A month ago I said about Zirax: "They do look quite cheap in terms of assets and potential earnings, but I'm giving up hope of the value ever being realised. At about 6p per share I'm probably out."
Well in the space of a few days last week, the price jumped from 3p to 6p. I'm not out yet, but I came very close yesterday (couldn't get a quote online, or set up a limit order - useless bloody stockbrokers).
Market cap: £10.7m = $17m
Earnings: loss-making / negligible
Revenue: around $33m
Shareholder equity: $19m - and the auditors won't sign off on $3m of that.
Zirax's balance sheet shows $6m cash and $6m of short-term borrowings. That seems to back up the auditor's opinion that not all that cash is genuine. Zirax seems to do business with Incarobank, which is under common control - this suggests that the majority owners of Zirax and Incarobank have siphoned off cash from Zirax to support the bank.
This is all extremely dodgy, and at a P/BV of around 1, I think I'm going to extricate myself from this situation and put my money somewhere a bit safer.
Update 26/10/09
Sold Zirax this morning at 5.75p, about 50% below my average purchase price. I can make use of the capital loss this year, so I was always going to sell before the end of of the tax year - and with no faith in the management I see no reason to wait.
1 comment:
Hi Dan, first of all great blog.
Secondly, I am also a long-term investor in Zirax having averaged down earlier this year.
From what I understand there is some acquisition interest in the chloride sub-sector at present and this is underpinning the rise. There is talk of Tetra as an interested party and they are known to be looking to gain a greater foothold in Russia.
It may be worthwhile waiting until mid-week to see how this plays out as I think there could yet be some price action to the upside.
Best,
GS
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