PMM portman limited

portman - starting to look like good value

  1. 708 Posts.
    Once Portman is in an uptrend again, I am set to buy it for the long term. I was seriously considering CLO but will go for PMM once the technicals are right. Some comparisons between the two:

    Cash backing: both stocks have excellent cash backing -something I really like. PMM has just over 40% of its market cap in cash whereas CLO has just over 50% in cash. Generally, both have good balance sheets with minimal debt.

    NTA: PMM is just above its NTA whereas CLO is trading just about at its NTA.

    Dividends: Both have a history of dividends, which is a must. Looking at the next 5 years however, I expect CLO to average about 5c per year. This is compared to the 4.5c it paid out this year and a possible reduction to 2.5c next year due to those contacts. So, it will be a struggle to even achieve the average of 5c/per year for the next 5 years. PMM, on the other hand, should easily achieve an average of 12c/per year for the next 5 years. It is expected to pay about 10c next year.

    Earnings: Portman will have quite a few things on its plate, starting with the Koolyanobbing mine expansion, which should really underpin its earnings outlook for the next 5 years. This operation will be the main driver and cash spinner. The more aggressive attitude to acquisitions, brought by new CEO Eldridge, means that fresh acquisition opportunities will be assessed over the next 6 months. Portman is looking for new places to put current and future cash to good use. CLO, on the other hand, will generally plod along as it has for the last god knows. Opportunities will appear in Oil & Gas, where it generally has achieved a nice little niche market for itself. This is, by far, the best area of their business - the rest is quite average.

    In general, even though CLO looks superficially cheaper, trading at book value, more cash etc... compared to future earnings and dividends, PMM is much better value. If you buy CLO at todays price, in 5 years you will receive 50% of your investment back from dividends alone. With PMM however, you will receive something close to 60% back from dividends. This is linked to the better earnings outlook of Portman and the greater stability of its cashflows - contract type income is prone to nasty surprises and CLO has proven this over its history.

    Management: This is the absolute clincher. Portman guys generally run a tight ship. The management was really boosted however with the arrival of Barry Eldridge. Eldridge is a well-known figure in WA mining circles with a long and impressive CV. He was major projects director at North Ltd when that company was developing the West Angelas iron ore mine. Before that, Eldridge was known as one of the "Three Wise Men" at successful gold group Forrestania Gold, along with Mark Ashley and Kim Robinson. The latter guys are now involved with Kagara (KZL). An impressive company which I own.
    Clough, on the other hand, has serious credibility question marks with their top management, particularly in light of the latest profit warning. The autocratic style of their CEO resembles more a family run Deli than a public corporation. Also, they have not changed their MD for the last 30 years - Harry must love this guy, a friend of the family no doubt.

    All in all, Portman is the better buy. Clough looks cheaper but only if you look on the surface. If you look more deeply: Portman has a better earnings outlook; a more stable cashflow outlook; a better dividend growth outlook; a better management team.

    Which company has more downside?

    Probably Portman but at these levels, both company's look like they are in value territory. My general opinion is that both are buys at current levels but I would be buying Portman with much more confidence.

    I apologise for the length of the post,
    Regards,
    J.
 
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