Astron - ATR: A zircon player in Aus and China

[Damo79]

Wow, this is a delay. A rejection to buy their non-core business would be a price moving news. Since, there was one rejection to a purchase last week on a coy asset due to the increasing AUD (a small iron-ore coy I think), then this could be the same. Foreign currency issues could be the key.

I don't think that should be an issue since the purchase price is in Chinese RMB. The only downside is that it's less for us at this end as the AUD$ goes up.

[weasel]

Hi ATR'ers
Has anyone emailed ALex Brown about what the f**k is going on with this co?

[soulman]

Are you holding this Weasel? I would just assume what an incompetent management this is. When this stock does get re-instated, it could well be $1.50 or less. People will be selling because I just can't see any reason for such a delay in reporting. Maybe unless they are just doing their accounting right now instead of doing them day to day.

Shareholders will want to sell down as quickly as possible because they don't want to hang their hat on a company that can't even report on time and if they do, always at the last minute. Hence, ATR has been saving quite a lot of dough on accountant and auditor.

Not a shareholder in this company but I find this very strange indeed. I feel for all current shareholders that can trade ATR and a nervous wait when the report do come out.

[Damo79]

Hi ATR'ers
Has anyone emailed ALex Brown about what the f**k is going on with this co?

No, but I'm going to now. This is ridiculous!!! I was holding mainly because I expected the gap between the share price and the $3.85 cash per share value would close somewhat. But at the moment, I'd just be happy to have my money back.

Edit: Ok, have asked. Will let you know if I get a reply :/

[weasel]

Hi guys, yes I hold ATR. Should have sold when the 3.85 was announced, but as you say, 3.85 seemed to good to be true... maybe it was. Thanks for emailing Alex, Damo.

[soulman]

Damo, if you don't get a reply within 48 hrs, I would assume Alex Brown has left the country living in Ethiopia, hiding from the ASX regulators. The head office has shut and no secretary to answer your question. Alex Brown has substantial holding in the coy, doesn't he. So, he want the company to be successful, doesn't he and then he go and do something like this. Can't they just copy last years report and change a few things.

Either way, ATR has all but ruin it's image as a listed coy.

[herbert240]

This is a bit worrying....was wondering if Dimebag or Cantab have a view?

[clearasmud]

i,m not worried.
we should still get our $3.80.

[Dimebag]

I think its fair to say that overall Astron has been nothing short of a huge disappointment to shareholders over the past three years. I've personally learnt a few valuable lessons about 'falling in love' with a stock with this one, and letting your past success with a stock colour your views about the future. You can't ever take a stock's success for granted, or let the kindness the stock has shown you in the past numb the critical faculties. Overall ATR has been a big success for me but over the past three years its been a significant drag on my portfolio's performance in an unbelievable bull market.

I still have a reasonable size shareholding at the moment (about 10% of the portfolio) but have been progressively reducing for some time, and will look to continue to do so. Management quality is a real issue for me, evidenced again with the inordinate delay in getting the annual report together. While it is sort of understandable that ATR was tied up with the sale process etc, a delay of this magnitude is unprofessional in my view, and irritating for shareholders who have their holdings locked up with the trading suspension in a bull market offering significant opportunities elsewhere.

During the past two years ATR have produced a glossy annual report with a lot of detail, and they seem to be using it as its primary vehicle for shareholder communication, so it is possible that parts of it are being re-written and/or were on hold until the outcome of the sales process was confirmed. And I think it is unlikely a hold-up with the auditing process is the main cause of the delay. Still, I find a delay of this magnitude unacceptable.

I'm with Clearsmud in that I don't think there is much downside from $2.80ish. The $3.80 in disposal proceeds is not going away (although A$ strength will have wiped a little bit off this), and the stock is already trading at a pretty significant discount to cash backing. Still, I do think a pretty significant discount is warranted, given the lack of visibility on the potential for the Donald and titantium projects, to which all of the cash will be committed. Clearly they are very confident in the prospects for these operations to have proceeded with the sales process, but there is a long way to go before the market will be convinced that they should pay book value for them.

The Donald project is potentially still quite a large and lucrative project, but the project is well behind schedule and has run into some technical issues with water procurement and the associated infrastructure. The ESS is still well behind schedule. And in the meantime, mining costs have gone through the roof (making anything close to the original capex estimate of $125m seem unlikely) and the zircon market is progressively becoming better balanced and zircon price strength is dissipating and could reverse.

The titanium project is the wildcard. Clearly they have spent a lot of time on engineering designs etc, but ATR have no experience in this area and there is absolutely no information about the prospects for this project. Hopefully the annual report and/or the appraisal reports that are being prepared will offer some further insight.

In the meantime, $2.80 is probably about a fair price. Unless there is some pretty clear and upbeat communications about the potential for these projects, I would bet that there is a high likelihood that the stock will continue to perform poorly. ATR has basically transformed itself from a stock with a growing, profitable operating business into a well capitalised company with a couple of big, speculative, and long lead time development projects, that will take several years to contribute any earnings. Barring any upbeat commentary I'll probably look to continue lightening in the near future.

Cheers,
Dimebag

[herbert240]

Thanks Dimebag for your excellent observations/appraisal...much appreciated