PRIMORUS (PRIM) at a 50% NAV discount...

[SKYSHIP]

Ploughing my never-ending furrow in search of VALUE. I recently stumbled across Primorus Investments (PRIM). Upon seeing the share price of 0.10p-0.11p I would normally swiftly pass on – the sp is a nonsense and a very clear case for consolidation, a matter upon which I have contacted the CEO.

Anyway, on this occasion I decided to read on and was quite pleased to have done so. I have an oft-stated fondness of Private Equity; and in this regard PRIM does partially tick a box. PRIM is an investment company taking stakes in pre-IPO private companies.

I read further as it swiftly became apparent that the CEO Alastair Clayton has an interesting CV and clearly has both stock-picking talents and reasonably deep-pocketed investor friends. He also has skin in the game.

Since taking control in Nov’15 of what was then known as Stellar Resources, a resources investment shell valued at c£1.25m; Clayton and his Chairman partner Jeremy Taylor-Firth (ex Singer & Friedlander) have issued a total of 1.534bn new shares raising £3.25m at an average price of 2.12p.

Both legacy and new assets have risen in value, but the shares have drifted down to exactly 50% of that average subscription price. One marked success is the sale of the private oil drilling operator Horse Hill Developments Limited which held a 65% interest in two onshore UK petroleum exploration licences near Gatwick Airport. This they sold to the listed UKOG in a cash & shares deal, subsequently selling on their UKOG stock to bank an overall £1m profit.

Elsewhere, each statutory report and each Update has revealed very thorough information on their portfolio of investments, primarily across tech and resource. Their website too provides all necessary research material:

https://www.primorusinvestments.com/

Two other recent RNSs revealed new private investors taking a view:
# 4th Apr’19: Stephen Labrum* bought 112.5m (4%)
# 8th Apr’19: Steve Ball bought 94m (3.4%)
*Stephen Labrum looks to be the Financial Services Transfer Pricing partner @ KPMG – whatever that means!?

In the most recent Qtly update on 8th Feb’19, the CEO stated:
“I should mention that over the Quarter I have had a lot of interaction with both existing and potential Primorus shareholders. Throughout these discussions, which were predominantly positive, two themes seemed to recur that I would like to briefly address.

The first one is regarding the possibility of, at the appropriate time, using excess funds to potentially buy back some of our outstanding issued capital. Given our share price relative to the Board's view of value this argument clearly has merit. We are having a look at the ability and mechanisms to determine if this is feasible. If the results of this are positive it will certainly be one tool available to the Company to invest in itself should the value proposition of its portfolio be as compelling as we believe it is today.

Secondly a number of shareholders expressed the desire to see a corporate marketing presence on social media and other such platforms. Whilst I acknowledge this may be useful, we also see significant challenges in ensuring a presence on social media doesn't infringe upon our AIM and directors' duties, not to mention MiFID and MAR requirements. Thus, we will continue to scope a presence that is both appropriate and responsible and report back to shareholders with our solution.”

To my mind the best way to improve the sp is to be patient - be successful and the discount will close. Also a good idea to promise distribution of a %age of sale profits, or an annual dividend of, say, 3% of annual NAV. I will be communicating these increasingly common Private Equity strategies to Clayton.

I won’t go into any further detail at this stage, suffice to say that at 0.105p versus an NAV of 2.15p and with no debt, the sp is clearly value should the future newsflow reflect the Board’s optimism.

An interesting microcap worthy of investigation...

[Pendrainllwyn]

Many of the investments look early stage so a bit on the risky side for me. Good luck with it.

Stephen Labrum looks to be the Financial Services Transfer Pricing partner @ KPMG – whatever that means!?

Within a global group, company A in country A will provide services to company B in country B. It is open to debate what appropriate price (the "transfer price") should be charged for those services. The global group may be tempted to price such that profits end up in the most optimal country from their perspective (perhaps putting profits into the country with the lowest corporate tax rates). Government Tax Collection Agency of country A will want a high transfer price and the Government Tax Collection Agency of country B will want a low transfer price. Each agency will conduct tax audits and argue their case. No doubt consultants help advise on industry best practice and help corporates and tax agencies come to agreement etc.

Pendrainllwyn

[SKYSHIP]

Pendrainllwyn - thnx for throwing some light on that - I seriously had no idea what that job title meant.

[SKYSHIP]

Sorry - EDIT - due to decimal place problems in original text!

In line 8: 2.12p should read 0.212p

Nr the end: 2.15p should read 0.215p

Hence the 50% discount to the current 0.11p.

Sorry about that...