Fox Marble #FOX – Catalysts Coming

Just put on a very small (2.5% portfolio weight) position in Fox Marble (bought at 9.67p).  This isn’t my usual cup of tea but I have a feeling it could do very well.  I also think it could go to zero so I am being very cautious.

This is a Kosovan Marble producer.  They have quarries with access to 300m cubic meters of marble.  They are currently trading at a market cap of £18.5m.  They have had lots of issues getting their factory up and running.  Some equipment was destroyed in a fire and they have consistently over promised and under delivered…. I think soon the worst of this will be behind them.

I think they can turn it round as they are achieving very strong sales growth – up from 110k 6m ending June 2015 to  262k 6m ending 2016.  The problems they appear to have encountered are not insurmountable and I am not too concerned. They seem to be achieving orders / sales.  They have net assets of £10m of which 1.3m is net cash.  The auditor is PWC.  There is no one dominant shareholder.

They are short of funds and directors are paying themselves in shares – as with 99% of companies out there, directors are vastly overpaid for what they do but it it positive they are prepared to accept payment in shares rather than looting the company cash. Directors paid themselves £742k in 2015.  The total wage bill was £1.089m – so management get 68% of the wage bill .  For a company which makes no money and which has consistently underperformed this is outrageous but all too typical…

I often read investors saying how crucial the quality of management is.  I don’t disagree, but correctly paid, good management working in companies which are sensibly valued or have good prospects are so rare I can’t use them as a criteria.  Doing so would shrink my investment universe far too much. The best I can hope for is management who won’t actively steal from shareholders.  Ultimately this is the fault of shareholders who don’t realise how much value management are taking, how little they are worth and who do nothing to maintain the value of their investment.  Being of the managerial class themselves there is also a lot of mutual back scratching going on.

I expect good news soon as the company has said its marble processing will be up by October and it said this at the end of August so it does seem very likely.  They have also announced a £100m venture to expand.  This will need funds and without any success on the existing venture investors will not give them more money.

Sales and the order book are ticking up.  If this gets to full stream I suspect the share price will double or treble.  Sharescope shows me forecast is 4p EPS in 2017 so a 10X multiple puts us on 40p a share – a quadrupling of my investment here…

A good (though laughably mistimed) article is here.

An equally badly timed note from a brokerage firm with a not great reputation is here .

This supports the 4p a share EPS target (approx there has been a bit of dilution since then).

There are rumours of fraud swirling round the stock, I have looked at them and I don’t think there is anything in it – but with fraud you never can tell 100%…

This is unusual in my investment as I am usually looking for $1 trading for 50c but I want to diversify.  I have observed investors doing very well buying stocks on lows with pending positive catalysts so I am giving this a go. In summary I think it’s a buy as:

  • Company’s bad luck unlikely to continue.
  • Mgt Paying themselves in shares, they wouldn’t do it if they didn’t expect a return. Equally shows financial weakness.
  • Cheap potential for several bag return
  • Orders / sales pointing to potential ahead of P&L.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s