s their VRI drug to consider as well. The third opportunity comes with KOR (2 bagger), which will be offering a priority entitlement to their float, where we will already acquire a free 1.6 to 2 share interest for every KOR share held.

Other little darlings this week include TRF (5 bagger), which has performed stunningly on its desk top study projections. U results are expected very soon. We’re hoping for $2+ after this news. Then there’s NTU (3 bagger), for which we await our free oppies.

We missed out on acquiring some MKY, which has U tenements in Queensland, where Beattie is sounding positive about allowing mining. There are gaps to be filled in the MKY chart, and thus we’ll be watching it closely for opportunities.

APG continues to look healthy, consolidating this week around 16c (4 bagger). On firm news about BHP’s interest, it will skyrocket.

¹ “Bagger” = Number of multiples on original price.

A healthy outlook is confirmed by Envirozel’s latest business update.

Positive points include:

• Brockman awarded contracts for large tanks to the value of $9.3m.
• Danum carrying out major shutdown operations with new contracts to the value of $1m.
• Syfon has $9.3m worth of forward contracts with two new big Australian contracts and $2m worth of work in hand in Malaysia.
• All businesses have won significant new contracts and are performing well ahead of budget.

However, 1.5m options have been exercised today so there’ll probably be further selling and therefore, good buying opportunities, particularly in view of the recent Wise Owl 12 month 80c price target.

Last week, as Fringe’s neurones grappled with flu fallout, we kept our investment activities under careful restraint despite the plethora of tempting opportunities presented by the correction. Our sole accumulation, apart from a large cheque mailed off for the exceedingly attractive SNU floaties, was some SMN at 22c. We first bought these at 11c a while back after noticing the outstanding potential of their technology and some judicious, handsome insto share purchases.

Structural Monitoring Systems is a great little Aussie achiever. Happily, it was announced last week, their CVM technology is to be included in the Boeing Common Methods - NDT Manual.

Rumour is that the managing director is in London before going to Germany to see Airbus, with an investor roadshow coming up in March to coincide with the Avalon Airshow.

There is some debate whether the current correction is over - some bulls consider it but a brief hiccup in the continuing bull market. Others foresee more volatility and consequent opportunities in the months ahead, whilst bears, as ever, are joyously imagining a serious crash in the offing.

We’ll continue to collect investment shares which are likely to do well regardless of fluctuations. This week we are studying CXY with its promising clean coal technology which may provide a very useful transitional facility and achievable political compromise for the environmentally disastrous dirty brown coal industry.

Speaking of green energy, there’s a very helpful GREENE thread happening over at HC on all the relevant Australian companies. Be there or be square!

We have completed a week of concerted re-positioning. Although the POG has remained in the 660-670 range, our preciouses haven’t shone as much as we would have liked. Finally our patience with CTO expired, and we sold our holdings, along with the static MMNO. With this stake we increased our NTU holding at 81c. These little wonders just closed at $1.26 - so we are way ahead. This is one of our ‘dream’ stocks, along with KOR, which we bought at 63c last month. Following success with these and previously with GPN (since sold), we acted on this morning’s dream of COZ, an innovative carbon credits trading company and bought in immediately at 41c before that price became unreachable. They closed this afternoon at 45.5c with a solid buy depth remaining. We may make these, like our environmentally friendly EVZ, a target for long term accumulation.

COZ also announced a solid deal with EDN today - which may prove to be the first trickle of a torrent of prestigious multinational companies getting set with their Australian carbon credits before the price escalates and the federal government becomes involved. Considering the lack of care with the environment and international responsibilities by the rodent and his mob to date, Australia has acres of blue sky in this new sector, along with virtually unlimited potential for reafforestation due to rampant, thoughtless land clearing for 200 years since the colonial invasion. It seems to us that companies may also be falling over themselves to participate when the corporations to which they contract give preference to tenders which incorporate ccts.

With a prominent existing footprint, COZ is well positioned in our view to profit from future introduction of state and regional carbon credit trading, regardless of whether the disgraceful prime monster climbs on board. For example, it is the only company accredited to create carbon credits under the New South Wales Greenhouse Gas Abatement Scheme. It is also a Major Carbon Offset Provider to the Victorian government.

“State and territory leaders unanimously agreed last week to set up an emissions trading scheme that would lead to a 60 per cent reduction in national greenhouse gas emissions by 2050.

Under the regime, electricity generators have to hold permits to emit greenhouse gases.

But they can also buy extra permits and offset emissions through forestry and the capture and storage of carbon.

Ms Martin said the federal government had been given six months to get on board, or the states would move on without it.

…

The states and territory’s carbon scheme is expected to begin in 2010, unless the commonwealth agrees to a national or international carbon trading system after it receives a report on the issue at the end of May.”

Along with the United States, Japan and Europe China is now joining the multi billion dollar global trading market for CCTs.

To garner carbon credits, COZ creates biomass carbon sinks with commercial mallee eucalypt plantations on farmholders’ lands.

“Landholders participating in this program are paid on a $/ha rate for the land planted under trees. All costs associated with the planting program including surveys, site preparation, planting, seeds and seedlings, weed and pest management, cultivation and monitoring costs are all met by CO2 Australia.”

Checking the DJAA we see a series of spinning top candles which may signal exhaustion and recapitulation. Its MACD looks like both buyers and sellers are losing steam too. We’re heading for a down week on the markets, we feel, except perhaps for the preciouses, which are booming with a rising oil price.

So finally are we going to have our long awaited and till now plunge protected gold spike? T’would be most pleasant to take some gold profits and cash up for the inevitable blue chip correction. Some cunning CBA accumulation will be our target in that realm this year. $48.50 looks possible - will it be achievable? Seems odd to be buying more at these levels considering the last time we bought was when they were $24 odd a few years back.

The rest of the profits will need a friendly home till precious metals drop after their spike and possibly a newcomer might be another potential target - the carbon trading company, COZ, at which we are having a closer look this week. We will definitely store away some loot to buy the wonderful LRL back too. It is nowhere near its potential - due for production at the end of the year. The balance may find a profitable home in more U shares if they correct slightly alongside the overall market correction. Hard to tell - if the spot price keeps climbing, there may not be a U correction, despite the forebodings of some on the forum. So many variables - we still don’t know whether the mad chimp is actually going to add insult to injury and whack Iran either unilaterally or in support of Israhell.

Israhell is still sounding incredibly belligerent toward Iran whilst the United Stupids are plaintively claiming they don’t intend to whack them. But of course, they said that before they illegally invaded Iraq. The military buildup is nearly complete for a whacking. We think Israhell may whack Lebanon ruthlessly again first to gee up United Stupids support (they are infringing on Lebanese air space and firing across the border already), then extend their aggression to Iran whilst whinging about the supposed “real” source of terror, Hezbollah and Iran. The ulterior game plan may be to grab Lebanese water, secure the Shebaa farms for Israhell and prevent any land deal with Syria over the Golan Heights. The provocation of another conflict with Lebanon and yet another with Iran would also provide ongoing cover for staving off any peace talks with Palestinians.

We had to laugh when reading that the United Stupids and Israhell aren’t amused by Abbas and Hamas resolving their differences - it appears that civil war and more Palestinian bloodshed is preferable to reconciliation - how obvious is that colonial imperialist divide and conquer trash. The democratically elected Hamas don’t qualify as part of the oft-stated wish of the United Stupids to spread democracy in the Middle East. Thus the Stupids prefer to attempt engineer and bully another “regime change”, wanting Abbas to purge Hamas altogether. Meanwhile, Israhell may wish to delay reconciliation so it can grab as much Palestinian land - establishing more grotesque facts on the ground - as it can before the United Stupids, out of sheer necessity as the American people become sufficiently wise to neoziotard manipulative games and realise how they are held hostage because of their blank cheque support for the ziotard state, to being an “honest broker” again, forcing them to adher to the terms of Res 242 and 1967 borders, which Hamas has stated it supports. At least that would be a positive start. Then there is the question of the right of return of Palestinian refugees. However, it also serves Hamas’ interest to delay recognising Israhell for as long as possible - within decades, demographics alone will alter political realities. At present, with religious fanatics and political loonies on all sides running the show, ongoing war looks horribly likely.

We’re still regretting not grabbing CFU around 50c when we had the chance. Don’t feel like going for hot rocks - they are unproven and too high sps at the moment, yet if there’s a dip, we’ll have another look.

The other share we should have bought is TFC when it was 38c - it’s now up in the 50c range and climbing. Nice divvy too. Maybe we’ll have another look at it though.