Global Analyst Shares Last Opportunity To Buy a Potential Takeover
Global Analyst Adrian Day reports on a seemingly minor but actually significant development at one of his top holdings, as well as an opportunity to buy a global blue chip on sale.
Lara Exploration Ltd. (LRA:TSX.V) received good news earlier in the week when it agreed to sell its Curion?polis Iron Project in the Caraj?s District in northern Brazil and received the first payment of R$6.85 million (approximately US$1.3 million). Another R$3 million will be paid once the license has been transferred.
In addition, Lara will receive a 3% royalty on future production. At the end of last month, Lara had agreed to settle a lawsuit against the former owner, who had defaulted on payments due and recovered the property. Though this week's news may not seem major, in fact, it is very significant since it ensures that Lara will be in a position to complete a resource estimate and preliminary economic assessment (PEA) on its flagship Planalto Copper Project, also in Brazil, without the fear of equity dilution.
The resource estimate is expected to be released by the end of next month. Lara has always managed its affairs in a cost-conscious manner, but the receipt of payments for Curion?polis removes any remaining concerns. Once a resource estimate has been published, we expect the project to gain the attention of potential acquirers.
We would expect the project to be sold by the end of next year and probably before. Exactly how this will play out whether the entire company will be acquired, and whether parts will be spun out remains to be seen, but shareholders will be well rewarded. Although the stock has doubled in the last little-more-than two months, it remains undervalued and is still a Strong Buy. In fact, this month may be your last opportunity to buy the stock for under $1.
Buy.
Gladstone Offers a High Yield and Strong Pipeline
Gladstone Investment Corp. (GAIN: NASDAQ) reported a strong quarter and fiscal year ending March 31, with net investment income (NII) of $1 per share for the year, while the fair value of its portfolio jumped over 20% to $921 million. The company invested a total of $184 million during the year, including in new companies, some add-ons, and one recapitalization at existing companies.
NII, though down from $1.10 the year prior, covered the regular dividend (of 96 cents), while the company also paid $1.24 in extra distributions from capital gains. The total payout means a yield of 16% on last year. An increase in expenses due to accumulated incentive fees paid means the company did not cover the dividend this last quarter, but this was an anomaly, and we expect dividends to be covered going forward.
Gladstone has low leverage and a strong deal flow, particularly on the number of opportunities (rather than the quality). It indicated it has signed Letters of Intent with several companies.
Unusually for Business Development Companies (BDCs), Gladstone Investment takes significant equity in companies to which it lends, in aggregate representing about 25% of the portfolio. This enables it to pay the bonus distributions. Gladstone is a conservative company at the smaller end of the BDCs (with a market cap of just over $500 million).
Ongoing Stock Sales Limit Upside
Apart from the size, which raises concerns about flexibility in a liquidity squeeze, the major downside is its aggressive use of its At-the-Market (ATM) equity issuance, which we have discussed before. In the last quarter, Gladstone issued 1.3 million shares under the ATM, a significant part of the total monthly volume of 6.9 million.
The aggressive issuance puts a cap on the stock price appreciation. Having said that, if one can buy close to book value right now, it's 1.03x it's a good Buy for income investors.
Buy.
Nestl? Introduces New Diet Line as Stock Is on Sale
Nestl? SA (NESN:VX; NSRGY:OTC) continues its innovation in healthful foods with the launch of a new line specifically directed at users of the new GLP-1 weight loss medications.
The line, called Vital Pursuit, is being introduced in the U.S. and is high in protein, fiber, vitamins, and minerals, while portions are small. The line will include pizza and sandwiches as well as many salads.
Down from almost Sfr 97 a week ago (where we had it as a hold), it has pulled back close to last month's low; in fact, the stock is now close to its five-year low (when the stock fell at the onset of Covid), with the yield of 3.25% at a 13-year high. The company has increased its dividend every year since 1996.
Buy.
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As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Lara Exploration Ltd.Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: All. I determined which companies would be included in this article based on my research and understanding of the sector.Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.For additional disclosures, please click here.
Adrian Day Disclosures
Adrian Day's Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. www.AdrianDayGlobalAnalyst.com. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor's opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. (C) 2023. Adrian Day's Global Analyst. Information and advice herein are intended purely for the subscriber's own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.