Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Gas flares in the Niger Delta. Among China's recent deals in Africa was a $23-billion agreement with Nigeria to build three oil refineries and a fuel complex. (GEORGE OSODI)
Gas flares in the Niger Delta. Among China's recent deals in Africa was a $23-billion agreement with Nigeria to build three oil refineries and a fuel complex. (GEORGE OSODI)

Schizas’ Mailbag

Mart Resources pays juicy dividend for considerable risk Add to ...

Hey Lou,

I’ve been a shareholder of Mart Resources Inc. for about 2 years. I use to trade the variations in price for quick profits, but decided to initiate a position at about $1.90 a while back. I have averaged in several times since then and my current cost on the holding is about $1.20.

The shares currently trade in the $1.50 range and seem to have found support at this price. There are a few catalysts in place that can help grow the price much further, but it always sells-off on the news. What do you think of the company?

More Related to this Story

Adam

Hey Adam,

Thanks for the assignment.

This will be the first time that I inspect the details central to Mart Resources Inc. The company is an independent oil and gas company developing opportunities in the Niger Delta. Their investment in the Umusadege field in concert with Midwest Oil & Gas Plc and Suntrust Oil is on the verge of seeing increased production and revenue on the completion of the Umugini pipeline in the second quarter of 2014.

MMT’s focus in the Niger Delta is to work on what are called marginal fields. These are fields with a proven presence of hydrocarbons that have lain fallow because they are too far down the priority list for the companies that have held the licenses. The Nigerian government has allowed companies like MMT to work with indigenous enterprises in the development and production of these reserves. Clearly there are risks associated with activities in the Niger Delta that have to be accounted for when considering an investment in the jurisdiction.

An examination of the charts will inform my thoughts on MMT.

The three-year chart outlines the huge advance that took place from October of 2011 when the shares were trading near $0.42 to the high of $2.25 reached by February of 2013. There was a trend reversal off the highs that saw the shares retreat to $1.00 by November of 2013 where support kicked in and a new advance began. The stock is currently building a base along support at $1.45.

The six-month chart demonstrates the support that has formed at $1.45 and the signals generated by the MACD and the RSI. The buy in February when the shares were trading near $1.19 and the sell in March near $1.55. Currently the indicators are making a slight turn to the upside.

I’m not sure the stock has been selling off on what you describe as good news. The move lower from $1.55 in March would best be described as a pullback. With a dividend yield of 13.51 per cent you are certainly being well paid for the risk inherent to the theatre of operation and to wait for the completion of the Umugini pipeline.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories