Carbon Conscious investment - February 2012 Carbon Conscious Ltd is creating large scale carbon estates by planting Mallee Eucalyptus trees in the Australian wheatbelt to produce carbon credits. Financially the company is profitable, receiving fees to plant the trees from large Australian companies. Profit has been growing at a fast rate, with projected earnings of 4c per share for 2011/12 - a 309% increase over the previous year.
The environmental benefits of planting trees on degraded land is obvious, but the company's reliance on just one species is somewhat of a concern - monocultures can be prone to diseases. But overall we see this company as positive, although still speculative.
We compared Carbon Conscious with a similar company, CO2 Ltd. Carbon Conscious seemed to provide the best value to shareholders.
Movement, finally - January 2012 Finally – the share price of environmental stocks are showing signs of life. Most of our holdings are up over January. CBD Energy, TPG Telecom, Carnegie Wave and Kuth are up significantly. Energy Action (see below) is up 30% no less.
There is hope yet.
Paritech Financial Services - January 2012 In 2000 we invested in Paritech Financial Services through a registered prospectus. We were looking for companies which would contribute to the paperless office. Paritech failed to live up to expectations. They stopped sending any information to shareholders and have not held a shareholder meeting since 2002.
We understand that complaints have been made to ASIC, but no action taken. Now the company has placed itself in voluntary wind up. We are writing them off.
Strangely, we note that they continue to sell their services to the public, despite being wound up.
Energy Action investment - November 2011 We have identified an interesting new investment. Energy Action was listed on the ASX in October and is rare among environmentally positive equities in that it is profitable and will be able to pay regular dividends. Energy Action provides energy retrofitting services to organisations, providing them with substantial energy savings. It also owns the Australian Energy Exchange where energy providers bid to provide the best energy prices to organisations and organisations are able to re-sell excess energy already contracted. Both services provide substantial savings and have environmental benefits.
Investments have been made in this company.
PS: At the end of January 2012 Energy Action shares have increased by 34% to $1.65. This is more than was expected in such a short time.
Retirement of Victor Dolmark
Victor Dolmark has retired as a director after 18 years. Victor joined the board of directors in March, 1983, just two years after the company was formed. His contribution to the governance of the company over these years – some of them during difficult times – is greatly appreciated. When he was initially approached to take up the position he accepted it willingly. Since then he has given freely of his time for very little return. We wish him well.
Results 2010/11
Our financial result for the year was a small loss to shareholders of 2.95%. This was substantially made up of losses on the value of our investments. Dividend payments for the year were 4.76% ($10 per share), based on the accounting value per share. We still have substantial profit reserves from previous years to continue paying a dividend at this level for some time yet.
Annual Report & AGM
The Report and meeting details have been forwarded to shareholders. Due to the poor result in 2010/11, directors have not requested any remuneration for the current year. A final dividend of $5.00 per share has been recommended, to be paid 1 December 2011.
Dividend June 2011
An interim dividend of $5.00 per share has been declared, to be paid 1 June 2011. This is up from the $4.00 June dividend last year.
Part of the reason for the increase was the decison that we will pay out larger dividends in future to reduce our large reserve of Franking Credits.
CSG review - Febuary 2011
Our attitude to Coal Seam Gas investments has been reviewed. The review revealed that we have grossly underestimated the amount of environmental damage, the density of wells and the social upheaval this is causing to farmers and rural communities.
August Investments will no longer be investing in CSG. Our existing investment solely in this area, Bow Energy, will be sold. We are now reviewing Origin Energy and AGL to determine the portion of their businesses based on SCG and coal. Based on the result of this review, we may either reduce or terminate these investments.
Results to December 2010
Our financial results improved somewhat for the calendar year to 31 December - shareholder value improved by a staggering 3.2%.
3.2% is a vast improvement on the 1.3% average managed fund return for the same period as reported by Morningstar research. To put a positive spin on the situation – our return was 2½ times better than that of the average managed investment fund!
Regardless, 3.2% is not a good return and we are working to do better.
August Investments Blog - December 2010
We have a new blog page. It is divided into two categories: one for dicussion of our various investments and one for August Investments company matters.
Feel free to share, comment or ask questions.
Remarkable new investment - December 2010
Rumour began circulating in Geothermal exploration circles a few months ago that a revolutionary type of drill rig was about to be tested. This rig, it was said, would dramatically cut the cost of drilling for geothermal heat.
The rig was being developed by a Western Australian company, Coretrack Ltd. The results from initial tests have been even more dramatic than expected. Coretrack now has a mobile rig which, together with their ground breaking air hammer drill bit , has cut the cost of drilling for geothermal, oil and gas by at least 75% and possible up to 85%. These are astounding results and have even taken the inventors by surprise. The initial geothermal test well near Perth was not completed, because Woodside has leased the rig at short notice to drill a very wide 1.7m diameter well at Karratha in WA. More rigs are under construction and will be available during 2011.
Financially, Coretrack has a market capitalisation of just $30M, funds in the bank and expects to have revenue for 2011 of at least $21M.
As well as recognising the boost these products will provide for the geothermal industry, August Investments has purchased shares in Coretrack itself at 23c per share.
Dividend December 2010
A dividend of $4.00 per share will be paid on 1 December 2010. Ex-entitlement date is 30 Sept 2010.
2009/10 Results
This would be one of our poorest years to date if we compared our results with the average balance fund return for the same period. We usually exceed the returns achieved by other fund managers. But for 2009/10 we just broken even, yet the average return for the public balanced funds was 10.5%. The write down in the value of our unlisted property trusts and forestry woodlots and the general decline in the market value of alternative energy shares all contributed.
Your directors have discussed this change of circumstances and are of the opinion that such events are bound to occur from time to time, although a close watch will be kept on future price movements in August Investments' shares.
It is worth noting that August Investments has consistently outperformed our benchmark (balanced funds average return) for most of the last 15 years.
Investments - a loss and some gains - September 2010
August had 2.4% of its assets in Willmott Forests before CBA and St George Banks appointed Receivers and Managers to this company on 6 September. Willmott had significant assets, but short term cashflow problems, so we are hopeful that there will be some return of our investment after the administrators take their share. Based on their last accounts, Willmott had net assets of $1.12 per share, compare to our purchase price of 40 cents. We will value our Willmott shares at zero till a return of capital (if any) is received.
We have purchased shares in Blackmores Ltd, plus additional shares in TFC Corporation and CBD Energy, all of which have increased in value significantly since these purchases. CBD Energy declared its first profit for the 2009/10 year and is trading at a PE ratio of 6, with profit expected to increase further in the current year. Shares have been sold in Australian Ethical Innvestments at profits in excess of 780% (no decimal point required). Our small holding in Lynas Corp has doubled in price since our investment in June, based on the tripling of Rare Earth prices in under three months.
Jump in share valuation - July 2010
There has been a reversal of the value behind our share price as at 31July, with each share now being valued at $234.79. Also, the Audit Committee has completed its audit of the 2009/10 accounts and the accounts are now with our accountants. The Annual Report will be available this year earlier than usual.
Government (in)action on alternative energy - July 2010
It is widely expected the Federal Government will announce renewed support for alternative energy research, especially for the geothermal sector. August Investments has repurchased shares in a number of such companies in anticipation of the announcement. This action is expected to be a 'softener' for the fact that no Emissions Trading Scheme will be announced before the forthcoming election.
PS: It seems that this decision was made, but key government figures changed or deferred the implementation to a later time. Such is politics during an election campaign.
Share investments - June 2010
The price of alternative energy shares on the ASX has continued to decline as the market continues to wait for a clear direction on possible support for the sector from the Federal Government. The georthermal explorers have been particularly hard hit. This has created exceptional value in some of these companies, but prices continue to fall.
In late May and early June we have continued to realise investments, thus further increasing our cash position to take advantage of any resolution, should that ever occur.
On a more positive note, we have identified an interesting investment in Lynas Corp. This is a miner (gasp!) of Rare Earths (or Lanthanides), which play a key role in green environmental products such as energy efficient light bulbs (CFLs), hybrid cars, wind turbines and other technologies such as computers and catalytic converters. There is increasing demand for Rare Earths and Lynas owns the richest known deposit, which is near Laverton in Western Australia.
Share price decline - April 2010 We usually take little notice of short term movements in the share price of August Investments. However, in the three months to 31 March 2010 our share price declined by 8% - large by our normal standards. (See the Valuations tab for details for how our shares are valued.) There has been a decline in the price of alternative energy shares generally, which has impacted upon our own share valuations. There are exceptions. Our investments in Arrow Energy and Bow Energy have cushioned the fall somewhat.
In line with our dividend policy, directors have determined that the dividend to be paid in June will be reduced to $4.00 per share. Ex-dividend date is 1 May 2010.
Investors Shun Renewables - March 2010
PriceWaterhouseCoopers estimate that investment in renewable energy in Australia has fallen more than anywhere else in the world over the last year. (“Investors Shun Renewables”, SMH Business Day, 18 March 2010, p.5).
The reason given is uncertainty surrounding the Government’s emission trading policies. If these policies can be settled, it is expected that such investment will return, with wind to be Australia’s main renewable energy source, followed by either solar or geothermal.
Director's resignation - February 2010
With regret we announce the resignation of Elliot Hayman, who has been a director since 1989, serving six of these years as Chairman of the company. Elliot has moved away from Sydney and feels that he is not able to participate in company affairs to the full extent required of a director. He was one of the initial investors in the company in 1981 and has been a valuable contributor to the development of the company during his time as a director. He has provided a clear understanding of corperate governance matters and has provided his services substantially on a voluntary basis. His considered and cool headed judgements in the interest of all shareholders will be missed.
Eco Investor Article - February 2010
Eco Investor Magazine to has again published an article on August Investments, this time in the Febuary 2010 issue. It looks at our investment in Hepburn Wind and reviews our 2008/09 results. An extract from the Febuary issue with the article can be viewed here.
Foresty investment matures - January 2010
In a rare peice of good news relating to our foresty MIS investments, we are pleased to announce that our Timbercorp (in liquidation) woodlots have been harvested. An initial payment has been received from the Liquidators, with a further payment indicated for March.
We expect to receive a total distribution about equal to our original investment in 1996 and 1999, with no return of the ongoing fees and insurance paid since then. This is negative return on our overall investment, but not a total write-off. We have money in the bank with more to come.
Hepburn Wind investment - December 2009
The people of the Victorian town of Hepburn are attempting to raise approx $8M to set up wind turbines to supply the town's electricity. This is exactly the type of project that August Investments was set up to support.
Community investment projects in Australia have many hurdles to overcome to raise investment funds. ASIC in particular makes it extremely difficult for any small venture to raise funds and Hepburn Community Wind Farm has been no exception. It has taken us three months to find a ‘loophole’ in the restrictions imposed on Hepburn Wind just to make our own small investment in the community venture. Over 90% of the investment funds have now been raised, funding has been received from the Victorian Government and Bendigo Bankhas provided a $3M loan facility.
Geothermal ventures receive Government support - Nov 2009
The Federal Government has granted $235M under the first round of funding from the Renewable Energy Demonstration Program. Of this, $90M has been granted to Geodynamics and $63M to the Petrotherm/Beach Energy joint venture to help develop their respective commercial scale demonstration electricity plants using geothermal heat. (See good article in the SMH by David Symons on 21/11/09. Business p 6).
The funding will be provided on a 1: 2 basis as each project incurs expenditure. While not money in the bank, if this funding were treated as cash it would add $0.31 to Geodynamics' asset value per share and $0.17 to Petrotherm's value per share. This is a significant boost to each company underlying value and would put Geodynamics' current share price of $0.87 at a large discount to an adjusted net tangible asset value of $1.27 per share.
Geodynamics is one of our core investments, and we have small holdings in Beach and Petrotherm, the last acquired immediately after the funding was announced.
AGM announced
The AGM will held on Thrursday 3 December at 4 pm. Your Notice was posted or emailed to you in early November. Directors are reccommending a final dividend of $5.00 per share.
Investment activity July - Sept 2009
There have been many small changes to our portfolio, main due to ‘tweeking’ our investment mix. When one share investment seems overprices, we sell some of those investments; then when it seems underpriced, we buy. There have been many such moves.
More structural changes include the sale of half our holding in Hydromet Corporation and all our holding in CO2 Group.
The current depressed market conditions have created exceptional value in a number of underpriced investments available for investment. Two such are TFS Corp and Willmott Forests. We added to our holding in TFC Corporation (Sandalwood growing and processing) and we made a small investment in Willmott Forests. Willmott are known for their successful pine plantations, but thy are moving into native timbers and the sustainable use of timber by-products. To illustrate the value noted in the shares of this company at 40c each: the Net Tangible Asset per share is $1.70, the dividend yield is 19.5% AND the company only pays out 1/3rd of its profits in dividends, saving the remaining profit for a rainy day.
Final dividend December 2009
Directors have recommended a final dividend of $5.00 per share to be paid on 3 December 2009. This is down $2.00 on the $7.00 final dividend paid last year. New shares will be available to shareholders on an ex-dividend basis from 31 October 2009.
Eco Investor Forum
The firstEco Investor Forum is to be held in Sydney on 21 October 2009. Our Managing Director has been asked to present on "Constructing and Managing a Green Portfolio". This forum should be of interest to all Green Investors, with speakers form many green companies and funds. For more details, use the link above.
Comparative returns (July 2009)
The average balanced managed fund in Australia for the 2008/09 financial year suffered a loss of 13%, the Financial Review reported (20 October 2009, p49). In comparison August Investment's portfolio had a loss of 9.04% over the same period. There is a difference between the two types of reporting in that the balanced fund returns do not include tax and August Investments does pays some tax. If the August Investments loss is adjusted for tax paid during the period, the loss for the year becomes 8.2%.
Our loss, similar to those of the balanced funds, was due to falls in the value of share investments and, in the case of August Investments, significant writedowns in the value of forestry investments (see below).
While not happy with an overall decline in the value of our shares, we are pleased with the comparative returns.
Geothermal investment article (June 2009)
Eco Investor magazine has published an article by our Managing Director, Damien Lynch, on the financial aspects of listed geothermal investments in Australia. This feature article, "Hot and Cold on Geothermal Investment", examines nine ASX-listed companies which are exploring for geothermal energy. It compares these companies for their financial strength relative to their share price at the end of May. Click here to view the June issue of Eco Investor.
Forestry MIS writedowns (May 2009)
Directors have adopted a new valuation for our Managed Investment Scheme (MIS) forest investments. Both Great Southern and Timbercorp are in receivership, so there is some doubt as to the level of return we may receive on MIS investments with these organisations. At the same time, it would require exceptionally poor management or incompetence to produce no return at all to investors.
For these two orgnaisations, our forestry contracts with them will be valued at 25 % of initial cost or 25% of the most recent valuation, whichever is the lower. Our investment in Macquarie forestry lots and land will remain valued at initial cost. These write downs at the end of May resulted in a decline in value per share of $7.67, or 3.2%.
We have no debt relating to these investments. Our forestry lots with Timbercorp were due for harvest this year.
We have never held shares in Timbercorp and our final shareholding in Great Southern was sold in 2008.
In the media - again (May 2009)
This time we have been profiled in The Sydney Morning Herald. Paddy Manning’s E-BIZ column (SMH, Weekend Business, 23-24 May 09) examines the negative impact that MIS forestry schemes, such as Great Southern, had on the capital raising of sustainable forestry projects such as our own EcoForest Limited. EcoForest and August Investments are profiled and our Managing Director is quoted at some length. August Investments’ MIS investments are also discussed. (More on the writedown of our MIS forestry investments in early June)
Comparative returns (May 2009)
We could not resist the comparison. The Financial Review (21 May, p1) reported that the median fall in value for super funds in the 10 months to April 2009 was 14.8%. In comparison, August Investment's portfolio declined by 'just' 8.9%.
The August result was after Tax and after the partial writedown of our MIS forestry investments with Timbercorp and Great Southern.
Interim dividend June 2009
Directors have declared an interim dividend of $5.00 per share to be paid on 1 June 2009. This is down $1.00 on the $6.00 interim dividend paid last year. Shares will be valued ex-dividend on 1 May 2009.
Geothermal Investments (April 2009)
Australian geothermal reserves will provide an important source of power in the future. As well as being carbon neutral, it is estimated that electricity generated from a commercial field pumping heat out of the earth will be cost effective compared to electricity generated from coal.
We have a core investment in the industry leader, Geodynamics Ltd (see Jan-Feb below). It is our intention to make a number of smaller investments in those geothermal explorers which demonstate potential for both success and growth in value. To our existing holding in KUTH Energy (see May 2008 below) we have added small holdings in Panax Geothermal Ltd at 13c per share and Hot Rock Ltd at 9.1c ps. Panax is developing a ‘hot artesian’ resource, rather than the usual ‘hot granite’ resource. It is managed by Dr Brutus de Graff, who was the driving force behind Geodynamics from its early days till 2008.
Eco Investor Feature Article (April 2009)
Eco Investor is a specialist electronic magazine about environmental investment. The April 2009 edition of Eco Investor has a feature article “Australia’s First Green Fund Still Performing.” This article examines August Investment’s history, investment policies and current portfolio, comparing our company with similar mainstream funds. This magazine provides monthly articles and analysis on many of the individual investments held by August Investments.
Shareholders who have provided us with their email address have received a complimentary copy of the April 2009 Eco Investor magazine with this feature article. If you have not received a copy, just contact me and I will arrange for your copy to be sent to you.
P.S. The above article has been reprinted in Alan Kohler's Eureka Report. The editorial describes the article by Victor Bivell as " ... a fascinating piece on how to build your own "ethical" portfolio ..."
