Natural Gas – Growth across the world in natural gas production. NA natural gas is an outlier. Why? Horizontal drilling and fracking. These have opened up significantly more reserves, available on an economic basis. Low natural gas should help industrial in the US. This is not a transitory event because of the size of the resource. Exporting LNG is a long term opportunity in NA. Focus on the long term and be willing to lose money in the near term if your thesis is still correct.
Idea: Enerflex Ltd (TSX:EFX) Global industry leader, exposure to NA, solid balance sheet, significant opportunity for growth, high roic with minimal required capex. Over 100% upside in the stock price. Compression is required more for the new resources because of lower pressure at the well head. Strong backlog. Debt has been reducing significantly. Not asset intensive. The stock trades at EV/EBITDA of 4.1x and should trade at 6 – 8x. Margin capture opportunity associated with the GE distribution agreement.
Southeast Asia to the Former Soviet Union – Isaac Schwartz’s talk
Samson Holdings Limited (HKG:0531) – Furniture company selling in the US and manufacturing in the US. EV = $160.4 million. Housing is creating some headwinds. Comps are Ethan Allen and Furniture Brands. Samson has higher roic. Balance sheet is strong with $235 million in cash with a market cap of $396 million. Insiders own 74.5% with the founder owning 70.4%. Low cost manufacturer. The company is short the Chinese currency given asset and sales mismatch. The company is operating significantly below existing capacity. The stock trades at 2.3x EBITDA.
Thai Re (SET:THRE) Thailand insurance company that was hit hard after the Thailand floods. They needed to raise capital and Prem Watsa put in capital. High roe of over 20% between 1996 – 2010. January 2011 book value was $96 million. March 2012 raised $225 million. Capital wiped from market and rates up100% in many lines.
JSC Kazmunaigas Exploration & Production (LON:KMG) – 2nd largest producer in Kazakhstan. Former communist country. Only a few dozen public companies. P/E 6 x and market cap $8.5 billion. Geologic risk is low. Long lived resource play. Low float and trading volume. Government owns the majority of the company. Exploration CAPEX going significantly higher.