Aberdeen International (AAB.TO)

While looking at Dacha Strategic Metals I encountered Aberdeen International in the statements as a related party. The company describes itself as follows:

Aberdeen is a publicly traded global investment and merchant banking company focused on small capitalization companies in the resource sector. In general, the Company’s investment philosophy is to acquire equity participation in:

  • pre-IPO and/or early stage public resource companies with undeveloped and undervalued high-quality resources;
  • companies in need of managerial, technical and financial resources to realize their full potential; and
  • companies undervalued in foreign capital markets.

Aberdeen provides valued-added managerial and board advisory services to these companies in addition to investment capital. The Company’s strategy is to optimize the return on its investments over a 24 to 36 month investment time frame. Aberdeen also has access to key experts in the mining and financial sector who can provide further assistance in evaluating and monitoring companies and their progress. As part of its business model, Aberdeen’s officers and directors take active management, director and ownership roles in a significant percentage of companies in which Aberdeen invests.

This also gives a somewhat reasonable explanation of the presence of Stan Bharti on the board of so many companies. Aberdeen has a portfolio of various stocks, warrants and debt in resource companies, and it owns 1.2M shares of Dacha Strategic Minerals. Just like DSM the company is trading at a big discount to NAV. The company reported that NAV/share was $1.31 as of 31 October while the current share price is CA$0.57, resulting in roughly a 55% discount (NAV is $114M).

Just like Dacha Aberdeen is also buying back the maximum legal limit for the current fiscal year (so far 2.4M shares have been bought back with 5.0M shares remaining), and in addition to this they are also paying a 2 cent dividend: resulting in a 3.5 percent dividend yield at current prices. These policies show that shareholder interests are being considered. Insiders own 17% of the common stock, but there has been some insider selling this year.

The company has a large amount of warrants outstanding with a strike at CA$1.00. The company has 86.8M shares outstanding, 6.9M options and 37.5M warrants. The warrants have a strike significantly higher than the current share price, and will expire on June 6, 2012. It does limit the upside a bit in the short term, but given the strike and the expiring date it is not a big issue.

Expenses also seem not totally unreasonable at first sight. Operating, general and administration expenses for the past nine months were 3.6M while NAV was 114M, translating to a 4.2% expense ratio. That would be pretty high for a CEF, but AAB is a bit more like a real business since it is a merchant bank.

Conclusion

I haven’t completed my research yet, it looks promising so far, but there are some items remaining on my checklist. I do want to take a look a historical performance, take a better look at the expenses, calculate the current NAV/discount and look if there is something noteworthy with regards to insiders or related parties. What questions do you think that need to be answered?

Disclosure

None

Further reading

Some old write-ups on Aberdeen can be found at FreeNPV.com

9 thoughts on “Aberdeen International (AAB.TO)

  1. fazsha

    I’ve done my research on this company a while ago. The company invests in the same companies as Forbes & Manhattan, a Canadian company run by Stan Bharti, the genius who developed Desert Sun Mining and sold it off ( I think to Yamana) for an astronomical figure. If you look at their biggest investments, Sulliden Mining, Belo Sun and others, Stan really knows how to identify and develop these properties and they do well. I’ve invested a ton into this company, and I am not discouraged by the flat-lining of the stock. You have to be patient, but 10 years from now I expect to be a very rich man.

    Reply
    1. Hielko

      I actually decided to not invest in AAB, I’m too worried that Stan Bharti is going to be the only one who is going to be very rich in 10 years time.

      Reply
      1. pallie John

        Too bad Larry King did not use his journalism skills before joining the advisory boad Stan Bharti’s
        http://www.stockhouse.com/community-news/2012/mar/22/stockhouse-movers—shakers–why-mine-financier-s-

        Ducan this is not a good investment unless you work for Forbes or Aberdeen
        a better title would have been Is Aberdeen International a public corporation of a family reunion paid for by shareholders?

        Bonus Reset is not normal – last year based on beginning 2011 so they paid themselves 8 million which is more than the 2 million they gave themselves in 2010

        1. Eurocontrol shareholder loan he has not paid back is almost 2 million dollars
        2. Depending on what many press release all worth a read and laugh valencia ventures Stan Bharti raised over a million then lent his wife and son’s company $700000 did not pay it back and resigned from the company

        On the Aberdeen front read all the loans companies never pay back and you will see Stan Bharti is on their boards over 8 million

        Then Temujin Mining Aberdeen kept lending millions they never paid back and now the company was sold
        But have google translate http://www.cmufund.com/tzzh.aspx as the english button on their website does not show you the real interesting BS
        Genghis Khan Temujin mining companies
        Project based on: the international copper and gold prices continued to rise; copper ore import dependence high; large amount of project resources, the higher grade; strategic investment significance.
        In January 2010, Mongolia, Temujin mining company investment, the investment cost of 0.5 U.S. dollars / share, now the PE price of 2.5 U.S. dollars / share.
        The company listed on the Toronto Stock Exchange in Canada in 2012.
        The current yield is 5 times.

        Dacha just did a Cash loan $3,500,000 to Stan Bharti and his wifes company

        Felix Pinhasov Corre pick is even crazier but way too difficult and long to write
        http://seekingalpha.com/author/felix-pinhasov

        Your comment is awaiting moderation.

        Reply
        1. Anonymous

          Seriously, Pallie- quit copying and pasting your comments across all the Aberdeen posts in the blogosphere. This is the 4th time I’ve seen this comment from you that was originally intended for Duncan’s blog. Jeez- what the heck is your purpose for doing that?

          Reply
  2. fazsha

    If you really want to see a safe undervalued company with plenty of cash flow and earnings, look at AuRico and Semafo. Tremendously strong balance sheets, good earnings, and almost unknown.

    Reply
  3. Paul Martin

    I updated the current NAV of their publicly traded shares, and not surprisingly it has fallen by about 33%. Discounting their privates by 50% to account for the illiquidity (i.e. assuming a 50% decline in value), the public + private NAV works out to about 69 cents vs. the $1 figure at 10/30/11. Note this adjusts for share repurchases reported subsequent to 10/31/11. The recent run up will likely be reversed when they report the 12/31/11 NAV absent a strong reversal in gold and commodity equity prices. I’m avoiding this name for now.

    Reply
    1. Hielko

      Yeah, did the same math: the discount is indeed a lot smaller than what I initially thought. But that’s imo not even the biggest problem.

      Corporate governance seems to be a problem, the management compensation has changed this year in a very bad way. They used to have a high water mark for the bonus based on NAV, and they changed it to a high water mark that resets every year (so if it drops big one year: no problem, they have a new shot at a big bonus next year). Stan Bharti also seems to get paid a whole lot of money for his various roles in all related companies.

      Reply
  4. Mike W Johnson

    Yea, pallie John. I too have seen your comment all across the web on every Aberdeen thread. It’s very suspicious what your motives are. Also, if you are going to spam something like that at least write it properly in the first place.

    I’m going to ignore everything in your comment.

    Reply

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