Mongolia's IVN's Outlook

A active reader recently emailed me asking what i thought of the stock IVN.  His concerns where with the Long-Term/Short-Term Outlook along with what will happen with the current Buy-Out situation.  Below is the abbreviated Analyst Report i wrote.

IVN Ivanhoe Mines Ltd. (USA)

What I like

With IVN's share price currently at $4.42 it shows the company is on an uptrend when valued against the 50-Day Moving Average, which is $3.29.  With a 52-Week High of $13.88 (Feb 08) and a 52-Week Low $1.55 (Oct 08) it has seen the same type of volatility in which most Mining Companies have felt.  Although unlike some Miners, IVN bottomed out in October and has shown a steady increase since as it has gone up 185% in the past few months.  IVN is 49.6% institutionally held which is strong numbers as generally the quota you look for is between 30-70% for a company.  Daily volume levels are above 100,000 which is a threshold i usually set. The fact that the company has zero debt excited me as i stay away from companies with large amounts of debt especially now-a-days.  Right now it seems to be undiscovered as it is followed by few analysts which gives it a large growth potential.  The fact that it is in Mongolia and is located in an untapped emerging market is a bonus.

What I Don't Like

IVN's income statement scares me.  Currently they are reporting a -27.49% Return on Assets and a 68.43% Return on Equity.  Yes this is partly the result of weakened commodity prices yet compare to other competitors like (TGB, RTP) they are slightly below par.  Concerns with inflation and weak global economy also have to be taken into consideration.

Overview

Overall IVN has mass amount of potential.  Depending on which route the company takes will decide whether or not it will become a short-term investment or long-term investment.  If the talks with Vale (RIO), Rio Tinto (RTP), Xtrada (XTA), and (BHP) heat yo then this could become an interesting bidding war with IVN ending up on top.  With talks of Chinese, Russian, and Korean Companies also looking to acquire IVN the price could get steeply inflated and they might overpay for IVN which will be great news for Investors.  As of right now the Prized Mongolian Coal Company is estimated to be worth $2 billion yet we could see that rise to $2.2 billion when the companies potential is considered along with an increase in the price of coal. The difficulty right now is with the Mongolian government who recently hired Deutsch Bank and JP Morgan to help handle the Merger.  Complicated Mongolian Mining Laws have pushed back any set date or time table.  Another route IVN could take is to borrow capital from the Government and Investors to grow the company to become a Large World Coal Producer.  This is unlikely though as they have drawn a lot of interest and have had a struggling Revenue Stream in recent quarters.  If the Buy-Out is successful expect a sharp incline in the stock price skyrocketing to high levels.  If the deal falls through the stock will drop temporarily yet if structured right the long-term aspect will help investor confidence.  Either way it looks good as they have the assets to grow long-term and the interest to be successful short-term.  I rate this Stock as a BUY due to the high chance of a Buy-Out.  If the deal unexpectedly fell through still stick with it as it has the potential to grow quite large.