OTI

[Cooper]

quote:Originally posted by Dimebag
(PS Cooper the result was eps loss of 0.05c, not $0.05 (i.e. 1/20th of one cent, not 5cps). In other words, OTI are operating at break-even.

[:I]Whoops... cheers DB

[robbo]

ooohh...

Ouch ! [;)[:0]]

May God Bless You and Keep You, May His face shine His countenance upon you Dimebag....

Knew my candidness; could incite a little personal [8D][8D]

criticism...

'Beware the ides of March and being the bearer of bad news...'--translated: being a bull is great, becoming bearish upon one's new interpretation of new & latest official downward revision figures/report is not quite okay[?][?]

Oh well....,

should I take up my OTI bat and ball & go home...?:(:(

Feeling unloved and misconstrued...

Regards,

Robbo...


quote:Originally posted by Dimebag

Wise words Cantab. Well spoken.

Investors never cease to amaze me with their foolishness. To my mind there was absolutely nothing unexpected in this week's release. I must admit I had been surprise OTI's price had been so strong because I thought markets looked out between 6-12 months, and the outlook over that period was (and this was well publicised information) weak at best. I was actually somewhat impressed that investors were willing to cast their eyes (quite rationally) beyond the near term outlook.

However, it appears that the reverse was in fact true. Investors were speculating with a time horison of less than three months. Such antics really are extremely foolish.

If the type of temprement exhibited by Robbo is anything to gauge the mentality of the market by, it is simply no wonder that we see this inordinate volitility. With full respect to you Robbo, your view certainly are very suspect to change on what (I'm in agreement with Cantab on this point) is simply the revelation of old news.

Dimebag

(PS Cooper the result was eps loss of 0.05c, not $0.05 (i.e. 1/20th of one cent, not 5cps). In other words, OTI are operating at break-even.

Cheers
Dimebag

[skinny]

Robbo - you're very much loved - I'm sure the huge readership of this thread has a lot to do with your efforts. So stop pouting :D

Cantab, I'm no geologist so don't know whether IVW (or more precisely its lead mine) will make a great long term investment or not. I guess it depends on how easily and quickly other companies are able to dig holes in the ground and reduce IVW's share of world supply! I've searched for this on the internet and haven't picked up much. So the short term outlook for IVW looks very good. Its still off investors radars, unlike the interest we see in copper, nickel, silver and...sigh....gold. As such it remains cheap relative to whatever metric you care to look at (DCF +$2, 2005 p/e estimates of 4 to 7, 2006 under 3). So, I think IVW's share price has a fair chance of doubling within a year as earnings start flowing, and the return maybe more if the currency swings back up against the Oz/NZd's (maybe 20% in that alone). Longer term if lead prices do start coming back then I know where I'll put funds into ;)

[Dimebag]

Robbo

My apologies mate :)

Your views and comments are always appreciated. You have certainly contributed a lot to this thread and others, and generated a lot of useful discussion.

I simply felt that going from a prediction of a share price of $3.50 to one of 7-9c within weeks was a great example of how peoples views can quickly change from one extremity to the next.

But of the two predictions, I think the latter is far more accurate and it is admirable that you can quickly change you views to reflect new insights. It was nothing personal.

Regards
Dimebag

[Cooper]

Hi all,
There's nothing wrong with going from a Bull to a Bear on a stock, Robbo... it show's the grey matter is dictating, not the heart.
The more I look at OTI the more I like it, however I still have problems with their prices...
the way I see it (and bear in mind I have little knowledge of the battery supply industry, the lead demand industry or Chinese companies in general) the inability to pass on higher costs is a result of:

1) Less demand than that stated by the company. This is concerning because it means that the company has stated they are in a stronger position market-wise than they really are. I know that the general consensus is that the management is a key component to the past, present and future of the company but this must be considered (as with any company).

2) Fairly long term contracts for Battery supply. As stated, I have no idea about contracts in this sector or field so this may very well be the norm for Battery manufacturers. However if we accept the statement that they could only supply half the demand, yet still didn't make any money, then the contracts must have been negotiated a fair while ago, or they must have been negotiated with the result being OTI had fairly slim margins, which therefore did not take the possibility of higher POL into account. This speaks to me of a competitive market where the supplier is not the dictator of price... the customer is. When I take this view it contradicts the idea of a high level of demand with restricted supply, and leads me (sadly) back to 1). Failing that, the prices should surely be up for renegotiation in the not too distant future, and given the stated supply/demand factors the margins should be looking pretty bloody good.

3) Other factors, of which I'm not aware (given the fact I know nothing of the industry, this is a large and potentially illuminating list!!!). If anyone knows of any of these I'd love to know.

ATM, given the Macro factors, specifically a huge increase in the amount of cars in China, India, Pakistan etc etc, and a lack of viable alternatives for lead based batteries, my own personal view would be to pick up OTI at a certain price and wait for the next report before jumping in "Boots and All" to see if the margins have increased.
I'm not trying to tell you guys your baby is ugly (in fact it may soon be my baby as well). I'm just giving you my point of view so you can slap me down and tell me what an idiot I am, whilst also enlarging my low level of knowledge re: OTI. Please, be gentle.

[thereslifeafter87]

Cooper,

Couldn't agree with you more.

[clearasmud]

Wonder if retail battery prices are moving.The cheapest (small 12v) batteries at the warehouse in Tauranga are currently $87

Disc 182,300 Oti @14c

[k1w1]

Don't say OTI are going topless, Cantab. I may have to buy some !

Just back from a few days in Christchurch. Clearly New Zealands most beautiful city by a country mile. With that snow on the Southern Alps in the background it was pure magic.

You're probably on to this already Cantab but I lost a few brain cells gladly on the Morworth Estate Pinot Noir put out by the Morkane family in Broadwood. What a lovely drop. They told me that Bob Campbell described it as the best pinot noir put out of Canterbury which is high praise indeed.

Oh can I suggest that the OTI holders should diversify their risk by investing partly in something like KZL, on the AX, a lead and aluminium producer with good reviews and trading at a good price now. That way you have some cover if the lead prices go high by way of a countervailing effect on the lead producers revenues. The combination of the two is a good combination in my opinion.

[skinny]

It would seem the leak in OTI's SP has been plugged :D
But wait there's still more folks! Lead acid batteries at the vangaurd of a new high tech revolution! RAPS, HEVS, ECRVS and UPS's point to the future!!

http://www.alabc.org/

Actually this is one tech promise I think is distinctly better than average. High oil prices are already changing consumer demand (e.g. Toyota prius's sales are going through through the roof this year) and this trend will only continue IMO, increasing the incentive of the manufacturers to bring to fruition research efforts like those above. Holding OTI (and lead mining shares ;)) could be good as gold :D

p.s. no offence intended either Robbo - I blame the Flemish!

[skinny]

Ah what the hell, too late Cantab :D
Now if only it was as easy to mop up the annoying sellers of AFC too ;)

bon weekend!

[clearasmud]

China set for surge in car sales


Foreign car makers are expanding in China
The number of cars on China's roads is set to rise sevenfold to 140 million by 2020, the government has forecast.
The total number of cars will eventually peak at 250 million, or 150 cars for every 1,000 people, the Communication Ministry said.

That compares with about 500 cars per 1,000 people in Western Europe, and close to 900 in the US.

The projected surge in car sales reflects rapidly rising income levels fuelled by China's economic boom.

Investment plans

According to government statistics, four million cars were produced in China last year, with the number of privately-owned vehicles rising by 80%.

China's burgeoning demand for cars has encouraged giant Western car makers to invest large sums on local manufacturing facilities.

Foreign car firms have pledged to spend a total of $13bn (£7.26bn) in China by the end of the decade, an investment which will triple the country's total car manufacturing capacity.

The latest forecasts come despite a summer slowdown in Chinese car sales, blamed partly on tighter credit conditions as the government seeks to rein in unsustainably high rates of economic expansion.

On Thursday, Volkswagen, China's top foreign car firm, said its Chinese sales had dropped by 19% in August compared with the previous month.

[skinny]

Interesting snippet from kitco below on the world lead market and China's influence. The tight lead supplies are forecast to continue for a while, but what I especially like as an OTI holder is the bit about Chinese manufacturers continuing to take market share and rationalisation of the industry :)

http://www.kitcometals.com/reports/ManMetals/metals_040924.pdf

[KD]

Thanks Skinny - I particularly like the bit in brackets on the last line of the article -

"so unless there is an unforeseen and dramatic change in China, this country will exert an even greater influence on the lead market in the years (and decades) to come."


also significant

"China...will continue to take market share from battery manufacturers in North America, Western Europe and Japan...with consolidation of excess battery making capacity in these developed regions"



cheers

KD

[KD]

Hi Cantab - thanks for those reasurring thoughts on OTI. I endorse your comments regarding the current opportunity. Some heat has come of the SP allowing me to pick up a few more at 15c. I think Skinny did particularly well picking some up at a bit less than this recently. The lead/plastic prices have been a savage test for OTI and they have remained profitable. The SP has held up pretty well too. There are likely to be some good news stories ahead, I agree - so things could get interesting. If not- I'm happy to accumulate some more on any dips.


cheers

[KD]

Mr Corrigan - welcome back on board!

[skinny]

Cantab, I think thats a good move. You never know when things are going to take off on a fundamentally cheap company in a high growth area so its best to be prepared. At any rate as a long time ATR holder you know that, but its really hit home for me these last 2 days...the lead mining shares (IVW.TO) I first started buying back in June just drifted until this Wednesday, and now they're up 47% and climbing as instituional buying has taken off this Thursday and now today. All this on news since June!

Markets are nuts...got to love it [:p]

[airedale]

Hi Cantab, as far as Chinese companies listed on the ASX, Oriel Communications- code- OCO may be in that category.Their predominant business is the development of a secure credit card payment system suitable for the Chinese economy/banking system. They have established a business relationship with one of the largest banks in China. They are currently trading at around 2 cents and I regard them as speculative at this stage.
Discl: Holding OTI and OCO

[Packersoldkidney]

quote:Originally posted by cantab

airedale, thanks for that. :)

Anybody else have any other suggestions?

Cheers

Cantab





Cantab.

Political affiliations aside for one mo; I don't want to be baited like Belgarion, but here is one you might like to keep your eye on. It was up round 10% on Friday (but still well in the penny dreadful category), and that is Suntech, ASX code SCE. From memory has some business interests on the Chinese mainland. I don't hold, so I guess this post is stupid as I'm sorta ramping it, but you might want to investigate a bit further. Unfortunately I know their management is dodgy, but it is still worth having a look at all the same. Very cheap given the upside, but possibly maybe perhaps expensive given the management, if you catch my drift.

[Packersoldkidney]

quote:Originally posted by cantab

Packersoldkidney, thanks for the tip on SunTech SCE, I bought a few at 3.2c, now 3.7c. I went back through all the announcements for a few years and read the annual report so am up to speed on this one, which is 100% in PRC. I pretty much agree with your sentiments so I put a bit of loose change into it. I don't recommend anyone else buys it because it is very, very, very speculative, but interesting all the same. ;)

Cheers

Cantab


Yeah, might be worth a punt given the upside: good luck with it.

[skinny]

Here are a couple of Chinese plays in US markets I've had on my watch list for a year now but haven't bought into cos they were over hyped at the start of the year and now are interesting value wise, but I'm wary about the fragile state of US markets in general:

- UTSI (telecommunications): p/e 10, p/sales 0.8. USTI has traded as high as $42 US this year and is now around $17. It’s been hammered through missing EPS targets this year. Mgmt expects EPS of over around $2.20 for 2005 (implying fwd p/e is around 7.7). For this to materialize, however, UTSI needs to really break into non-Chinese markets and evidence on this so far is spotty. This is a really brutally competitive industry (look at Lucent and Nortel) so IMO any investment in this one would be pretty speccy.
http://www.utstar.com/

- NWD (foodstuffs - instant noodles and wheat products). Like UTSI this has gone on a boom bust cycle this year from 1.18 down to 50c in June and now back up to 68c which seems pretty good value - current p/e 7.7, revenue growth was 33% for June 2004 1/2 year, ROE 18%. Mgmt expects continued growth and improving margins.
Q2 results
http://biz.yahoo.com/pz/040813/62370.html
co. web site
http://www.newdragonasia.com/en/index.phtml

I also like and hold RPL.NZ (leather buinesses in the Shanghai region) and NPX.NZ (speciality chemicals), both of which have plenty of discussion on the NZX channel ;)

[Halebop]

Thanks Skinny. Something new to check out. You must have a pretty diverse portfolio by now?!

[skinny]

quote:Originally posted by Halebop

Thanks Skinny. Something new to check out. You must have a pretty diverse portfolio by now?!


Mmmm, only holding 10 stocks at the moment, a bit overweight in commodities, but yeah still geographically and sectorally diverse. Common theme is that most all small to mid caps with good historical EPS growth and fairly low p/e's (aside from MHI) - so I hope there is a few 5 to 10 baggers in there. Oh gawd I sound just like tla87!!

Like you I've also been watching FPH for ages now waiting for a sell off... Another group I'll get into if and when there is a sell off are the Austrian banks who have a dominant presence in the rapidly growing lending markets in Eastern Euope (the Czech Republic, Hungary, Slovakia and Poland, now getting into Romania and Bulgaria).

Cantab - on your battery question I know there is an Italian company that does re-constitue the lead from old batteries!

[skinny]

I've been doing a bit more digging into alternative energy sources for cars. Increasingly it seems hybrid electric cars are are the most feasible alternative to the old IC engine at this point. This represents both an opportunity and a threat for us OTI holders. Currently, the lead acid battery is NOT the power source of choice for commerical vehicles such as the Prius, but the advanced lead acid battery consortium (whose website has been posted here before) is fighting back, see some very promising research below...


http://www.foresightvehicle.org.uk/info_/RHOLAB/ACpaper.pdf


Encouragingly, it looks like the prototype specialised lead acid model described in the report above is 1/4 the cost of current NMH batteries. As such, we should expect the development of hybrid cars using advanced lead acid batteries. I believe OTI is currently plugged into this wider research network, so the future IMO seems a little brighter still for our own humble Chinese battery maker.

[whirl]

damn cantab that many gives you a nice percentage per cent.

[skinny]

Hi Cantab & whirl, I'm holding onto my OTI shares - there is another chocolate fish + a big bertha driver to collect from the Kidney in 2006 on this after all!

More seriously, I agree with Cantab's broad outlook but suggest the swing in earnings will be quite savage. Lead prices may not come down until 2006 as there are further falls in global lead stocks predicted for 2005 despite increases in world production, see link below.

http://www.ilzsg.org/archives.asp?go=getarchive&num=97


OTI's other main production costs, plastics & energy, will also be hurting them with the ramp up in oil prices in the 2nd half of this year and the chronic shortage of electrical generating capacity in Shanghai. In addition, given the Remnimbi is pegged to the USD (at least for now) they won't get any currency relief to the USD declining further and pushing up USD priced inputs. So, in short I suspect their losses might be quite deep and persist over 2005 assuming they are not able to pass on cost increases flexibly - something we do not know much about still!

On the other hand, if this scenario pans out it really will drive OTI's competitors to the wall. All the bottle necks in supply, especially lead, are forecasted to reduce through 2005 and even more so in 2006. As such, they should get huge margin relief in 2006 and face less competition. I think 2006 will be a very good year for OTI!!

My 2c: for long term holders I'd still consider buying into the lead miners. IVW are now up 56% since my initial buy in point in June but are still on the lower end of NPV estimates and are listing in Oz now early next year which should boost them further :D Zinifex here on the ASX looks good value.

For anyone still looking for a quick return from OTI I'd sell now, there are more patient long term holders lined up [:p];)

[thereslifeafter87]

I still don't see the attraction of a company like OTI, when you can buy companies like ATR, and UOS.

Theres no point in taking more risk than you have to.
OTI is inherently risky, because no one has any idea how much money it is going to make (lose) in the next few years.

[OneUp]

quote:Originally posted by cantab

airedale, thanks for that. :)

Anybody else have any other suggestions?

Cheers

Cantab




Richina Pacific (on the NZX) is worth investigating. They recently made a US$20 million acquisition at a bargain basement price - less than the NPV of the rent on their current Shanghai Leather tannery.

Another one worth having a look at might be Davidrob's pick of Alpha Technologies (ASU). One thing that will boost profitability in a major way this year is that they are switching production of their gadgets from Mexico (where the gross margin is 20 to 25%) to China (where due to lower costs they can earn a margin of 40 to 45%). .

DISC: Hold RCH and ASU.

[airedale]

Hi Cantab,have just been reading a report by Kerr Neilson on research by Toyota on the petrol/electric drive system.
One of the problems Toyota faced in giving an 8 year guarantee for the battery of the Prius is to over-specify the size to ensure it stands up to the large number of recharge cycles. A fluke discovery ,together with clever current control software,may in due course obviate the need for such over-engineering.

A Japanese development team has discovered a way to produce a power storage device that combines the storage capacity of a battery yet can accept and dispense power in the manner of a capacitator.

As it is a non-chemical reaction the cycle life is exceptionally high and because of its high power-taking characteristics it could allow the capture of as much as 80% of regenerative power created when the vehicle brakes.

As always there are trade-offs,one being the cost and the other being the 30% greater size over a traditional lead-acid battery.

Should this development live up to its promise its use could impact on the traditional battery market.

Neilson says that this research has two listed backers,unfortunately I can't find out who they are. It would be re-assuring to think that OTI were involved in this. I think that Skinny alluded to something similar in one of his posts.Any comments,Skinny.

Discl: Holding OTI

[skinny]

quote:Originally posted by airedale

Hi Cantab,have just been reading a report by Kerr Neilson on research by Toyota on the petrol/electric drive system.
One of the problems Toyota faced in giving an 8 year guarantee for the battery of the Prius is to over-specify the size to ensure it stands up to the large number of recharge cycles. A fluke discovery ,together with clever current control software,may in due course obviate the need for such over-engineering.

A Japanese development team has discovered a way to produce a power storage device that combines the storage capacity of a battery yet can accept and dispense power in the manner of a capacitator.

As it is a non-chemical reaction the cycle life is exceptionally high and because of its high power-taking characteristics it could allow the capture of as much as 80% of regenerative power created when the vehicle brakes.

As always there are trade-offs,one being the cost and the other being the 30% greater size over a traditional lead-acid battery.

Should this development live up to its promise its use could impact on the traditional battery market.

Neilson says that this research has two listed backers,unfortunately I can't find out who they are. It would be re-assuring to think that OTI were involved in this. I think that Skinny alluded to something similar in one of his posts.Any comments,Skinny.

Discl: Holding OTI


Hi Airedale,

I posted a link on this site a while back by the 'advanced lead acid battery consortium' whose group looks like it has some very promising research for developing batteries for HEV's, here it is again. To my knowlege OTI is not part of the consortium but BMW, Ford, and Zinifex here in Oz, amongst others, are.

http://www.alabc.org/
http://www.autoindustry.co.uk/news/industry_news/news-54069ajkp8

The 2nd link suggests a lead acid battery can be developed which is superior to the lithium-ion batteries currently used in the prius.

Do you have a link for the research you cite? I have a lot invested in lead so I do follow this with interest!

cheers
p.s. have a gr8 holiday cantab.

[airedale]

Hi Skinny, to read the report on batteries go to www.platinum.com.au
then click on to Reports,Articles, then take the link to MLC Platinum Global Fund, go to the latest quarterly report dated 30th Sept, and it is on page 4.
The report is written by Kerr Neilsen,Managing Director,Platinum Asset Management.

There is possibly another problem with using lead acid batteries in cars like toyotas Prius is the Toxic Fumes given off during charging of lead acid batteries

[robbo]

OTI

Anyone see this evenings Negative Profit Down-Grade Announcement ??

Ouch !! :([:0]

Regards,
Robbo.:)

[KD]

...and delay of new factory [xx(] which was the unexpected bit.

[skinny]

Hmmm, yes the profit downgrade was entirely expected, and looks like my more "savage" earnings scenario outlined above is panning out with the the size of the operating loss around $735,000.

The factory timing slippage is a bit disapointing but its not at all unusual at the moment with the shortages of labour, raw materials and energy.

On the whole thw news release is probly more negative than perhaps the mkt was expecting, it will be interesting to see how low this goes now (my nose is twitching [:p])....

[airedale]

Hi Skinny, low volume as usual today, not many holders have been spooked into selling.

[jebigabre]

There are a few misconceptions built in by a few posters (which I won’t name) about the current situation with OTI on this thread, which I believe are misleading especially to newer posters. These can be summed up with the argument that short-term issues are holding back profits and that these issues will be an advantage in the long-term as they are (1) providing an opportunity to accumulate stock at an attractive price and (2) an opportunity for the company to expand.

I believe that we are at the early stages of a bull market that occur in commodities once every 30 years or so and that the price of lead will not be coming down for years yet. The current situation OTI faces is an excellent example of how higher commodity prices lead to inflation in the economy as a whole as manufacturers are forced to increase prices of their finished goods.

These are the problems I see with OTI:

1. Realistically, if I wanted to invest in a battery maker for the ‘longer-term’, I would be buying the company when the price of lead is at record highs not where it is now. By the time this bull market it over, the price of lead will be much higher than it is now.

2. Comparing the half-year June 2003 to June 2004, average lead prices OTI paid nearly doubled from US$466/tonne to US$823/tonne. Since then lead prices were never below US$823/tonne and are currently US$966/tonne. If OTI was not making money in the half-year ended 2004 ($64K loss) when they were paying US$823/tonne, the situation looks even bleaker now.

3. The other (less important) raw material the Company uses in production is plastic (for the battery container) and its price too has increased. OTI recently stated that the price of plastic “is highly sensitive to crude oil price movements. The recent record breaking oil prices have given yet more pressure to battery manufacturers around the world”.

4. The issue of rising debt is also worrying. OTI’s net debt increased from $9.8m to $16.5m to June 2004 and this will continue to rise as the new manufacturing facility is completed. The weaker the Company is financially, the harder it will become to participate in any industry consolidation and seize the opportunities that some posters here are talking about.

5. Expanding facilities in the face of rising input prices is financial suicide. If margins are not positive, selling more batteries from a bigger plant isn't very smart. The cost savings will never be enough to compensate for the rising input costs.

6. Can the Company pass on the higher input costs on to consumers? We have no clue about this and even if it could it would never be able to fully compensate for the % by which input prices rise.

7. In May 2004, the Company signed a “Letter of Intent” with a major international battery Company to obtain technical assistance and the right to use its brand in China.
I believe that OTI needs a bigger o/s partner to be a serious investment candidate. The technical, financial and marketing cooperation from any such deal would certainly make the Company’s position much stronger. However, despite the Chairman’s statements that “contract negotiation is now in advanced stage”, nothing as yet has materialized and the market has not been informed as to how these ‘negotiations’ are progressing.

8. This stock is highly illiquid. Some posters here are not ‘worried’ about this. I would be extremely worried if I was in OTI because if things do go wrong (and they do go wrong with much better businesses than OTI), I would want to know what my exit strategy is. How do I get my money out and cut my losses?!

9. The profit share payment OTI has to make equal to 20% of each NPAT. This is old news but still relevant news when OTI is making money. The ongoing payment reduces EPS by 20%.

10. The company’s revenues and profits are absolutely impossible to predict and the management isn’t really keeping the market informed about the immediate and medium-term outlook. Investing in OTI at this point in time is pure speculation and while some continue to see ‘opport

[airedale]

Hi jebigabre, are you holding OTI now, or have you ever held OTI.??

Airedale: Holding OTI

[jebigabre]

No I never held this stock.

[stephen]

Thank you cantab. One thing you said is a little unfair though: "He has done a lot of research about a share he has never owned".

Some people do a lot of research about shares we have never owned - that's how we identify the ones we should own.

disc: a few OTI stashed away, at a loss :(

[jebigabre]

Hi cantab,

Just to clear your last comments up, I joined this forum last night but wanted to post here on OTI and various other things since july. I remember it took a while to get a login and I went o/s soon after, never had time. I never posted under any name and I'm sure that can be confirmed with my IP address. I have however been posting on HC for a few years under the same name. And no I never owned OTI. Maybe one day when lead prices peak! :D if they are still around. I'm not being nasty here and regarding the debt issue, it is correct that it is total debt. My point was that financial risk has increased and that stays, it isn't misleading.

[jebigabre]

Great cantab, I'm glad you didn't take my post the wrong way and I didn't want to step on people's toes here from day 1.

Regarding AFC, I think its a classic GARP stock if it just wasn't a micro cap. However this probably means that the returns at the end of the day will be much higher if we are right. I do think however that it will take a long time for the PE ratio to be re-rated adequately to the growth in the Company's earnings.

Cheers,
jebigabre

[skinny]

Hi ya Cantab & other OTI afficionados! Welcome too Jebigabre, like Cantab I think the risk:reward ratio is attractive, but yes there is reason to be cautious with this one for sure (note most of your points had been covered here, just not all in one place ;))

Anyways, the thing that intrigued me most about your post was the outright assertion that we are just the start of a very long lived bull cycle in commodity prices. I wonder if you could expand on that?

disc: hold +100,000 IVW.TO lead mining shares AND OTI!

[jebigabre]

Hi skinny,
To answer your question.

A picture always speaks a thousand words.

http://www.ditomassogroup.com/images/alltimelowcommfin_jpg.jpg

From the 1932 low to the 1934 high, in the midst of deflation and the Great Depression, commodity prices, on average, rose by 100%.

A decade of high real prices during the 1970's (a time of high inflation) encouraged a massive expansion in the supply of commodities on a global scale. (Many economists believe the current situation is closely leading to resemble this scenario - especially with the US economy awash with printed money thanks to the US Fed & its single minded desire not to see the US markets crash).

Then, from 1980 until 1993, prices came under constant pressure. A price recovery began in 1993 but it was snuffed out by the 1998 Asian financial crisis. As a result, commodity prices tumbled from what were still relatively low levels.

For producers this turn of events was a catastrophe. This led to underinvestment (see Aussie mining co's during the Internet boom). When selling prices fall, producers tend to respond in predictable ways - mines are closed, exploration budgets are slashed.... New production is discouraged. In a free market economy, production without profit cannot continue indefinitely. At some stage, prices must rise at least to the point where producers can earn a living. This is what has been happening since 2000.

The point is this: the prices of commodities, like the markets in general are cyclical. Everything goes in cycles. Viewed within a long term perspective, if reversion to historical "norms" is a reasonable expectation, then commodity prices, in aggregate, could double from here. And from the diagram above you can clearly see that it has happened before.

So why couldn't it happen again?

[jebigabre]

At the end of the day I still wouldn't be so bullish on commodities if it wasn't for the monster that is CHINA. Which brings us back to the paradox of OTI. How can you not be making money selling car batteries in China? Well, the answer is rising commodity prices.

And we can also see from the OTI example how higher commodity prices lead to inflation in the economy as a whole: OTI, like many other manufacturers, will be forced to increase prices of their finished products.

[skinny]

Interesting chart Jebigabre. Do you have a similar graph for base metals alone, i.e. ex-soft commodities and oil prices? I wonder if it would show a similar picture?

Also to be a bit contarian the chart shows the largest sustained bull phases in commodity prices were the post ww2 boom and the negative supply shocks of the 70s. Both events could be considered quite unique.

Today China is putting pressure on commodity prices for sure, but as you say things go in cycles and China has been slowing from its current blistering pace of activity, while at the same time there is a lot of new capacity coming on stream in hard commodities given the expansion in mining capacities over the past couple of years.

I'm long in some mining companies (particulalry lead!) as my judgement is that prices will not crash as this happens - but I could well be wrong. Its not just China that has led to high base metal prices over the past year, its also from the fact that most of the world has had enjoyed a fairly synchronised upswing in activity from the 2001 troughs. I wonder what will happen to commodity prices as, for example, increasing interest rates in the US lifts global long term bond rates and therefore debt servicing costs in Latin America and other emerging market economies.

Anyways, as far as OTI goes I look at it this way - given high and possibly rising input prices surely a battery company situated in one of the fastest growing and lowest labour cost centres in the world will be better placed to ride out the margins pressures than most. We'll see!

[Arthur]

Hi Jibigabre and Skinny

Do you know about the Liontamer commodity funds? They offer capital protection, but an exposure to commodity increases.
http://www.liontamer.com

It's the Combi series. Both offers are closed now, but the will probably have another one

Cheers
Arthur

[jebigabre]

Hi Cantab,

I look at it this way. Historically, commodities and hard assets have been a natural hedge for inflation. I like commodities over the next decade and my portfolio reflects my view. That doesn't mean I just invest in commodities. There are excellent financial services stocks about, for example AFC which I hold. Also stocks with a focus on the growing financial needs of the aging population, like MFI for example, which I don't hold as yet and others.

If we look at what it happening around the world atm in the US, China, Europe, Aus, even Japan, the trend in overall prices is up. The period od disinflation (caused by productivity gains etc..) is over and behind us. The Europeans are in the process of easing monetary policy and pumping money into their economies to curb the Euro's gains against the US$. China is seeing inflationary pressures as well and if you look at todays Australian CPI figures: CPI rose 0.8% in the December quarter 2004, compared with 0.4% in the September quarter of the same year. That's a double increase.

With unemployment at low levels around the world including Aus, (which has unemployment at low levels never seen before), the challenge of finding adequate/suitable staff is rising for businesses which places additional pressure on wage increases, leading to further inflation.

Global economic growth may slow and that will place pressure on commodity prices - true. However, there is too much cash floating around in the economies of the world (see Japan, interest rates 0% for god knows how long, US interest rates at historic lows, madman at the helm of the RB pumping cash into the US economy, Europeans look like they are adopting Greenspan's strategy to get their economies moving, China ain't going to slow, from 8-9% to 6-7% maybe, but that's still growth) that any serious world economic meltdown or recession is unlikely.

Rising prices of lead, gold, zinc, cotton, gas, oil whatever is going to be the investment theme of the next decade IMO. It is the result of careless and prolonged expansionary monetary policy around the world. (to over-simplify in one sentence maybe).

Cheers,
J.

[Halebop]

I haven't read this thread for a while.

Jebigabre I guess we won't know if you're right for a while but you have some compelling logic. Perhaps you'd like to start a "long term themes" thread in the Investment Strategies forum as my myopic view of the world could use some discussion in this regard. (Maybe this will draw Skinny out of retirement too!). I particularly like the chart you posted earlier - puts things in perspective!

Cantab you said something like the "risk for OTI has now increased" but this is not strictly true. Your perception of the risk has changed but the risks were always there. (and perhaps I'll start a Risk Management thread!)

Good mature discussion all!

Disclosure: Nil OTI

[airedale]

Cantab, in the automobile age car batteries are still a staple[must have] item. Somebody [or company] will make money by supplying the market. OTI is well placed to do that.

Airedale one problem with car batteries is they have to be good

[airedale]

quote:Originally posted by ENIGMA

Airedale one problem with car batteries is they have to be good


Hi Enigma,I have owned a number of cars over the years and I can't remember one which had a "bad" battery. Old batteries, tired batteries, sometimes, but they all did what they were meant to do within the warranty period.
In one instance I bought a Nissan Laurel diesel car [Jap import] with the original[I think] Japanese battery in it.I had that car for seven...yes seven years before I replaced the battery.
I hope that the OTI batteries will be as good as that. A quality product

[Dimebag]

Cantab

Nothing wrong with buying straw hats in winter. The winter can seem long and cold at the time, but does pass fast enough.

With that said, I do have some concerns with OTI. Firstly, it doesn't appear as though OTI have any sort of pricing power at all. They continue to heamorage money. I'm not entirely convinced of their "fixed-price contract" explanation. It's been over a year now.

This doesn't reflect positively on OTI's economic strength.

Secondly, the further delays in opening their second factory is frustrating. You mention this risk yourself. Generally, you want to invest with a company that gets things done and gets results, without a constant stream of excuses.

12.5c seems relatively cheap, and OTI could well prove to be a huge success, but it's tough to call at this stage. The company can't grow while it's not making money, and opportunity costs abound when you consider that your funds could be in growing and profitable enterprises like ATR instead.

I've still got most of mine though. Sold some at 16c a while ago but still hae 23,000 which I will definitely hold for the long-term

Cheers
Dimebag

[stolwyk]

The question is: are there better investments?

Gerry
Don't Hold

[skinny]

quote:Originally posted by skinny

Hello again OTI aficionados,

What do folks think about ‘vertically integrating’ their investment in OTI by taking a stake in a lead producer, in particular Ivernia (trading as IVW on the Toronto stock exchange)? Could be a good way to manage risk should OTI have difficulty in fully recouping margins over the next 1-2 years, no? And if I remember my modern portfolio theory right we’re ‘sposed to try and find investments whose returns are negatively correlated to improve return per unit of risk.

Of course such an investment needs to be with the right company and at the right price so I spent a few hours researching IVW. They have a relatively new management team, with the CEO (a Mr. De’ath!) & COO joining in 2000. Both have loads of experience at major companies (Rio Tinto and Anglo American) and seem to have done a good job so far turning a company around which was near bankruptcy when they joined. Non-performing assets were sold off and the balance sheet was cleaned up so now they are sitting with little debt, a pile of cash, and only one asset – the Magellan lead mine in Western Australia for which development funding is secure. Like OTI this makes valuation of the company relatively simple. Essentially, it’s just the intrinsic value of IVW’s lead mine, which I had a stab at estimating by putting together a spreadsheet to calculate the NPV of the cash flows from the mining operation less expenses. Taking the existing cash position and CAPEX plans IVW expect; the production schedule and per-unit extraction costs (0.13 US cents per pound) IVW expect; Oz government royalties of 5%; the Canadian corporate tax rate of around 25%; and assuming: head office costs at 5% of sales, full depreciation of the initial capex costs of the mine over its life (estimated at 12 years), full dilution of the existing equity base via 100% exercise of current options and warrants, and a discount rate of 7.5% on the cash flows (my hurdle)....I came up with the following numbers:

- if lead price stay at current levels over the life of the mine the intrinsic value per share is 51c, 173% above the current share price (21c Canadian)
- if lead prices were to go back to the companies target ($700 US per ton) immediately once production starts (2005q1) and remain there the intrinsic value is 37c, 73% above the current share price
- if lead prices were immediately to fall back to $500 per tonne the current share price is fully valued.

Interesting eh?
I’d be happy to pass on the spreadsheet too for the real pros like Dimebag or Halebop to have a look at – no doubt it’s a bit screwy in places!





Just a quick pop in to skite [^][^] and to say thanks to KD for bringing IVW to attention :):) 6 months later and the skinny global hedge fund is up around 52%, in large part due to IVW rocketing away, now up 240% from the average levels I bought in through middle to late last year. (Note the NPV got blown out of the water when IVW had a huge resource upgrade a few months later, lol.)

I see Mick started a commodities thread. Jim Rogers in his new book says "find a way to turn gold into lead and you'll be a rich man."

Time to start ramping lead stocks Gerry [:p]

[Dazza]

could someone tell me where i could find their annual reports with substantial shareholders info.

and also their website thanks?

[airedale]

Hi Dazza, go to www.stocknessmonster.com enter OTI, select ASX, from the drop down menu select News, click the green arrow head, and you get all the company announcements back to 1999.

[jebigabre]

OTI holders have been very patient with their investment. Despite the vicious downtrend, they've been steadfast with no signs of panic. Today a few lost their nerve.

10c is more of a psychological then some intrinsic support level. If more holders lose their nerve, panic will start. Then there is no rational price level. The sellers accept whatever is on offer. As there is no liquidity, there is no interest. The same goes when the SP is going up; there is no interst to sell and panic buyers move it way above to what its worth.

Anyhow, when panic starts, this one could easily tank another 50% from here.

So if there are people interested in buying, wait for the panic to start. Bargins galore. I wouldn't be buying because OTI is an unprofitable company in the near term at least.

[Dazza]

good point good point
i will continue to monitor slowly

[clearasmud]

Hi cantab and others,
Just had a look at the annual report and noticed the $10m debt is classed as a current liability.
This is a surprise considering the companys current lack of cash flow.

Also does anybody know if the 20% profit agreement is still in place.

cheers
Clearasmud

[airedale]

The AGM is Thursday 12th 11.00hrs. Would appreciate an update from anyone who is there.
Cheers,

[airedale]

Well a neutral sort of announcement today. No progress on re-negotiating the CVIC deal, but new factory up and running, and some positive words about finding an international partner.

[Packersoldkidney]

Not an OTIer myself, but they sparked up today after a refinancing deal was announced. Wonder if the Skinster is about and our bet is still extant? God knows we picked two dogs to compete against one another, OTI and EMS: but every dog has their day so they say.

Good luck to holders.

[skinny]

Hey Packers yes I still holding this flea bitten mangy curr, gambling instincts came out last week and bought a few more actually so am now only 15% down on average purchase price [:o)]

[Packersoldkidney]

quote:Originally posted by skinny

Hey Packers yes I still holding this flea bitten mangy curr, gambling instincts came out last week and bought a few more actually so am now only 15% down on average purchase price [:o)]


Ha ha. I've 'averaged down' a few times too: only to the stocks I think will make it, though.

Hope the price of OTI gets HOTI at some stage for ya.

[airedale]

Ann. report out yesterday. Generally no worse than last year, but no better either. New factory in production, but revaluing of RMB currency is another drag. Lead price still too high for comfort. No buyers or sellers quoted recently. Chris Corrigan is still there,and most of the board been there a few years. For the sake of a few grand I may as well hang in for another year.

[steve fleming]

2nd director resignation in a matter of days...are they both protecting their personal liability positions in the event that the company is insolvent/about to become insolvent???

[SEC]

OTI trading suspended since they have not submitted their HY report on time. Is this the end for OTI?

There was a lot of talk on this thread that OTI represented an ideal way of exposure to the China boom. Fact is, there are far less risky and more profitable plays out there that are leveraged to the China boom. Any decent sized resource stock would do, with easy 150+% profits made over the past two years.

SEC

[Packersoldkidney]

Gone.......

[silu]

I have already written off my investment in OTI (it was a high risk one from the get go) but now a “relatively” positive announcement regarding its unaudited yearly results. Is there any life in this dog?

[skinny]

Still a mangy curr but at least it hasn't been put down just yet [:p]

[clearasmud]

They still live!

http://sa.iguana2.com/cache/87e6b5d2a6ef5672d1e3719536cd1527/ASX-OTI-429242.pdf

http://www.asx.com.au/asxpdf/20061009/pdf/3yx533l12j22r.pdf

[clearasmud]

Chairman,s address.
OTI to trade soon

http://sa.iguana2.com/cache/60542ba0933b1a6475c087cd1e5b3317/ASX-OTI-436690.pdf

[airedale]

Announcement today. OTI have a new address:
Level 12
32 Martin Place
Sydney.

[45south]

Market cap. down to $5.6 million.
Maybe we should take the hat around and mount a take over.
Annual rev. around $30m.Interesting to see what opening prices will be. Got a few too many of these in the bottom draw, just about given up.

[silu]

HY Report is out. NTA 15.7c. Revenue up 60% and Profit up 283%.

Maybe I have given up on this puppy too early? Still have several thousands in the bottom draw.

[OldRider]

I thought they had fulfilled their ASX requirements now, so would be able to get relisted. this hasn't happened so must be something I don't know about.

I haven't seen any HY announcement yet, but if the above is correct it would seem an upward price movement might occur if relisting ever occurs.

[airedale]

HY report to June06 out today, and the HY to Dec 06 is promised later this month.

[clearasmud]

The annual report (Fullyear 2006) is still outstanding and would have been due 31 March 07.
Gee we might have an NTA of 20c by now![}:)]

[skinny]

According to the 1/2 year statement the full year report is due end of this month and I would hope re-listing on the release of that [?]

The NTA looks good as does the massive profit increase, but the latter was mainly from the disposal of plant & equipment - operating cash flows were negative for the 1/2 year ended June 2006. And over the 2nd half of 2006 lead prices shot up dramatically...

I've also got some in the bottom draw but am not expecting them to leap to the top anytime soon :(

[airedale]

Lead touched a contract high of $2,120 and ended the official session at $2,115, versus $2,080 on Thursday.

If lead prices are a concern for OTI then what are the prospects for other battery makers?

[clearasmud]

http://sa.iguana2.com/cache/1514ac7ee5485eb0c1e7b884ddc5d2a3/ASX-OTI-465228.pdf

2006 Annual Report.
Wonder why it is still not trading?
Is it that the 07 half year report is due.
business seems to be surviving ok but barely profitable.
Noticed they are sitting on A10m$ land rights which aren't reflected in the B/S.

Clearasmud

[silu]

I have 30k shares at an avg price of 16c. I am seriously considering averaging down now they are trading again. Gamboool??

[airedale]

Hi Silu, are they trading again? Yes, just checked on Stockness. There is a seller, but no buyers.

[slam]

quote:Originally posted by airedale

Hi Silu, are they trading again? Yes, just checked on Stockness. There is a seller, but no buyers.


Buyers on etrade airedale

Buyers
Number Quantity Price
2 220000 0.031
1 300000 0.030
1 500000 0.002
1 1000000 0.001


Sellers
Price Quantity Number
0.045 200000 1
0.100 72661 2
0.150 50000 1

[skinny]

So it's alive after all!

I have over 100k of these in the bottom draw with an average buy in price of 5.5c. The NTA is 14c but then again they are barely scraping buy at current lead prices and the stuff about the possible suspension of the operating licence on page 3 of the annual report due to some arcane capital listing requirement of the Chinese regulatory authorities is a bit of a worry...

[skinny]

Now sitting on a 225% gain in a week. Good doggy :D:D

[airedale]

Hi Skinny, big rise on low volume close to closing time. Is it too early to feel confident?

[silu]

Dammit! Should have followed my own advise to average down. Still early days though.

[Nimble]

"The company is aiming to make the business the largest manufacturer of batteries in the People's Republic of China. In particular, it is the company's intention that the business take advantage of the anticipated growth in the sale of hybrid and electrical vehicles in the Chinese and international markets." Hmmm... sounds promising. China's vehicle fleet grew by 20% last year.

New cornerstone investor investing US$20million, restructure etc.... Unfortunately each time new equity injected into business it dilutes OTI shareholding which will now fall to 27.79%. By my calculations it values OTI shares at AUD 8.9 cents.

[airedale]

"The company is aiming to make the business the largest manufacturer of batteries in the People's Republic of China. In particular, it is the company's intention that the business take advantage of the anticipated growth in the sale of hybrid and electrical vehicles in the Chinese and international markets." Hmmm... sounds promising. China's vehicle fleet grew by 20% last year.

New cornerstone investor investing US$20million, restructure etc.... Unfortunately each time new equity injected into business it dilutes OTI shareholding which will now fall to 27.79%. By my calculations it values OTI shares at AUD 8.9 cents.

Hi Nimble, this company has lofty ambitions. I should have sold out years ago, in fact I should never have bought in, but I stuck it in the bottom drawer after they were suspended from the ASX.
Lets hope that they can rise from the ashes.:o

[PLYNCH]

Apollo Battery to be sold for $ 42m Oti owns 56%.Thats about 20c a share.Great news.

[silu]

Wondering whether they redistribute to shareholders?

[silu]

So directors will most likely decide distribution of the sale to its shareholders at around 15 cents and wind the company up. At least I breakeven after 10 years of investment. A sad lesson learnt.

[silu]

After getting my money back in dividend redistribution and years of inactivity it seems as if the action of late points to a reverse takeover. I'm not selling my lot just out of pure interest to see where this is heading.

[silu]

eGrowcery - what an awful name. But even with the 15-1 share consolidation I will still have enough shares to make it a viable holding.