Takeover bid is unlikely. Firstly, PAAS is too big (acquiring company should be in major category). Secondly, PAAS is too specialized (some mines do not present interest for a PM major company). Thirdly, PAAS management doesn’t show signs of tiredness (CEO is very young). Finally, PAAS doesn’t present overwhelmingly undervalued case (it is undervalued if/when operating problems are resolved).
On the other hand, I strongly agree with your point about commodity price. It is very positive (strong increase in silver price) and it will be inevitably reflected in stock price. It takes time and some patience and some management actions.
Hmm im not sure about PAAS not being a takeover target. Its not that big!
Say at $35 an oz in 13, it should make $2 EPS, at a conservative 20 P/E you will get a sp of $40.
Then you have the half a billion in cash,. So in my opinion its a good play.
What I think is most important is that i am almsst certain they will hit their top line and their eps for the 4th quarter, which will be 3 straight quarters of EPS growth.Giving the MGMT a serious shot in the arm of credibility.
Barring a massive collapse in the price of silver (which I cannot see happening, fiscal cliff, china turnaound), we should be looking at $30 a share by Jan 15th 2013
I am closlyl watching the BIG resistance point in silver at $35.We are currently under $2 away from this. if it goes through this resistance point, we are up up and away to $40 and PAAS will go nuts.
At $35 silver PAAS could make about 35 cents/share this quarter (it assumes about the same operating performance as in last quarter) and P/E=20 is not conservative anymore. It was somewhat conservative in glory sector days (before 2008-9) when every legitimate PM play was considered “strong growth” and P/E=30-40 wasn’t outright abnormal.
Going forward it depends on operating performance. Currently, analysts project $1.80 earnings for 2013 and, I guess, it relies more on operating improvement than on silver price increase. So far strong silver price factor is mostly wasted on “fixing” operational underperformance.
Regarding takeover size, market cap is almost $3B. Who can swallow it? It should be around $10B company. Do you see a silver company of appropriate size to buy PAAS? CDE and HL are smaller than PAAS and other US-listed silver companies are simply minuscule. Probably, Fresnillo (that is not US-listed) is the only company that could consider going for PAAS by size and beyond Fresnillo it’s only gold majors that could fit. However, many PAAS mines are poor match to Fresnillo and/or gold major company criteria (they are too small and poorly located).
It can be said in total that common shareholders depend on management operating and other talents here. At the same, do not interpret my message in wrong way. I agree, wholeheartedly, that in case of silver going to sky, PAAS share price will go to sky too; it is too obvious to be considered as a stock-specific observation.