Monday, April 11, 2011

Ultra juicy play in Mongolia

Some of you might not be aware but one of the fastest growing markets is Mongolia. They`ve been seeing incredible growth lifted mainly by China and their border proximity. While China is hungry for energy and importing it from US or Australia over large distances, Mongolia however is best positioned to end up their prime energy provider due to way lower transport costs.

I`ve been prospecting the Mongolian investment landscape and I can truly say there are jewels there to be owned at this point.

One of them particularly caught my eye: Mongolia Energy listed on Hong Kong exchange ticker: 0276 and MOAEF in the US.

"So what`s so interesting about this Mongolia Energy" you may ask.
Well...several things actually:

1. Their management is very good and bent on creating shareholder value.
2. Market has discounted them for quite some time now due to project being in limbo without generating much profits and having negative EPS. A poorly understood Mongolian government environmental announcement freaked out some traders in the past, which also contributed to further unrealistic devaluation.
3. Their production just started few months ago but most of the market hasn`t really caught on to it yet.
Even with a small increase of 30% for the past month, stock is trading at a huge discount at around 2 HK$, which is far away from their all time high at over 18HK$. Also shouldn`t forget the HK$18.06$level was prior production level in 2008.
4. It can effectively quadruple from these levels in 1year time!!!
5. Production started few months ago and it hasn`t yet featured in any press release or quarterly reports that are usually catalysts for stocks.
6. They have a very diversified investment in the energy sector. They own both coal mining perimeters, metal perimeters including gold and have exploring and mining rights for big areas the size of a few European countries combined. They have only explored less than 10% of their concessions so there can be also a huge premium hidden there, waiting to be discovered. 
7. They have secured contracts with China for the next 20years and there`s big interest for their products.
8. They have the huge advantage of being next to China vs other competitors in US and Australia.
9. They have built a direct road linking their mining operation to China via a border crossing.
10. Mongolia was ranked about the top 10 most safe business environments. Most of the country is a barren wasteland which makes it more mining friendly than Canada even(which is considered very mining friendly) where most operations are in mountain forest areas or bordering native Indian reservations. It is known fact that most tend to dismiss that there have been several eco terrorism incidents in Canada and protest from the native groups. Some were actually successful in stopping industrial operations.
11. Mongolia Energy is also part of a big consortium looking to explore and exploit oil perimeters in Mongolia.
12. They have best coking coal around which is already being priced at a premium and arousing special interest in China.
13. I can go on and on.... :)

1 comment:

  1. MOAEF up 9.26% for the day.

    Up 23.6% in Hong Kong the past 5 days.