Thursday, August 5, 2010

Hudson Resources: Well under asset backing

One thing I do like to find in the market is stocks that can be clearly valued but for some unknown reason they aren't reflecting their true value.  You could almost call it an arbitrage opportunity.  Many of these opportunities come up in the property trust sector and India Equities Fund (INE) is a recent example whereby the net asset backing was above the current share price.  In order for India Equities Fund to get the share price to converge with the asset backing they decided to sell down the portfolio and complete a capital return.  I will talk about this company more soon as I believe there is a more compelling story in Hudson Reseources (HRS).

Hudson Resources has about 106 million shares on issue and the stock closed at $0.21 today giving it a market capitilisation of about $22 million.  When you complete a sum of all parts, that is, all of it's investments it is substantially above the market capitilisation.  Hudson Resouces has main investments of:
  • 55,600,000 shares in Australian Bauxite (ABZ) @ $0.50 = $27,800,000
  • 31,800,000 shares in Tiaro Coal (TCM) @ $0.45 = $14,310,000
  • Cash, property, potential royalties etc.
The share holdings by themself equate to $42,110,000!  Whilst anomalies do in fact exist in trusts and investment companies this one seems quite compelling.  If anything, if you are a fan of Australian Bauxite then Hudson Resources is a great vehicle to get exposure or leverage to Australian Bauxite which has had strong share price gains lately.  One concern I do have about Hudson Resources is the lack of liquidity in it's trading.

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