I agree, and that is partly why I mentioned the adjustment to profits from previous years. At present I am comforted that somebody big is interested in buying into FEA, and that they are ramping up their timber mill. The MIS side of things is the concern IMO, and this is where lots of cash is injected up front from new investors. However if they sold $20m of new subs last year in possibly the worst financial market since the 70s, and if the government is not rubbing out the tax benefits (for forestry MIS), then I am comfortable that they will be able to realise their assets over time and squeeze them throught their p and l eventually. There will be new subscribers for MIS. I believe that if FEA was not trusted as a supplier of MIS investments (unlikely IMO), then there would be an eager purchaser of their business, that would pay more than 30 cents in the dollar.
I also feel that timber is becoming scarcer as developing countries are gradually working out how to stop timber "pirates" from pillaging their forests. Also carbon credits are potentially providing another income stream.
I'd like to see a standard created for how much of the cash from new subscriptions can be recognised as revenue (then profits) up front. Then the profits reported might be conservative, and reflect reality a bit more closely.
Additionally - banks are letting FEA spend the cash from the capital raising - if they were concerned about their security, then there would be a different story here.
I'm happy that there is a margin of safety, and that FEA is undervalued due to the extra supply of shares created by the cap raising. This will sort itself out I believe.
We'll see what happens in the end. There are definitely risks.
FEA Price at posting:
8.9¢ Sentiment: ST Buy Disclosure: Held
