This blog relates to projections for the future of PPX based on Chart Share Price action. Firstly, congratulations to Harry Boon on winning the vote. Regrettably there were mainly losers on the day.
The Losers, in no order of ranking.
- Andrew Price because he won less that 50% of the votes cast;
- Harry Boon because he managed only 51.84 per cent of the votes cast with the benefits of incumbency and the “club”;
- The three major shareholders, Orbis, Schroder and Maple-Brown Abbott for their own individual reasons;
- The shareholders who didn’t vote, circa 29%, as their votes may have clarified the overhanging uncertainty;
- Employees of PaperlinX, especially those in the UK;
- Suspected whistleblowers as Harry Boon and Toby Marchant will surely use their remaining time in office seeking them out then delivering their revenges; and
- TRUTH, being the first causality of any conflict.
The few winners, and much more, will be discussed in EGM2 to be published soon-ish.
What’s next for the share price of PPX?
If you’re interested in the future of share prices, the most valuable resource is past share price action measured against perceptions and facts.
Apart from algorithm trading by slick operators, shares are bought by the greedy and sold by the fearful. For plain vanilla shares like PPX, i.e. those without exchange traded options or retail short selling; the only way for most people to profit is to buy low and sell higher.
As previously indicated on the blog, I subscribe to the old maxim: “buy the rumour and sell the fact”.
I bought after Feb 3 and sold as above. This was posted at Hot Copper at midnight Thursday. I believe that 12¢ is overpriced at present, regardless of who won at the EGM.
CHART 1 is of PPX share prices between Feb 3 and March 23, 2012. It is our best immediate guide to the future.
CHART 2 is of PPX share prices over the past 12 months. In this case it confirms the short term view.
In a subsequent blog I’ll address the implications for PXUPA; however at the moment whatever PPX does is relevant to PPX.
Referring to CHART 1, Andrew Price’s intentions were announced after the close on Feb 3. That day PPX closed at 6.5¢, an equal all time low close for PPX. His timing was perfect.
For the next 6 weeks and 4 days, Mr Market believed Andrew Price would prevail.
On Thursday Mar 22, PPX closed at 12.0¢ on strong daily volume (4.6M) - up 85% in seven weeks. Mr Market likes Andrew Price.
On Friday, the EGM ran for three somewhat fractious hours. PPX was in a trading halt until 2 pm then followed a blood bath of two hours when 14.5M shares were traded. PPX closed at 9.6¢, down 20% on the day, with an intraday low of 8.8¢ (-27%).
Obviously Mr Market preferred Andrew Price over Harry Boon.
To put Friday’s bloodbath in perspective, on Black Friday, May 13, 2011, PPX fell 21% on volume of 8.3M shares over 6 hours.
The real worry for long suffering investors and Harry Boon, as opposed to day traders, is the share price band at 10.5-12.0¢ (red).
Referring to CHART 2, it’s going to take a lot of confidence, i.e. money, to break through this solid wall of share price. The technical analysts call this “overhead resistance”. It probably requires new money as old money is now long tired of PaperlinX.
Also, many traditional “moneyed” buyers are precluded from buying PPX as it is no longer a member of any recognised ASX index.
Nothing that current management of PaperlinX says or does will cause PPX to break through this resistance as the words of PaperlinX have proven to be unreliable guides to share prices in the past.
Three events, indicated on CHART 2 support this assertion:
- May 18, 2011 Toby Marchant’s now famous NoNewNews Conference
- Oct 21, 2011 AGM
- Dec 23, 2011 Platinum Equity’s “proposal” released by PaperlinX. Release of this was an irresponsible act as it neglected the interests of hybrid holders.
After the EGM, the share price band 10.5 – 12.0¢ (red) remains intact. Two important periods are marked with purple ellipses. Note their similarities in terms of time and price action between the upper and lower boundaries.
There is also a price band of lesser significance between 10.0 – 10.5¢ (amber). The price range 7.5 – 10.0¢ has little recent price action and is effectively no-man’s land.
The green or safe buying band must now be 6.5 – 7.5¢.
Observe the oscillating price action between the green and amber bands since August 2011, marked with grey dashed arrows. We've now had DOWN, UP, DOWN, UP ....guess what's next?
Down movements in share price start with “PaperlinX Talk” as noted on the dates above, hence Protagonists Talk, Money Shouts.
Where is the share price headed now?
Next stop is 6.5 – 7.5¢. The share price has been there three times before, and in the absence of some new external force should revisit there soon. Why would anyone buy PPX this week?
The PaperlinX board finds itself in a conundrum. It cannot work out how to make money, but believes it is best placed to find the solution.
The board of PaperlinX may be so successful in thwarting those seeking serious change that the next time the share price revisits the green band; formerly interested parties may have lost interest and taken their marbles elsewhere to play.
In the logical absence of natural buyers, i.e. passive equity investors, an informed opportunist is the only possible buyer.
What price would an informed suitor need to pay to gain the chance to turn around PaperlinX? Platinum Equity thought $120M for 100% and sought to circumvent the rights of hybrid holders in the process. In reality, its total offer of $120M was much less than 9¢ per ordinary share. Much less.
Andrew Price and his associates thought equity of 10-12% acquired at less than 10¢, and a shake up at the top, would work. So did 48% of shareholders who voted at the EGM.
Assuming the non-voters at the EGM continue to go with the flow, about 50% of the shareholders want significant change, not window dressing currently proposed.
Reverting to CHART 2, it is clear that a serious offer at 12¢ would have a strong chance of success.
12¢ is supported by "rough" fundamentals. By June 30, the NTA will be circa 15¢ maximum. An offer at 80% of NTA for an inveterate mismanaged loss maker is generous.
If Andrew Price and his associates decide to walk, who will take their place? Someone like them.
Meanwhile PaperlinX continues to preach to an empty cathedral, synagogue, mosque or whatever is your place of worship. Very soon all that will remain is prayer.
Time will soon prove me right or wrong. This blog is the opinion of the author and doesn't purport to be investment advice.
The ASA (Australian Shareholders Association) recommendation to vote NO was what foiled Andrew Price's takeover. Apparently they are enjoying the music on the deck of the Titanic than the risk of hopping in a lifeboat. They haven't served their members well so far.
ReplyDeleteGood work on the charts and the analysis. All very clear ...Blues234
ReplyDeleteI simply agree there is no change and the closed shop wins the day . the establishment is still all powerful, and the owner and lender (PXU) who is now financing this botched up party of management personal, are powerless as is too often the case. Marchant has clearly been a popular rather than a professional choice, and that can only mean more costly errors and loss of more vital competent hard working dedicated staff who simply cannot tolerate the management. Poor lazy management attracts poor professionals. A vibrant spoken Andrew Price I expect would have brought a new enthusiasm to the company and certainly seemed fit and ready for the challenge
ReplyDelete