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Sharewise & Funds Bulletin                                                          Tuesday , March 17,  2009      #469


Peninsula Capital Management   9642 0545                                                                                                          c /- South Suite

rcampbell@peninsulacapital.com.au                                                                                                                    Level 13, 350 Collins Street

                                                                                                                   

 

Amending Bulletin's name:

This change of name is long over-due. There are  many  listed funds on the market as well as off-market and they shouldn’t be over-looked.  The usual objection to unlisted funds is the lack of clarity and their relatively high running costs, but after so much volatility aided and abetted by shorting and short term trading, there is merit in reduction of volatility.

Cost reductions add to the argument. This is not to say that this is a bad time for direct shares. 

As the note below suggests, things suddenly look a lot better. The potential gains from very over-sold markets could be particularly strong if Obama can cut through in the US and nationalise the banks that need nationalising.

 

 

Markets: A sea of green

Apart from one or two stocks still under pressure, there seemed a notable shift today as a rally spread across aAlmost all  sectors of the market. Banks all strong especially Macquarie. Retailers generally weaker.  Woolworths turned up after a sell down yesterday.

 

In general smashed big leaguers like Incitec are moving forward.  Positive re- ratings are popping up, like

today’s  BUY sticker for Ansell.  Earnings forecasts have been slashed but  even so the prices compensate.

 

Energy markets

An obvious feature today was uranium  with both ERA and Paladin distinctly firmer- up 6 & 10% respectively.

ERA ‘s chart looks exemplary as it makes a steady well paced recovery from its sell off  lows in October.

 Paladin is more volatile but from a chart perspective now interesting.

Today marked the break out from three months of yo-yoying.

 

The Uranium Association’s recent commentary on uranium potential in Australia seemed to ignite interest, but just for the top dogs.  Most of the juniors are still flat  on the floor.

 

Feature:  Galaxy Resources

Galaxy is very confident about its mining plans and markets for its lithium carbonate project.

The presentation makes the point that China will by-pass hybrid cars and go straight for plug-in electrics.

To do this third generation lithium ion batteries like the ones in power tools and mobile phones will be dominant as their life is now five years  (with the addition of scandium ...see all previous commentary).

 

There are two preconditions:

a)      Electrical Vehicle infrastructure..ie battery swap over stations

b)      Low polluting power.

Better Place is planning chains of EV stations with the idea that the batteries can be charged during the day from solar or when the wind blows etc. Better Place are trying to organise for themselves an annuity stream of batteries that we rent and

they charge.

 

Fundamental to this is a supply of lithium carbonate. Demand for lithium is expected to treble as the hybrid plug-in car arrives. Only EV’s will save the US car industry as the best EV’s are now costing 1c a mile with far lower pollution per mile. The efficiencies work out to something like the energy equivalent of 100mpg. 

 

 

Gold signal: selling of long US bonds

Those are today’s positives, but we don’t ignore the lash and the hair shirt.

 

Bond investors are turning bearish in the U.S according to the Treasury International Capital report.

 

Monthly net foreign sales of longer maturities are rising with 61 billion sold in January.

 

As this was associated with a rising $US dollar during the period, this report made little sense to

to some observers as it should logically mean a fall of the $US as money left the US.

 

Others cringed and saw this as a clear indication that the US will now have trouble funding its deficit.

 

Gold may jump.

 

Cake and eating it too: protected fund with upside

INstreet has come up with a twist on the hedged and protected fund, some of which have proved their worth through the down-turn.

 

The idea in this case is that an call position is bought on the index with 5-10% of a sum,  and the balance invested conventionally in a term. If the market collapses completely there is a total loss of the 5%, but no loss of the balance. If it rises 20-30% (there is an option) then the 5% goes up 20% or 30% but no more.  The risk taker counter party gets the rest.

 

 With the interest and the gain the return will be unexciting, but it is a return and not as unexciting as purely cash.  As the pay-out is in shares by default with a cash option, this is legally a deferred purchase agreement for shares, not the purchase of a derivative which

it basically is thus allowing super funds to buy a derivative.  

 

Since the running  time is two years, it is likely that in that two years a 20% lift in the market is almost certain. But if it is sooner, the gain can be cashed out which provides flexibility.

 

Investors Desk
Energy stress in Europe
07 January 2009 Read More

Temperatures in continental Europe plummeted in the first week of the year. Some areas of Germany were at -25 below so it was not a good time for Ukraine and Russia to repeat the supplier/customer dispute which shut down gas supply to parts of Europe two years ago.



Stock of the week
06 January 2009 Read More

Sharescene has put a high focus on the coal seam gas story after the arrival off-shore energy companies last year. Cheque books came out. One reason why our coal seam gas is in high demand is that the gas is rapidly becoming a global rather than a local commodity as LNG technology advances



Oil has only one way to go: up
06 January 2009 Read More

The key to the mid term oil price is the amount of pain high cost producers will bear. As many oil producers like Venezuela, Mexico and Indonesia rely on oil exports to fund the schools, hospitals and infrastructure oil prices that stay too low create political problems or even raise the risk of social upheaval.



Jervois Mining: shareholders invited to change Board at forthcoming EGM
06 January 2009 Read More

Following a deadlock in negotiations between Jervois and China Rail Resources in late October, many large and small Jervois shareholders are calling for a restructuring of the Board. The largest single shareholder in Jervois, Mr Noman Seckold , has agreed to nominate for election as Executive Chairman.



Who has cash?
12 October 2008 Read More

Now that the government will guarantee all bank deposits - no matter how large - attention turns to the companies with cash. The more the better. We identify several large, mid and small cap companies with ample fire power for acquisitions once the banking systems stablises.



Blue Energy (BUL)
10 October 2008 Read More

Blue Energy's review of its position has an upbeat note. It should. Wih cash of $20m, an off-take ageement with Stanwell Power (see below September) which supplies 30% of Queensland's energy and the sight of Shell sniffing around the great coal plains of central west Queensland it senses strong potential. Recent drilling is confirming the gas content expected which is lending early stage support to BUL's 10-30TCF estimate.



Oncard: cash positive
09 October 2008 Read More

We confess we are a neighbour of Oncard. It helps to be able to duck next door to grasp another piece of the jig-saw which, it tuns out, is as simpler business than it seems at first sight.



Blue Energy (BUL)
11 September 2008 Read More

Blue Energy has done an early stage estimate of its gas reserves which it puts at 21 Trillion cubic feet of gas, If this resource can be converted into a reserve of even 10 TCF, this will be a very serious asset. Recent deals done by Santos and Petronas valued proven gas at just under $5 a GJ so if an independent geologist confirms Blue Energy's mid-case estimate of 21TCF shareholders are looking at values of $40 billion or more.



Conoco supports coal seam gas
10 September 2008 Read More

Down south we don't get it. Victorians are stuck with low energy brown coal for most of their power supply,but up north iits all go for gas. ConocoPhillips has just confirmed how valuable Queensland's vast resource of coal seam gas are when considered soberly and globally. By laying down almost seven billion, some immediately, Conoco has gazumped BG which thought it had the measure of the parochial locals.



ESI
10 September 2008 Read More

It would be difficult to find a share performance worse than ESI's over the last three years. As the Chairman frankly said today, almost every governance aspect of this energy company went awry since listing. It was undercapitalised, management was not ready, major shareholders had too large a say...he went on. But when he turned to the actual business the message was far more positive. ESI was getting there. It had formed firm commercial partnerships and had viable plans and projections. It is a good idea.



Silex Systems - solar project still coming
01 August 2008 Read More

The latest operational update says the solar cell project is "well advanced" but still coming. November 2007 was to be the completion date and now it appears that "mid year" 2008 will stetch to November or December. Nevertheless, a completed thin-film multi-junction photovoltaic collector doped with rare earth oxides should be worth the wait.



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