Hi thanks for your reply, i found the part on market sentiment interesting. (good / bad for a low/high PE). I suppose I have always followed the same mentality but never thought it through into words.
For this reason i never invested in Google or the new VMWare IPO. and also never got involved in the runup on Tasar, I always saw them as overpriced (Maybe i missed something). Prior to the Dot-Com crash I had investments in SEBL , BRCD , JNPR and a few others JNPR hitting a PE of 2000+ at the high (seems mad now looking back). But hey i made some money, and lost a fair amount of it again in the inevitable crash. Back then we used PEG ratios to justify the price.
My point on the PE for DGMS is the these one-off deals, selling assets effect Book-Value more than what could be considered repeatable earnings.
So a simple valuation calculation would be more
Book Value + (Earnings * PE Multiple)
not
(Book Value * PE Multiple) + (Earnings * PE Multiple)
The repeatable earnings for this company are not really yet understood. For example if they decide to keep the Granite mine and produce $10M revenue per quarter and the net profit on this is $1M then thats earnings of $4M per year multiplied by a fair PE - say 12 - = 48M or $4+ per share.
If they sell the mine the cash goes to the book value.
Moving forward when the portfolio increases and sales and purchaces are happening on a much more regular basis then I agree totally the profits from this should be considered repeatable earnings and factored in with a nice PE.
Just as a side note. If they keep and operate the Mine I would feel happier with a calulated PE of 4 not 12. (As it's effectively mining) if that is considered our main income then the company could even be considered a mining play with some additional land assets to sell.... Which is a good reason to sell it rather than operate it.
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