written by reader LNAFF

By Anonymous Questions, July 25, 2012

Travis, I’ve held LNAFF for a couple months now and there has not been the slightest move up or down or sideways. Not one cent.
Do I have the right stock? Is it really so dead?

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Travis Johnson, Stock Gumshoe
July 25, 2012 10:24 am

Yes, it’s really so dead and that is really the pink sheets ticker for Lonrho — things have been pretty quiet for Lonrho shares, despite what I think is an improving business. My last note on this one was here: http://stockgumshoe.com/2012/06/lonrho-taking-a-bit-of-beating/

I hope I’ve been pretty clear that I consider Lonrho to be a very long-term investment — I think they’re getting in fairly early in building up some solid businesses that will profit from Africa’s emergence and increasingly interconnected economies, but they are just on the cusp of profitability. Reading the tea leaves indicates that they have a good chance of becoming consistently profitable this year and next, with a dividend likely by next year, as they’ve completed a lot of their larger capital investments and spun off responsibility for hefty investments in the airline to Rubicon (which they sill control), but certainly nothing is guaranteed. Their big revenue drivers going forward will be continued oil exploration and production in the Gulf of Guinea and surrounding areas, and continued growth in agriculture exports (fish and fruit, mostly, to the US and EU) and agricultural modernization in sub-saharan Africa, though it’s likely to be the airline that gets the most attention for at least the next few months.

My shares are under water, I’m continuing to hold and am more likely to buy more over the balance of this year than to sell as long as things continue to develop as they have. My original purchase was looking out five-ten years, and I’d still urge any potential Lonrho investors to keep that kind of long time frame, despite the fact that I’m optimistic about their chances for profit growth settling in soon. Remember, this is still a tiny company (market cap less than $200 million), and they own some substantial and valuable assets, including control of a major oil services port and a large agricultural products distribution division — we’l see how the balance sheet looks once the Rubicon selloff/spinoff of the airline gets fully reflected, but right now they’re trading at a discount to book value.

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alan platt
Irregular
July 25, 2012 10:39 am

Travis, what a terrific response and so fast.
Yes, that’s what I thought, but I hold a few other marginal shares
that I have faith in long-term, but even these have SOME movement.
I was worried that somehow I had bought them in a way that was not kosher.
I’m happy now to sit on them until the fat lady personally brings the cows home.
Alan

Travis Johnson, Stock Gumshoe
July 25, 2012 10:43 am
Reply to  alan platt

Well, it’s still worth watching — management could always do something stupid (they’re a bit on the aggressive side, particularly in the way they compensate themselves). We ought to get a quarterly update on operations sometime in early August.

Oh, and part of the reason for the shares appearing not to move much day to day on the pink sheets is that the pink sheets shares sometimes don’t trade on any given day. Trading in London is also typically pretty light, but it does show more day to day movement in general (home listing is LONR on the London Stock Exchange, so try Yahoo Finance or Bloomberg to get a better financial picture of Lonrho using that ticker — and remember that London shares are traded in pence (often abbreviated GBp, not Pounds, which is GBP).

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