Tuesday

Cooper and Babcock Japan Trust

Post a Comment June 23, 2009 – 1:03 pm |   | Permalink |  Print This Post |

We are expecting markets to pull back in the next few weeks - this is a great opportunity to stock up on cash backed companies. We already have Cooper Energy and Babcock Japan Trust (BJT.AX on yahoo) in our portfolio, but remain relatively light. We reviewed these two companies today to determine a re-entry price. Cooper Energy has a cash backing of 31 cents per share (ZERO debt) - with record production and recent new oil discoveries in Perlubie and oil shows in Butler field announced today 23 June 2009. It fell to 44c today, which is still 1 cent higher than where we offloaded 15000 shares 2 weeks ago. We will start buying more at 39c (10% discount to previous exit), and accumulate as it falls lower to its cash backing.

Babcock Japan Trust is currently at 41c - relatively immune to market weakness. It announced a dividend of 5c per share (!). Our acquisition price of 22cents makes this a 22.7% yield! Its annual dividend for 2009 is 9 cents (40.9% yield per annum!). Absolutely ridiculous. After selling one of its major commercial property in Tokyo, its cash backing is 12c/share. Of course, all property trusts have debt. From memory its debt is not due until 2010-2012. At this rate, even if it delists by then, we would have made back our capital (22c) in dividends alone. Absolute steal. 5000 shares is way too light. When we first started buying BJT, we were expecting it to fall lower - allowing us to average down. We knew from experience that we are such poor market timers that there was no way that our first hit was the turning point! We look to get more if it falls sub 35c.