A couple of points on Allmine Group I would like to share:1)...

A couple of points on Allmine Group I would like to share:

1) Some of the contract delays are actually a blessing in disguise. (By rolling revenue recognition from FY'12 into FY'13, the company is actually 'smoothing out' their revenue recognition and profits.) Given their buoyant tone of their outlook statement at the end of May, it is highly likely the positive trading conditions will carry into FY'13.

2) General market attitude towards investing. Investor sentiment is a fickle beast. For those hardened investors, they will know that fear and greed dictates any investment. What should also be said is fear is 10x more powerful than greed. So, in a market lacking any confidence, selling dictates. This is true for a lot of other small cap. stocks and is not a localised occurence for AZG.

3) There will be work for the likes of AZG. Given the go ahead of expansion plans by RIO tinto in the past month + the likelihood of Gina Rinehart's mine getting constructed in the next 12 months + Gorgon + Inpex NT's LNG plant + NW Shelf energy expansions etc, it is likely there will be flow on work for AZG. I believe the task for AZG is getting the necessary bonding capacity to grow their business, rather than a lack of work. This is quite evident in their most recent $5million debt funding --- it shows confidence in the level of work that they believe they can win.

4) 12 months ago, mining services companies were seen as an alternate way to invest into the commodity sector. Now, investors are queuing up to get out of mining services, because the world is about to end (+ the fact that some popular commentators have called their followers to get out). As we know, small caps do not have significant liquidity, so when investors decide to get out (or get in),it is pretty much a one way street. If the engineering services sector is really that bad, why are their larger peers like UGL & MND, although down, are still trading at current prices?) The key for AZG is to give some form of outlook commentary when they report in August 2012. No one has factored into their numbers a potential MGO or IBG deal coming through anytime soon. Most investors discount that at this point in time. AZG has

5) Right now, the Australian market is irrational and still quite bearish. Retail investors are out of the market. Institutions are still in the markets, but some of the mum & dad investors are 'over shares' and have decided to place their investing funds elsewhere. There is a lot of cash on the sidelines, but i doubt that cash will pile into the markets anytime soon. Right now, retail investors are still using any given opportunity to get out of the market.

6) The make up of AZG's register is still pre-dominantly retail investors. The notable institution on the list would be Ellerston (a private fund, which was public at one stage in time. This fund has the backing of James Packer). In other words, AZG is very under the radar and a lot of institutions might not have heard about this stock. Additionally, AZG has only had a limited track record to date, and any potential institutional investor would like to see a more established track record before wading into the market.

7) Dilution. Saw a couple of calculations about P/Es etc. on the basis of a fully diluted shareholding base. Well, as it stands, with the stock price under $0.20, most of the options will expire at the end of the year. In these markets, the outstanding options will only be exercised in full if AZG is trading above $0.22 (IMO), as most investors want to see a safety margin before committing. This brings me to my next point.

8) AZG has forecasted an NPAT of $13 mil for FY'12, with positive trading conditions heading into FY'13. Market cap. (exlcuding options) is $38.6 mil. This stock is trading at 2.97x FY'12 P/Es. This company is still growing. It seems like there is a lack of understanding from retail investors (or should I call them punters) in this stock. At current prices, the stock has already priced in a huge slow down in growth + a huge discount for being a recently listed company + a huge discount for management's capability to grow the company. We as investors should always rely first and foremost on fundamentals of a company.

If you have any questions, please post it on the forum & I will try my best to answer them to my best capability.


Happy investing.