THIS quality mining service company reported today. Suspect it'd be hard to short this one seeing as there are only 39m shares and not a lot of action most days. Don't know about that, but its share price could head significantly lower? You can imagine a bearish Head and Shoulders pattern Stretching from 2011 to mid 2013 and hinged at neckline level of $5. If you flip the pattern over, the height of the 'head' gives a conventional downward target of $2.50 Or compare the downtrend of the GFC. Back then LYL took a plunge of 4.50 - from 5.50 to about $1. If that were repeated nowadays it would drop LYL to from 7.50 to $3. However if the drop now were proportionate to 2008 you could expect an 81-2% fall which would take the price from 7.50 to about 1.50 Lycopodium NPAT for Dec Half fell 51% compared FY13. Both revenue and profit margin shrank. Outlook for second half is lower than H1 and full year guidance is NPAT 9.5m Management says sector could remain subdued for 18 months but doesn't sound sure. This company has put in a very consistent high quality performance over the past decade, so I have it on watch should it decline to a price that would seem cheap based on the expectation of eventual recovery of a good profit level A few things I like about Lycopodium: Shares on issue in 2004 were ~37m shares, today there are still only ~39m shares Negligible debt - borrowings at Dec 31 only $2m Cash $36m Achieved exceptional average Return On Equity (ROE) over the decade FY04 - FY13 = 32% The cash will be reduced a bit if the company executes a non-binding heads of agreement to acquire a majority interest in ADP Holdings (Pty) Limited, a South African based engineering business. This would be well within its cash capabilities. Management looks good
Will $3 hold? Positives are lower prices but an improved momentum, and price is at a level of support 2009/10. Candles looking ok. Negative would be the Head & Shoulders top suggests a lower target going by 'the book' - $2.50 would be ideal
..and they say charts lie, and they call it puppy love ... 23 May 2014 GUIDANCE UPDATE "Lycopodium has previously communicated the strong headwinds in our sector and a forecast reduction in the demands for our services. Over the past few months the reduction in demand has been more rapid and more pronounced than previously anticipated. As a result Lycopodium is now forecasting a material reduction in the annual net profit after tax to $4M from our previous forecast of $9.5M, reflecting a second half loss of $2.3M"
... and so now it's a dollar lower. Has touched 1.50 and closed at 1.59 today Oct 31 According to shareholder report published a week ago LYL had 143 cents Net tangible assets per share as at June 30 fy14 close Next to no debt and cash per share would have been about 85c at fy14 it looks, but LYL has since made an acquisition. LYL 4 yr mthly [imgz=http://forums.silverstackers.com/uploads/1893_lyl_oct_31_2014.gif][/imgz]
Missed it, and it seems so obvious in hindsight. I'd have to remake my psychology to be a contrarian. The doom and gloom pervading the sector overrode chart vigilance maybe. I hear it's reported well fy16, but havent read it yet. This is a decade quarterly (3 monthly) chart, and note resemblance to the other major bottom in 2009 - small bodied candles at $1 level LYL quarterly chart [imgz=http://forums.silverstackers.com/uploads/1893_big_10.gif][/imgz]
