Newsletter 63 – PV Crystalox - worries and conclusions

​You know that I've bought PV Crystalox (LSE:PVCS) shares; so you know I'm prepared to face up to the risks.  But I thought it might be worthwhile listing my main concerns. (That way, I'll be able to remember them myself a few months down the line!).  If you have some more, or would like to add a point or change of emphasis, I invite you to comment.

​Worries
 
There is a lot that could go wrong (if you have any information please tell us):
 

• Management continuing a loss-making business to benefit themselves while destroying shareholder value
• Price of polysilicon declines
• Price of wafers declines
• Cost of closing factories becomes excessive and, until it is too late, hidden.  Thus the BS numbers are unrealistic because they are based on a ‘going concern’.  If drawn up under a liquidation scenario closure costs would wipe out all value.
• Cost of mothballing factories may wipe out shareholder value

 
Conclusion
 
Looking at the qualitative factors this is a risky share.  It is in an unstable industry with over-supply and plenty of government interference. Prices have been below costs of production for years.
 
On the other hand, to reflect the worries, the share price has fallen so much that it is now 2.4% of what it was a few years ago.
 
Much more importantly, it has declined to one-half of the net current asset value. While it is true that NCAV is being run down, it is happening at a relatively slow rate, giving time for something good to turn up.
 
There are sound reasons to expect this company to find a way out of the darkness, either through long-awaited industry improvement, managerial excellence, being taken over or by liquidation.
 
So despite the risks of being wrong greater than 50% I think it is worth holding these shares. It could be a multi-bagger.
 
The first entrant to my 2015 net current asset value portfolio!