Portfolio Update

Yesterday I closed my position in ADA at an SP of 337c, for an overall gain of 70% in SP terms. Slightly lower due to exchange rate.

My reasoning for this is simply the company has run up a lot faster than I expected. Accounts for FY16 will be out late August and the market is expecting greater than 70% NPBT increase on last year. This will amount to somewhere between 9c and 13c per share depending on exchange rates and whether they realise any tax losses. That puts the company on a trailing PE of 26-37. I expect the company will grow earnings significantly again in FY17, but I simply don't know whether this will be by 20% or 70%.

If profit grows by 30%, earnings could be 12-17cps. 50% would be to 14-20cps. The variation depends on how they utilise tax loses. Those numbers relate to a forward PE of between 17 and 28. One of those looks cheap, the other looks relatively expensive. Given my short timeframe of one year (6 months now) I have decided to remove the unknown and take my profit on the basis that the company's valuation is looking a little stretched.

I could be completely wrong on the above. Momentum is good and earnings look like they will keep growing. I have kept half of my long term holding and sold the other half alongside the ones from this portfolio. I still really like the company and will consider reentering once I have more visibility on near term earnings.

Today I used some of the ADA money to purchase Mount Gibson Iron (MGX) at 30c. They are historically an iron miner but have run into difficulties with the Seawall collapsing at one of their mines.

I don't have time to do a full write up, but key reasons for investing:

-Debt free

-Cash in the bank of approx 43cps (trading at significantly below that)

-Possible takeover target. Takeover would likely have to be above 50c

-Exposure to (possibly) recovering iron ore prices

-Seeking acquisition opportunities

-Waiting on business interruption insurance payout

-Share price momentum

I see the above producing near term catalysts for the share price to continue its recent run up.

I am also actively trying to buy a gold miner currently, so will update once I've followed through with that.

Earnings are due out for MBE, PRO and GLH in August as their FYs finished in June.

MBE

MBE is about to embark on a ramp up of international expansion. Good newsflow is anticipated which should support SP growth. Trailing PE is around 23 (estimated) and forward PE could be around 14. This leaves lots of room for SP appreciation.

PRO

PRO made it through the rest of the FY unscathed after an earnings downgrade. As I stated earlier I don't expect this to be a sign of things to come. I took the opportunity to load up so this portfolio is heavily weighted towards PRO. Therefore, I will considering taking profits after any rerate. I expect they will hit the middle if not upper end of their revised guidance, although I justified my buy based on the lower end. There are lots of exciting developments going on with the company that should begin to be monitised over FY17. I'm still very bullish on the company and am looking forward to an update on how things are progressing.

GLH

GLH had recovered well this year up until a curious announcement by the company last week. They informed the market they missed internal revenue targets and therefore will only make 0.5cps for FY17.  This is below expectations of 3-4cps. However, this is similar to PRO in that it appears to be mostly an issue of accounting periods as they have a very good backlog for FY17 already. The SP took a hit, but I expect a recovery once they provide more clarity around what to expect in FY17. FY17 looks like it could be a big one for the company.

In summary, I've encountered a couple of short term blips on the radar for a couple of the companies in the portfolio. This obviously makes a 1 year horizon tricky, but I am confident management are on track to get things back on track which will result in the market rerating the various SPs.