“Legal Blackmail” Supercharges Your Investment

When I say that the Stock Gumshoe readers are the wisest souls on the Internet, I don’t just mean in North America — we’ve got a pretty fair crop of friends around the world here, and I like to take a look at non-US teasers every now and again.

Two of the countries that boast a pretty strong newsletter industry that’s heavy on the teasers (and whose language I can understand) are the UK and Australia, and today we’re looking at a British teaser — for the Profit Hunter from Fleet Street Publications, edited (and pitched) by Manraaj Singh. We’ve seen this newsletter before in these parts, and scoped out one or two interesting companies as a result … so let’s see what’s on offer today …

Singh has been using this same ad for more than a year now, though it changes a bit to keep up with the times — but I’ve never written about it, and the company is certainly very obscure to US investors, and probably to those in London as well, though it carries a famous name. How does he tempt us? You can see the ad in its entirety here if you like (and enjoy the much clearer and more prominent disclaimers that they use in the UK), but if you just want a taste and the solution, here you go …

“Your chance to take advantage of the most cut-throat, greedy (and richest) racketeers on the planet… it’s a “PRICE FIX” that could supercharge your investment by 288%, it’s… ‘LEGAL BLACKMAIL!!’

“Act fast and YOU could make spectacular gains from it without writing the ransom note, issuing demands or even breaking a sweat…”

What he’s talking about there, and goes on to explain over the course of a few long winded pages, is OPEC and their continued focus on extracting higher prices for oil. But this isn’t really an oil investment, he goes on to say that providing services to oil companies is the stronger growth idea (lots of folks agree with that assertion, to be fair), and that this tiny “7p company” has a lock on a critical asset that oil companies need.

7p means seven pence, for those of you who are a bit currency illiterate — it’s a company that trades on the AIM exchange in London (sort of like AMEX used to be — a junior exchange with lighter rules and lots of penny stocks), and the pound has been recovering a bit of late from its free fall so 7p is now worth almost 11 cents in the US.

So what is this key asset? I have to include a bit of the story from the ad here:

“The 7p* US oil panic share you should load up on today – before the cat gets out of the bag…

“Here’s the deal…

“A secret supply of 1.1 billion barrels of oil is hidden under a country far from the clutches of the Middle East and could help solve the US energy crisis – for DECADES…

“The exploration work has been done… There are no barriers to drilling… But there’s one snag: before the Americans can take this oil home, they need to obtain special permission from one AIM-listed company… a firm that has completed one of the shrewdest oil deals of all time!

“America desperately needs this “last piece of the jigsaw” to secure it’s energy future… act quickly and you can buy a stake in this small firm for just 7p*… Read on and I’ll explain…

“It’s the oil deal of the decade…

“Some 1.1 BILLION barrels are up for grabs… and you have a chance to sit at the negotiating table…

“The Washington delegation is in a weak bargaining position. Everyone around the table knows how desperate they are for new supplies… they themselves know they can’t continue to bomb oil out of the Middle East for much longer…

“The one thing they do have is money – and tons of it. But they’re likely to be held to ransom for every last cent…

“The representatives from Beijing are no better off – if anything, they are more desperate for this oil than the Americans, thanks to their massive 25-year infrastructure-building programme… They’ll match the yanks dollar for dollar for prime access if needs be…

“There are no objections from the locals: there’s no political instability or religious fundamentalism here like in the Middle East… this is a small, stable country that will be rich beyond it’s wildest dreams when the oil dollars start pouring in. And the drilling has already begun…

“That just leaves you.

“And you have the ace up your sleeve!

“You’re only a minor player… but without you, this oil is practically WORTHLESS.

“You see, without you, no one can physically get the oil out of this country to where it’s needed… You sit back in your chair knowing that billions of dollars are about to be thrown around the room to secure this oil…

“Well, it’s reality for one brilliant little AIM-listed company. They’ve known about the huge oil potential of this country for years… and they’ve been quietly working behind the scenes – long before the Chinese and Americans were ever interested – to secure a key role in every oil deal that takes place…

“What they’ve done is breathtakingly clever… it could be one of the shrewdest oil moves of the century…. and one in which you stand to bank a stunning 288% in just 12-15 months!”

Phew — good stuff, eh? The Brits don’t have any apologies to make on the newsletter selling front, they’re up there with the finest from Agora, Stansberry and the Motley Fool when it comes to painting a picture of pluripotent profits. The asterisk for the 7p bit is to specify the date when the shares traded at this price, a nice bit of specificity — if you want the details, they use 7.25p on May 7.

So I’ll spare you the rest — the oil supply we’re talking about here is Equatorial Guinea, which has been a big oil producer for a number of years, but I suppose they’re still discovering more in this area and throughout the Gulf of Guinea in West Africa.

And the asset that this company holds is a port — it’s actually on a large volcanic island that makes up one province of Equatorial Guinea, and as such it’s apparently the only convenient deepwater free port in the area. The island itself, which is the biggest land mass in the Gulf of Guinea (also home to the tropical paradise Sao Tome and Principe), is called Bioko, and the port that we’re interested in is Luba.

So … you know we’re talking about the company that owns the Luba port, and now you could jump off and find it yourself — but let me tell you what else they own, and spill the beans myself, to save you a bit of bother …

  • “This firm has stakes in a diamond miner – and the oil and gas industry…
  • “They sold $7 million worth of diamonds between April 2006 and June 2007. And it is now developing a huge diamond mining concession in Angola – one of the most diamond rich countries in the world.
  • “The company is also emerging as a major player in Africa’s air travel industry. The airline operates some of the most lucrative air routes in the country and launched numerous international routes across East Africa in 2008. It also provides freight services, opening up further lucrative opportunities.
  • “They are launching a new airline in Angola. The carrier will offer passenger, freight, leasing and charter services.
  • “They also have large investments in the African travel and leisure industry. Tourism in Africa is booming. Data from the World Tourism Organisation shows that it grew by 10.6% in 2006. That’s almost double the world average of 5.2% that year, and Kenya and Mozambique actually had the fastest-growing tourist industries in the world.
  • “The company owns an 80% stake in a prestigious hotel in Mozambique. The hotel recorded its best performance for eight years last year… and they are now establishing a five star hotel in the Congolese mining boom town of Lubumbashi…on the back of this the firm are now looking to expand their African hotel portfolio.
  • “The company is also emerging as a major player in the rapidly growing bottled water industry Safe drinking water is such a basic need that we expect to see the bottled water industry continue to grow exponentially as Africa develops.
  • “It controls a Zimbabwean investment company that could see its value pop like a champagne cork once the political situation in that country changes.
  • “It’s now building a major logistics hub in Angola. I can’t tell you how excited I am by that. Angola is the sub-Saharan Africa’s second biggest oil exporter and this could be the missing piece to help it take off!”
  • “This company also owns 51% of sub-Saharan Africa’s leading agricultural processing business, whose clients include Tesco, Marks & Spencer and Sainsbury.
  • “And if that wasn’t enough, it also holds a majority stake in one of Mozambique’s largest information technology companies”

So who is it?

Lonrho (LONR on the AIM in London, LNAFF on the pink sheets, where trading is very sparse — be careful!)

Lonrho has a fascinating history — it was a massive African conglomerate in the 1960s (it began life about a hundred years ago as the London and Rhodesian Mining Company), with a toe in probably half the countries on the continent and a large portfolio of mining and other operating businesses. About 10-15 years ago they effectively spun off the mining business as Lonmin, and Lonrho ended up with a lot of operating companies that were apparently in some trouble, and a lot of debt, so they went on a selling spree. They ended up owning just a pile of cash and a four-star hotel in Mozambique, and about three years ago they decided to rebuild their African conglomerate.

So yes, this fairly small company does own controlling interest (60%+) of the Luba deepwater port for Equatorial Guinea, which is still a hot oil property (though the citizens wouldn’t know it, they remain extraordinarily poor as the rulers and elites enjoy the oil boom). They also still own that hotel in Mozambique and are refurbishing the one big hotel in the Democratic Republic of Congo’s mining district, and there are several other businesses that they’ve picked up or built … a prefab building company in South Africa, a pan-African regional airline, an ambitious agriculture firm that’s working toward vertical integration to provide produce to Africa and Europe … they’ve even leveraged their “brand name” in mining to reinvest in a diamond mining operation in South Africa.

And the price fits — it has fallen a bit from that 7p level of a week or two ago, you could buy shares today for 6.4p, almost exactly ten cents.

So … interested in buying shares? The company is not yet profitable, and they have done a lot of diluting of current shareholders as they raise funds to expand their businesses, though they said in their annual report that they won’t have to come back for more funding in 2009. They did show a large loss last year, though, to be fair, much of the loss was from their shipping division that they have since liquidated.

Africa has been the next great marketplace for decades, and so much of it (like Equatorial Guinea) remains simply a pile of natural resources for the US, Europe, and China to fight over, that it’s hard to make any guesses about whether these companies will be profitable — they are essentially betting on increased trade in the Gulf of Guinea, which seems likely (the biggest customers for the port are already ExxonMobil, Shlumberger, and their ilk), and increasing travel and tourism and infrastructure buildout in Africa. I’d have to agree that it does seem like the port of Luba seems like a wise investment on their part, and they’ve been smart to expand it, but I have no idea whether it’s likely to be profitable in the near term, or whether their other businesses will likewise please — the biggest grower so far, in terms of sales, has been Fly540, which operates out of Kenya as a regional budget airline.

Africa remains a continent that’s often difficult for individual investors to access, save for South Africa and some of the Mediterranean countries, so companies like this that allow you to buy into potential growth in the nations that aren’t even big or investable enough to be “frontier” economies (let alone “emerging” economies) are always intriguing.

If you’re at all interested in this nascent conglomerate with a long brand-name history in Africa and some assets that seem promising, I’d urge you to at least start by reading their filings to get a handle on how they’re growing and if and when you’d expect them to start turning a profit … I don’t know much of anything about the company’s major shareholders (though a BlackRock fund apparently just went over the 5% ownership threshold), or analyst opinion about these shares (if there is any), or any burgeoning scandals or anything of that sort, though such may well exist.

And if you do buy, whether on the AIM in London or on the Pink Sheets in the US, be careful to use limit orders. If you’re in the US and can’t buy directly in London through your broker, which would usually be the smarter bet, pink sheets orders could probably get filled but you’d likely have to offer a premium to the London price to buy … and a discount to the London price to sell them if you decide to sell later. So beware that the friction on these transactions is great, which means it pays to be sure that this is a company you want to own, trading in and out in short order seems unlikely to be profitable unless something fabulous happens.

Even if you’re not interested in investing here, you can check out the company history on their website and look around a bit — it’s a fascinating story, whether or not it’s a great investment is your choice to make. Enjoy!


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7 Comments on "“Legal Blackmail” Supercharges Your Investment"

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Katie Catt
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Katie Catt
May 19, 2009 1:23 pm

Africa investments will be speculative plays for at least the next 50 years. Since the Chinese are rapidly re-colonizing Africa it seems to me ANY Chinese natural (PTR, for example) resource company is a safer bet than this

James
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James
May 19, 2009 4:20 pm
“Second quarter turnover from the continuing operations was £19.6m, up 245% on a reported basis, and a 61% increase on a like for like basis against the prior year. Turnover for the first six months was £41.5m, up 275% on a reported basis against the previous year and 60% increase on a like for like basis. in the half-year to June, David Lenigas, Executive Chairman predicted today. We expect to report a profit before tax for the half year end 31 March 2009,” he said.” I think stable profits could be close at hand for this company. It is an… Read more »
Hans
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Hans
May 19, 2009 10:23 pm

FYI.’Profit Hunter’ is one of Bill Bonner’s global newletter tentacles.

allen
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allen
May 20, 2009 12:35 am

Can some one give me the short History on the “GUN BOAT BASIN” and the UN. Thank You very Much.

ablanco32000
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ablanco32000
May 24, 2009 9:07 am

i know very few about guinea and if it is a good place to put some money there. But i know some guineans citizens here in spain ( Guinea was spanish several years ago) and i know they are good profesionals and with very good curriculum vitae. I know for a friend of mine that there is a lot of foreign investment there and oil and agriculture are being good catalyst in guinean economy. Probably i will investigate more about this company but probably i will put some bucks there.
thank you

David
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David
May 25, 2009 1:53 pm

And that 1.1 BILLION barrels will last the US, at present rate of usage just about, but not quite, two months. Ho hum.

Katie Catt
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Katie Catt
May 19, 2009 1:26 pm

And Mr. Gumshoe, with a sleaze bag like Zuma now the President of South Africa, I would be very, very careful about investing there as well. Can you say, Robert Mugabe south??

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