[miningmx.com] — SENTIMENT for new listings and small caps has be really awful for the market to mark down a company that released a trading statement suggesting interim earnings could be as much as 20% ahead of full year earnings forecast.
But commodities trading specialist Insimbi found itself in this very position on Wednesday afternoon.
The group, which listed recently on AltX, indicated that results for the six months to end August would show earnings up between 140% and 160% and headline earnings between 521% and 541% higher than the corresponding interim period in 2007.
Insimbi also indicated that earnings were expected to be between 40% to 60% higher than the reviewed earnings in the annual results to 29 February 2008.
And what’s more earnings for the six months ending August 2008 were also expected to be between 3% and 23% higher than the annual forecast earnings to end February 2009.
In other words Insimbi looks set to earn more in the six months to end June that it earned in the full year last year; and has already earned more than what it expected to earn for the full financial year ahead.
Despite the encouraging news on the earnings front, Insimbi shares were down 1% at 64c at the time of posting this article. Perhaps the market is waiting for Insimbi to discover oil under its head office parking lot?
The market’s under-reaction to the trading update should perhaps be seen against the backdrop of a number of new listing missing their profit forecasts as well as a tail-off in commodity prices in recent weeks.
Insimbi commercial director Fred Botha told Miningmx that the group had perhaps been a tad conservative in its pre-listing profit forecasts (you think?).
Insimbi’s earnings surge has largely come about as a result of a greater focus on higher margin commodities, and an exchange rate consistently above the R7/$ and higher commodity prices.
Botha said the interim results (due for release in September) would be accompanied by a revised earnings forecast.
The new earnings number should be interesting to gauge – especially for yield seekers as Insimbi has set a generous dividend cover of two times.
Asked about the effect lower commodity prices would have on Insimbi’s business, Botha said prices would have to fall a long way before reaching the levels that the group’s pre-listing forecast was based on.
“Trading conditions remain good, and commodity prices are still substantially above last year.”
Watching an upbeat trading statement fall on deaf ears won’t really buoy the mood at Insimbi. But maybe the company should recall that the market treated Metmar, a main board listed commodity trader, rather coolly when it (reverse) listed in mid-2006. Metmar is now a bit of a market darling.
