The old boys’ luncheon club

I spent the bulk of Friday last attending Bob Catto and Jeremy Lyon’s old boys’ luncheon club, located on this occasion at the Naval Club hired by Hobart, their employer. I describe the boys as old boys given that the minimum age of those attending seemed to me to be at least 70. This was underlined by the first presentation which was by Angle Plc (LON:AGL) with their Andrew Newland on its product, Parsortix.

I have two observations: (i) Andrew is clearly honest and believes that Parsortix is the way forward for economic diagnosis of cancer; (ii) I know nothing of potential competitors – it therefore follows that I cannot comment on Parsortix. But if Andrew is not completely screwy you would not want to be short of Angle.

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There were a couple of other presentations which I shall pass over but the final one was by Richard Robinow for his REA Holdings (LON:RE.) which I puffed about nine months ago. I take this opportunity to give my latest understanding. It is more measured but, I think, worth reading nonetheless.

First, I deal with a canard or, perhaps more relevantly, a singe, in that some potential investors back off coming in on the grounds that palm oil plantations in Indonesia are giving orang-u-tans hell. It is true that there is a partial loss of habitat through planting but the main cause of diminution of orang-u-tan numbers is that the villagers shoot them either for food or because orang-u-tans are not particularly pleasant creatures in the first place.


Second, REA is capitalised at 315p at £125 million. (It is difficult to trade since the true price is not obvious from a study of the screen.) There is debt of $235 million or, say, £169 million. On top of which there are £72 million of irredeemable preference shares.

As against that there are perhaps 54 million hectares of planted land some of which is immature (the plant does not yield until year five). There is a further c. 10 million hectares of land which are not suitably contiguous, although useful to others, which might yield $120 million (£85 million) on disposal. This will have a marked effect upon net debt.

There are differences of opinion on valuation of the 54 million hectares. But I have heard it claimed that $12,000 a hectare is about right or £462 million all told. Netting off the debt/prior charges tnav comes out at c. £306 million right now. There are tight fisted buyers standing by. But they are there. This suggests a break-up value of £7.65 per share.

On top of which there is a stone quarrying operation and a biomass-based electricity generation operation. No values were suggested for these two but their markets are assured and perhaps a figure of £40 million or, say, 100p a share is not absurd. This suggests that REA is a strong buy now and that one’s foot should not be taken off the gas until at least 600p is attained. Purists will stay for the complete ride. Family Cawkwell are mega purists.

REA’s earnings are of course dependent upon the general level of the palm oil price. This is currently of the order of $700 a tonne which is enough upon which to get by and it can be expected to improve. Needless to add each dollar improvement goes straight through to the bottom line.


Finally, for now, I remark that Richard spits and polishes his shoes. I like this. So few take the trouble these days.

Gardening notes: Palm oil bushes take five years to mature (the costs are capitalised and written off over the following twenty years on a straight-line basis) and, after twenty-five years, they are reckoned to have ceased their economic life. The reason is that although they continue to yield a crop the bushes get too high – as Richard said it is not fun being hit on the head by a bunch of fruit weighing twenty kilos. Of course, some will say that mechanical harvesters should be used – the plant doubles in height. But Richard said that these devices would compact the earth in which the roots are set and inhibit the bush/tree. I do not doubt that hundreds of engineers have thought about this one but he who works this one out will make a fortune.

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Educational slot: My brother’s wife taught at a local primary school in East Anglia for many years until, finally, the Ministry of Education had insulted her so often with form-filling that she packed it in. But she is still open to ideas and, when I pointed out that Trump had proposed arming teachers, she thought this a tremendous wheeze since, as she noted, this means of persuading recalcitrant pupils to do their homework more attentively had never hitherto occurred to her.