Endeavour Financial: A Massively Undervalued Gold Investor

24hGold

Published : May 26th, 2010

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Endeavour Financial: A Massively Undervalued Gold Investor

May 26, 2010
By Jason Hamlin

It is not too often that you come across a company with quarterly income that is just shy of their entire market cap. Endeavour Financial (TSE: EDV) (EDVMF.PK) is just such a company and boasts a P/E ratio of just 1.1 based on their latest quarterly earnings.

Not to be confused with Endeavour Silver, Endeavour Financial is a merchant bank focused on the natural resource sector. Somewhat similar to Silver Wheaton (SLW), Endeavour funds producing junior gold miners in exchange for ownership in the company. Since 2002, Endeavour has advised on M&A transactions valued at over $28 billion, and has helped arrange $3.5 billion of equity finance and $2.2 billion of debt finance. It has worked with Wheaton River Minerals, Bema Gold and is currently working on funding for one of my favourite lithium plays - Canada Lithium.

The more interesting part of their business is the dedication of around $150 million to a gold-focused investment strategy that seeks maximum returns by identifying, investing in, and consolidating junior gold mining companies. Endeavour carried out its first strategic investment in the gold space by buying 55 percent of the equity of Etruscan Resources (ETRUF.PK) for $71.1 million. The second company to come into the Endeavour stable was Crew Gold, in which Endeavour acquired a 43 percent holding this year. Even with the recent correction in gold, Crew's stock is still up over 100% year-to-date and the company recently turned a quarterly profit of $10 million, after losing $12 million during the same quarter last year.

Now to the truly impressive part of the Endeavour Financial story. The company posted Q1 earnings of CAD$215 million, yet has a market cap of just CAD$240 million! Furthermore, their stake in Crew Gold alone is worth CAD$244 million, or about 102% of their entire market cap. Their 55% stake in Etruscan is valued at CAD$78 million and "other merchant banking clients" are valued at over $100 million. The bottom line is that Endeavour Financial is trading at a significant discount to its book value or the sum of its identifiable assets. These types of conditions don't persist for too long and I believe the market will remedy this situation soon.

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For more information, please contact:

Vanguard Shareholder Solutions
Tel: 604.608.0824
Toll free: 1.866.341.4111

www.endeavourfinancial.com
investor@endeavourfinancial.com