CELEBRATE THE CHINESE NEW YEAR BY HUNTING FOR GOLD IN SOUTH AFRICA
04-Feb-2011
I like this.
By Liu-Yue Lam
An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.
Browse other articles
Browse in Africa / Middle East Commodities Finding Oxstones Oxstone Investment Commentary Stocks
Translate this page:
-
Categories
-
Archives
- July 2023
- June 2023
- April 2023
- March 2023
- October 2022
- September 2022
- August 2022
- July 2022
- June 2022
- May 2022
- April 2022
- March 2022
- February 2022
- January 2022
- December 2021
- November 2021
- July 2021
- June 2021
- April 2021
- July 2020
- June 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
-
By Liu-Yue (Louie) Lam, Co-Founder, CEO, & Chief Investment Strategist, Oxstone Capital Management,
DROOY, DRDGOLD Ltd. – South Africa, $4.47, 1/28/11
DROOY is one of the largest South African gold mining companies. DROOY has a long operating history; established in 1895. This shows the sustainability of DROOY as an ongoing business.
DROOY is considered a small cap stock with a current market cap at $185mm. This is a terrific advantage for the astute international investor as frontier small cap stocks are underfollowed by Wall Street analysts. I believe frontier small caps possess the most fertile grounds for finding ‘potential oxstones’ due to market inefficiencies that individual investors can exploit by buying undervalued, underfollowed stocks and then waiting patiently to benefit once big boys finally notices and joins the party. Current institutional ownership of DROOY is still under the radar at 6.9%.
DROOY is extremely cheap with a PE Ratio of only 4.8x and a price to sales ratio of .58. DROOY is already trading at a significantly lower price/earnings and price/sales than the majority of publicly traded gold mining companies. To top it off, DROOY also pays you an attractive dividend yield of 1.3% and payout is just 8% of earnings with plenty of room to grow. DROOY also has a very strong balance sheet with positive net cash and almost no debt. Incredibly, DROOY is trading at a significant discount – 82% of its book value. The company is well managed as shown by its high ROE of 17% with almost no leverage. Its ROA is 3.6%. Revenue grew 40%; benefitting from the surge in gold prices. DROOY also has positive technical trends. What’s not to like?
DROOY was originally established to exploit the Witwatersrand Basin – the world’s richest gold deposit (40% of the gold ever produced). The major concern for DROOY and other gold mining companies in South Africa are the increasing strength and wage demands of unionized labor. This has led to higher costs and DROOY already has one of the largest gold production costs in the business. However, this concern is mitigated if you believe gold is indeed in a long term secular boom, then gold prices should continue to rise and any production by DROOY will only add to the bottom line.
DROOY is already closing less efficient mines and refocusing efforts on the better opportunities at alternative sites. DROOY also has the world’s largest gold surface retreatment facility.
I believe DROOY has tremendous upside potential at its current depressed price of $4.47. It is already trading at multi-year lows. I expect as gold prices continue its historic secular bull-run and global liquidity turn inflationary, it should push up stock prices of all gold miners, which are leverage plays on gold. South Africa is one of the top frontier markets in the world. For any investor who wants emerging markets exposure and looking for the next top emerging economy to invest in after BRIC; should definitely consider Africa. It is still the land of untapped potential. And one of the few remaining places on earth where you can still find ‘potential oxstones’.
You might also like