Director Deeds: Micro-miners and industrial strength

At last squeeze, Dongfang Modern Agriculture founder Hongwei Cai purchased five million shares at 91c a pop. This time around, a few weeks later, he spent more than $270,000 on 322,000 shares. A cold-weather earner, because of citrus benefitting from wintery conditions, Dongfang’s performance hasn’t come into fruition this year. The China-based Cai purchased at 84c per share. His voting power now stands at 66.9 per cent. He recently retired as a director, as per the constitution that one of four Dongfang directors were required to retire at the late April AGM, but his growing shareholding would indicate he doesn’t seem to be going anywhere.

This one is a concrete jungle. Adelaide Brighton’s Ken Scott-Mackenzie spent around $55,000 on shares on May 14 in the cement manufacturer. Sentiment has turned against this cyclical stock that is highly exposed to the housing downturn. The company is expecting a full-year underlying profit 10-15 per cent below the $190 million reported last year. There are cracks in construction, we have made clear, but there’s promise in planned infrastructure. It’s a question of whether public spending can offset private sector contraction. Intelligent Investor analyst James Greenhalgh has reiterated Adelaide Brighton is a hold. However, around the same time, Eureka Report financial commentator Stephen Mayne talked us through Adelaide Brighton’s questionable, potentially illegal, CEO payout. A slumping share price, and a big cheque for the boss, safe to say shareholders are probably not particularly happy. Maybe Scott-Mackenzie’s purchase will be a panacea.

At the micro-miner end, there has been a flurry of activity to seal off resources reporting season. We had Craig Burton buying around $75,000 worth of his shares in Grand Gulf Energy. And then, an assortment of small purchases all between $30,000 and $45,000 at Rox Resources, Swick Mining Services and Magnis Energy Technologies. Based on market capitalisation, and maybe market hype-onomics, the last two are most worthy of a mention. Drilling into Swick Mining, this is a company that does surface and mineral analysis for the resources sector. With revenues inching only just a little higher in the year to March, Swick is however estimating for EBITDA to grow by around 50 per cent within an earshot of $30 million. Swick last year landed contracts worth $210 million with Northern Star, BHP and Kirkland Lake Gold – heavyweight miners, cashed-up and keen to explore more. From the dirt to the plant, Magnis Energy is a lithium-based battery-maker with a share price that has been running out of power all year. It’s regarded as a leader in unmanned water and surface vessels for the US government and private and public enterprises. To get there, Magnis has been burning through cash, spending $422 million in the nine months to the end of April on development alone (but seemingly curtailing spend, by stumping up only $6 million at the start of the March quarter). That’s not adding the other metrics of exploration costs, staff costs, and administration costs, which as individual items rank higher in the spending department. Costs are mounting in this crowded trade to the top. Magnis Energy’s Frank Poullas spent around $35,000 on May 9, with the shares changing hands on market, so around 24c, which is higher than where they are trading now.

Up the market leaderboard, with a little more oomph, Ian Middlemas spent around $400,000 on Equatorial Resources. The iron ore miner is currently waiting on the results of its application for a 100 per cent company-owned project in the Congo. On the flipside, Paul Burton over at fellow iron ore miner TNG dumped more than half a million dollars’ worth of shares. It may have looked off on the surface, as it happened a few days before a trading halt, but the provided reason was to “satisfy the amount owing on the shares pursuant to the terms of the Plan”

Far fewer directors seemed keen to exit mining positions, other notable exceptions being Peter Wright at Laneway Resources, who sold stock to the tune of $130,000, and Tim Carstens at Base Resources who dumped around $45,000 himself. Laneway is currently transitioning from gold explorer to producer, granted a Queensland Government mining lease on March 1. In its recent quarterly, it was anticipating “achieving material positive cash flow” from its activities at Agate Creek thanks to high prices for Australian dollar-denominated gold. Being such an illiquid stock, this is a tricky one to get in and out of, with Wright’s trades taking place on market through several days in early May.

A couple of weeks after SUV accessory company ARB Group published a market update, noting revenue was up 5.6 per cent to $217.6 million, and profits were up 5.1 per cent to $37.5 million, a couple of ARB directors dumped a tonne of shares. Roger Brown parted with 2 million shares, a sale netting him around $37 million, while John Forsyth let go of $9.25 million worth. Analysts at Intelligent Investor provide coverage to this company, in March reiterating it’s a ‘hold’ considering the tested resilience of the four-wheel drive market in Australia contrasted to new car sales, among other things. ARB is also heavily exposed to the US, benefitting from the strength of the greenback.

Showing some industrial strength, Andrew Harding spent around $150,000 on Aurizon shares. Intelligent Investor has dropped Aurizon from coverage and slapped an ‘avoid’ on it, as the formerly state-owned rail freight operator based in Queensland. Aurizon has long been considered safe because, similar but different to Telstra, it owns the infrastructure that its business is built upon. Is that enough to safeguard the stock? Harding seems to think so. Elsewhere in industrials, Decmil’s Scott Criddle put the axe through his holding, to take home a little shy of an extra $900,000. Like Aurizon, this transaction took place on May 8. Criddle attached a note to the sale, citing “personal commitments”.

It was only just featured in the last instalment of Director Deeds, and now IDP Education is back again. Soon after Peter Polson let go of $275,000 worth of shares, Greg West also dumped around $380,000 of his own holding. On the market, the company has been going from strength to strength. IDP profits from placing foreign students in Australia and other countries, as far as Canada and the US, but it makes most of its money from certifying students with English-language proficiency specifically.  

For a full run-down on what directors behind ASX-listed companies are doing behind the register, click here.

For extended research on the companies behind Director Deeds, click here.