I read of Dundee's new report "Exploring Valuation Techniques" this morning, mainly becuase one of the three companies newly covered is Colossus (CSI.to) so the house view was interesting.
To be honest, it's a pretty good analysis (apart from the actual 'buy' reco, which I disagree with). Dundee even manages to squeeze in a few short lines about the political risk scenario at Serra Pelada....not much and doesn't make it out to be as bad as it really is, but at least Dundee addresses the issue and doesn't sweep it under the carpet, cough loudly and pretend that nothing's ever happened oh no no no. So good for them.
The problem is that on all three company analyses, Dundee calls 'buy' but doesn't set a price target. Here's the reason quoted from the intro that Dundee gives for not setting targets:
To be honest, it's a pretty good analysis (apart from the actual 'buy' reco, which I disagree with). Dundee even manages to squeeze in a few short lines about the political risk scenario at Serra Pelada....not much and doesn't make it out to be as bad as it really is, but at least Dundee addresses the issue and doesn't sweep it under the carpet, cough loudly and pretend that nothing's ever happened oh no no no. So good for them.
The problem is that on all three company analyses, Dundee calls 'buy' but doesn't set a price target. Here's the reason quoted from the intro that Dundee gives for not setting targets:
Exploration potential, otherwise known as Value Beyond Proven and Probable (VBPP) is widely accepted as a tangible asset class of exploration and mining companies. Over the past decade security regulators, accounting standards boards, industry participants and equity investors have debated a definition and valuation method to describe VBPP for impairment testing and business combinations. To date, no consensus has been reached on either matter and as a consequence, valuing an exploration company or asset remains problematic. Herein, we have summarized the debate and provided a description of the filtering process we apply to assess exploration potential. We conclude by launching research coverage with a Buy - Venture Risk Rating and no price target on three companies that we believe offer excellent opportunity to create shareholder value.
This is a mistake. Not an intellectual mistake, mind you. There are times when I've been drawn to do the same kind of thing and I fully appreciate the logical train of thought that gets you to, "Well, let's call it a buy but not set a target yet". The mistake is practical, because clients of big Canadian houses really don't like thinking for themselves and this kind of instruction will either confuse them or just plain irritate them. "Dude, where's my price target? .....You're supposed to be good at this...... I pay you to think so that I don't have to.." etc etc. Calling buy on a stock and not putting a price target confuses a whole group of people that are easily confused (e.g CFAs, fund managers, personal finance experts, newsletter writers, HNW individuals....)
Report authors Ron Stewart and Robert Thaemlitz put their phone numbers under their names on the report. They might regret that.
Report authors Ron Stewart and Robert Thaemlitz put their phone numbers under their names on the report. They might regret that.