A year ago Labat was trading at between 5c and 6c a share. The year before that it was trading at  2c – 3c a share. But then, in February last year, it announced that Aurora would acquire a 46% shareholding in the company through the purchase of 90m shares at 5c each, and had secured a further 21% holding from the ensuing mandatory offer. On rough calculations, acquiring 70% of Labat for about R6.6m.

According to the pro-forma figures, the acquisition would (somehow) convert the reported loss of 6.2c a share at 31 August 2010 into earnings of 7c, but reduce net tangible asset value from 5.3c to 1.3c a share.

Within two weeks of the proposed Aurora acquisition, Labat’s share price had hit a high of 72c a share.

In June, together with Aurora, it issued a clarification statement, stating that there were no agreements in place between the two regarding the acquisition of new assets from Aurora and that there was no intention to list Aurora on the Johannesburg Stock Exchange.

The following month Labat announced that it was acquiring the gold processing and smelting operations known as  Primrose Gold Metallurgical (PGM) as well as ERPM Gold Metallurgical from an Aurora subsidiary for  R38m through the issue of 38m shares at R1.00 a share.

The new board appointments announced a little later that month included that of Khulubuse Zuma as non-executive chairman, Zondwa Mandela as CEO and Sheshile Ngubane  as executive director.

By mid-August Labat was forced to announce that the PGM acquisition represented a reverse listing and would require shareholder approval –  to be obtained in November.

Last month the company released interim results to 31 August that showed a further loss of R4m, which together with the loss of R33m in the previous 12 months (to 28 February) has reduced (increased?) shareholders’ funds (liabilities) to a negative R56m. The net tangible asset value of the company now stands at – 28.4c a share.

In retrospect, getting out at 5c seems to be the smart thing to have done. But it pales in comparison with getting the share price of a company that is essentially bankrupt, up from 2c to above R1 before any of the deals that underpin the move have been completed.

That’s pure genius!

Nor is the story over yet; Labat is currently in negotiations with the Chinese … just don’t expect it to stay listed too much longer, if that works out as expected.

At a quick glance Ellies delivered another pleasing set of results today, with headline earnings of 12.1c a share – 30% up on the previous six months (11.7c). Shareholders’ funds increased by R31m to R548m, from 170.5c to 180.5c a share..  Management sounds upbeat too with regard to continued organic growth, current ventures – including its renewable energy sector products – and new opportunities – including internet satellite connectivity. It also believes the forthcoming migration to Digital Terrestrial Television will materially benefit the group.

Nevertheless there are some worrying aspects to the balance sheet, not the least of which is the intangibles figure of R225m on net total assets of R448m. It means that at around 220c the company is currently trading at twice its tangible value and at some point the impairment of those intangibles (which always seems inevitable) must negatively impact the share price. The cash situation is worsening too. Although Ellies reported cash inflows from operations of R14.7m, that’s half the previous six months figure and  nearly two-thirds the previous first-half figure of R35.2m. Whereas the net decrease in cash of almost R20m has raised bank borrowing above R33m.

The lack of funds means that Ellies will probably have to carry on funding its ambitions through the issue of new shares – following the issue of 57m new shares in the last 18 months (246.6m to 303.5m).

Investors won’t mind as long as earnings and asset values per share, and above all the share price, keep rising.

On that score, Ellies is now trading 50% above the low it reached in August last year (142c). It’s transfer to the Main Board in November probably helped (it’s dipped in price since then) but for those who are not worried about book value, the share doesn’t look expensive (on a p:e of 8).

Another plus: directors were consistent buyers throughout the whole of last year. And unless they have a change of heart are likely to provide support if, for some reason, the Ellies share price should head south.

Between the 12 months to end February 2008 and February 2010 Erbacon’s turnover almost trebled, from 225m to 834m, its net income more than doubled, from R31.7m to R65.3m and cash on hand increased from R42.4m to R81.7m.

Yet the company’s share price from the time those results were announced fell from a high of 270c (26/5/08) to a low of 140c (24/5/10). And when Erbacon subsequently reported a loss of R18.6m for the 6 months to end August 2010 its share price fell only a further 20c (8/11/10). Suggesting either the company’s shareholders were expecting it or its share price is impervious to short term performance.

Which will be a pity if Erbacon manages to bounce back quickly with a decent set of results in the second half.

Something it’s apt to do given the change in CEO along with a forward order book of nearly R1 billion and the new initiative announced in November.