A 45 per cent reduction in administrative expenses was one of a number of restructuring initiatives that enabled Polo Resources (POL) to reduce its interim operating loss to $1.1m (£0.7m), from $6.4m in 2013. But Polo's operational efficiencies are of secondary importance to the perceived value of its investments.
This latest half-year update does nothing to dispel our suspicion that the market is undervaluing Polo's key holdings in Signet Petroleum and the Nimini Komahun gold project in Sierra Leone. At the end of last week, Polo's short-term holdings, receivables and cash amounted to $40.2m or 9p a share - just under half the share price - including 5p from the Signet share buyback. Signet has also implemented a dividend in specie, under which Polo has received 42 per cent of two new entities. The first holds a bonus right to the proceeds of a sale, contingent on future resource levels, while the second facilitates a bid for a new transaction which, even if unsuccessful, will result in another return of funds to Polo.
However, one reason why Polo's shares are trading 47 per cent below book value is the disparity between the company's estimates of carrying value ($29.5m) and fair value ($4.1m) for its 28 per cent stake in the prospective Bangladesh coal miner GCM Resources.
| POLO RESOURCES (POL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 19p | MARKET VALUE: | £52m | |
| TOUCH: | 19-20p | 12-MONTH HIGH: | 30p | Low: 16p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 60¢ | NET CASH: | $8.7m | |
| Half-year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | nil | -8.8 | -0.4 | nil |
| 2013 | nil | -2.5 | -1.0 | nil |
| % change | - | - | - | - |
Ex-div:- Payment:- £1=$1.67 | ||||
