Michael Kao Pitches Canadian E&P Company

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Michael Kao is the founder and portfolio manager of Akanthos Capital Management, LLC, a capital structure long-short fund with an event focus based in Los Angeles.  Prior to forming Akanthos in 2002, Mike worked at Canyon Capital Advisors where he co-founded the Canyon Capital Arbitrage Fund, directing investments in various arbitrage strategies.

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Michael Kao spoke at the 9th Annual Value Investing Congress, also see Greenblatt Explains His New Approach To Value Investing. Below are notes from his presentation.

Highlights from Michael Kao’s presentation

Tao of asymmetric investing

Long/short capital structure

Event-driven focus

Overweight highest conviction

Different thematic drivers to offset position concentration

Old ideas: General Motors Company (NYSE:GM) distressed bonds 8-bagger

Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA), Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) preferred 20bagger


Canadian domiciled E&P company

Toronto traded

Op assets in nz

Most active driller in nz

$200M market cap

$68M cash

140M ev

3.5x ebitda

Profile similar to distressed bond plus event options

Trades at 3.5x current cash flow with production at distressed levels


Base case: $6.2, 100% upside

Upside: $15.5, 400% upside

WH in deep value

Disappointing production numbers in past few quarters

Apache Corporation (NYSE:APA) pulled out of a JV


Commodity price risk: 85% oil

Limited op history of wells

Lack of oil gas infrastructure in east coast

High potential for capex spending

Near term drilling results could disappoint

Michael Kao the Tao of Asymmetric Investing by scribdvw

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