AWRCF--Stan--Sorry for the delayed response--I have been on the road. I liked the PR. The fact that they put one out for starters even though all it really did was summarize the prior cc. I thought it was balanced and candid and straight forward. You may recall that I posted an email I sent to the CEO and CFO recommending they issue a PR. Don't know whether it influenced them at all but I was glad to see it nonetheless.
As to the action in recent days, this is such a thinly traded stock that a $10,000 buy or sell can move the stock price 20+%. I used to worry more that sellers "dumping" shares must know something really bad about a stock I was holding. That is possible, of course, but not likely I don't think. I think who ever sold recently:
1) Got nervous about potential dilution per the PR
2) Saw more doubtful account reserves coming in the 4th Q per the PR and figure that will blow earnings and they are tired of waiting for numbers that will cause the stock to pop
3) Have to sell to pay taxes etc
4) Are watching their stock portfolio vaporize before their very eyes and are panic selling and/or meeting margin calls 5) Are worried that the high price of copper is going to erode margins and squeeze earnings.
My view is that 2) is a short term issue and shouldn't be an issue for longer term investors, and that 3) and 4) aren't company related and won't impact the stock price long term.
The dilution issue (1) is a new one and related to (5) because the high cost of copper is what is causing the cash crunch per the PR:
"The Company also noted that it has been negatively impacted by the rise of copper prices since some of its subsidiaries are operating on a cash-basis. The Company explained that by raising additional capital the Company would be able to effect copper hedging."
I don't think "negatively impacted" means squeezed margins as much as it means limiting growth in production because of the high cost of copper. They can't maintain too much inventory because it requires too much capital to do so--so growth is being stunted to some degree. Not sure how much capital they need to "effect copper hedging". Makes me a little nervous to hedge too much when prices are at all time highs, but it may make sense to lock in even a high price and work with a stabile cost structure so they can better control pricing, margins etc. At the end of the day copper wire will still be in big demand in Asia and all producers face the same copper cost so I think they can still prosper despite high copper costs. Regarding raising more capital, I thought the last sentence was interesting:
"The Company also announced its intention to raise additional capital through one or more equity offerings to increase the working capital of the Company. Consequently the Company is in discussions with certain U.S. investment banks as well as some investment banks in Asia. The Company assured that any equity offering will not favor institutional investors only."
Not sure exactly what that means, but I wonder whether they would give existing SHs the right to participate in any offering to avoid dilution. I was planning to email them and ask about that. In any case, I don't think they are going to do like AOBO and do a horribly dilutive secondary on terrible terms. The controlling Japanese investor wouldn't let that happen I don't think.
I bought some more between $3 and $3.50 over the last 1-2 days even while I was on the road. It was good to see others push the price above $3.50--that was not me buying at those levels although I still believe anything under $5 is very cheap. It will be interesting to see 4th Q financials in approx 30 days. The additional doubtful account reserves should be offset to some extent by exchange gains because the Thai Bhat and Aus $ have strengthened as well unit sales increases. They should then be able to put some good earnings on the Board for Q1 which should be reported on soon after Q4. Good luck longs and keep the faith.
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