Change in power at India Equities Fund?

I've talked about India Equities Fund a couple of times already because I always have an interest in shell companies and what may eventuate.  Anyway, this one seems to be hotting up quicker than I anticipated.  I mentioned how GW Holdings Pty Ltd popped up on the register as substantial holder.  Only five days later and with it's powers as a substantial share holder the company has called for a general meeting to overthrow the existing directors and replace them with James Chirnside, Alexander Feher and Gabriel Radzyminski.  It clearly shows that GW Holdings Pty Ltd is not going to be a passive shareholder and has plans for the shell...

I've done a quick search on these persons and whilst it didnt prove too fruitful you could generally see that they are of an investment funds-style background.

After a quiet week of trading in INE shares it is also interesting to note the jump in volume today with the shares up $0.005 to $0.062.

New substantial holder in India Equities Fund

I recently created a post on India Equities Fund (INE) on 08/08/2010 regarding the fact that the company appears undervalued considering the cash it will be holding after a capital return to shareholders and the value of the listed ASX shell.

Only 5 days later a new substantial holder noticed was lodged on 13/08/2010 with GW Holdings Pty Ltd declaring an interest of 22,752,981 shares (18.8%) purchased on 10/08 and 11/08.  I am interested to see what the intentions are of this company.  Unfortunately google searches proved unsuccessful so I couldnt join any dots together and work out what kind of investments this company has undertaken in the past to gauge whether they have a track record of using shell companies to effectively 'vend in' or backdoor list other companies.  Watch this space.

For those with experience in company options it is interesting to note that the bid/ask spread on INE is 0.053/0.058 whilst on the options it is 0.05/0.064 so possibilities of arbitrage could occur (liquidity allowing).  The INEO options have an exercise price of zero (0) however expire at the end of August, in other words, don't forget to allow for postage time for your exercise form to get to the share registry.

Value in India Equities Fund shell company

I've always taken an interest in companies that are more or less an asx listed shell awaiting a further direction.  The majority of the time these companies eventuate because the company has recently gone into administration and possibly a deed of company arrangement has been executed with the company to back door list a new resources project or a complete a change in focus.  Other times a company has been underperforming and so the company is sold off leaving a shell with a bit of cash to buy into some hot new project.  I love this scenario because there is a few catalysts for share price appreciation and these include speculation as to what the new focus will be followed by an announcement that determines what new project or company that is acquired.  If the project is a good one there's a high chance that the share price will continue to rally too.

So what is a shell worth?  I would usually say about $3 to $4 million.  The reason for this is because the costs involved in listing a company on the ASX dont come cheaply.  I think that India Equities Fund (INE) is an interesting one.  The company recently sold down it's portfolio of Indian shares in order to find some value and complete a capital return to shareholders.  I would recommend taking a look at the announcement made to the ASX on 30/07/2010 by the company that details this information.  In summary the company has just over $80 million in cash, will be paying out 90% of that leaving about $8 million.  To wind the company down will cost another $2 - $3 million leaving the value of the company at about $5 - $6 million.  The last traded price at $0.047 gives the company a market cap of $6 million.  If management play their cards right and use the shell effectively we could potentially see a $0.07 - $0.08 share price.

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.