Tim Eriksen – Add a Little Ick to the Mix – Long Mart Resources

The 10th Annual New York Value Investing Congress takes place in New York on September 8th and September 9th 2014. ValueWalk will be providing coverage of the event- below is a summary of a presentation by Tim Eriksen on add a little ick to the mix.

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Tim Eriksen - Add a Little Ick to the Mix - Long Mart Resources

Tim Eriksen is the founder and Managing Partner of Eriksen Capital Management, a value-oriented investment firm based in Lynden, Washington. Eriksen Capital serves as the advisor to Cedar Creek Partners, a private investment partnership created in 2006. The partnership focuses primarily on small and micro cap stocks. Mr. Eriksen earned an MBA from Texas A&M University in 1997.

Tim Eriksen on Add a Little Ick to the Mix

Started the firm in 2005. based out of washington (state)

wants to stay away from Wall Street mentality

18.5% net of fees annualized since 2006

Ick investing — taking a special analytical interest in stocks that inspire a first reaction of ick.  hated stocks

Tim Eriksen’s Long idea: Mart Resources

Mart Resources Inc. (TSE:MMT) (OTCMKTS:MAUXF) 1.26 cdn

mkt cap 413m

recently announced a dividend reduction

25% of oil gets stolen in the pipeline

operates in very geographically troubled countries (lots of kidnappings and islamist terrorists)

company is a low cost producer

NPV 10 was 2.59

located in Nigeria (lower southwest corner)

a new pipeline is expected to be online in September reducing theft losses from 25% to near 10%, causing pre tax income to rise 40-60%.

the new pipeline should also mean fewer shutdown days starting in q4 (from 27 per quarter to 15)

efficiency will increase from 70% to 83%, boosting pre tax income from 23-38%

overall production will increase rapidly as already drilled wells will be brought on lin

they can increase production by 20%, increasing pre tax income by 17-28%

high probability of additional horizontal wells

could increase pre tax earnings with all 4 items from 12m to 54m, and in 8 mos he thinks they can do 82m, with worst case doing 54m

company is participating in the process of bidding on additional marginal fields, which could further increase production

Risks to thesis

pipeline theft continues a high rate or goes higher

additional production shut downs

increased royalties and or taxation

oil prices plummet

government instability/coup/expropriation

dilution –mgmt has expressed interest in listing in london

some unknown event

Tim Eriksen thinks the stock will be $3-4 in 12-18 mos and is trading at 3x forward earnings


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