25-09-2012, 11:30 AM
(24-09-2012, 11:30 PM)Serendipity123 Wrote: At this price (~0.045), here is what the market is discounting..
1) the entire cash hoard is non-existent (as opposed to the approximately $60m cash recorded in the books)
2) the company is actually a loss-making business (as opposed to its financial statements which show that Foreland is profitable every year)
3) the company has a huge amount of undisclosed debt (as opposed to the currently zero debt recorded in the books)
Thus, even with all the fears of fraud, I find Foreland to still be a good buy simply because of the price.
To further illustrate, let's say you discount all the cash to be conservative.
Total assets 737,898
Cash 307,704
Total Liabilities 60,808
Adjusted book value per share = (total assets - cash - total liabilities)/No. of shares = ~0.14
Compare this with the market price of 0.047. Even if you take this extremely conservative stand, the company is still undervalued. If the company is wound up right now at this very instant, payout to shareholders is likely to be substantially more than 0.047.
Comments welcome.
Disclosure: I hold Foreland stock
Assuming ONLY the cash reserve is doubtful, you still over-valued
Took a closer look into the balance sheet, almost half of the asset is PPE. I did not look further, but it is likely worth much less for a garage sales.
The rest of the asset are inventory and receivable, all are likely worth much less than booked value
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