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Very good points by Visitor and TBTT. I have large investments in THS, SLP and for that matter JLP - JLP for very different reasons. A couple of weeks ago I compared all 3 P&L's & Balance Sheets with an open mind. let's ignore JLP's which has several items of weakness not uncommon in a company that has only recently entered profitability.
SLP's figure are outstanding and easily to see why it flags highly on the likes of Stockopedia and IC which naturally garner the interest of retail investors and drive the SP higher. It's EPS growth is very appealing, it's financial statements are simple and easy to understand, it does not use fair value adjustments to boost short term sales, its historical current ratio is 9.9 and its quick ratio is 6.2, both of which will improve this year as it's cash pile grows.
THS by comparison is a bit harder to understand although not difficult and in no way manipulates it's financial position. Clearly its profitability has been lower and it has invested recently in CAPEX. it's historical current ratio is only 1.79 and it's quick ratio an uncomfortable 0.42. I calculate it's 2020 year end book value at $374m against SLP's $141m which gives some clues of it's potential.
This is the beauty of being a retail investor. the ability to find a company like THS that looks OK historically although nothing special but then to realise that the work that has been put in coupled with the now favourable market conditions makes for an amazing investment. So yes in the past SLP has beaten THS hands down and rightly deserves the write ups that it is getting and the appreciation in it's SP. But this year the metrics for THS will change dramatically and I think we will start to see THS getting the write ups and thus the retail investors attention.
Another way of looking at it would be to simply look at the Q1 results with a basket price 42% below today's price, an average Rhodium price of $14,000 and a Chrome price 27% below today's prices, use a P/E of 6 and THS would still be trading at a slight discount.
Personally, I love SLP and THS for different reasons and I expect both SP's to appreciate. I am just expecting THS's percentage increase to be so much greater - the first 6 months of the year are almost known - and boy do they look good.
Visitor, I totally agree with you 100%. My entry in SLP wasn't as timely as yours ( I first bought at 34p) but I still had a good run like many of us here. I sold out of SLP completely yesterday and invested all proceeds to add more THS. I couldn't agree more on THS's growth prospects vs the lack of them for SLP. Whilst I still think SLP is still undervalued on any metric, THS is significantly more undervalued based on its current production and growth prospects. I am not concerned about THS's net cash position vs SLP as THS are investing for growth whereas SLP isn't atm. If Rhodium prices stay anywhere above $20k, expect THS to be c250p by year end.
A lot us here posting on THS have also been in SLP or still are. SLP was one of those life changing shares for me getting in 1st at 7-8p, but to spot value "for the here and now", it would be incorrect to solely look at the past to predict the future. SLP has now stagnated from a growth perspective - post Project Echo there is now no real way they can expand past the circa 70-75k oz of 4E PGMs (Volspruit paladium asset could be a good one, but don't believe SLP have the expertise). They can make lots of free cash at that level and pay dividends (although seem to think of any possible excuse not to!), but it's not clear how they can expand further, unless Samancor who they rely on decide to open up other sites, but even then they might not use SLP for new sites - it's slightly concerning the main II AAC (IMR) of SLP has been partially selling down, which from my last research was still owned by the 3 Kazakh oligarch owners of Samancor. But who knows who owns what when it comes to them.
THS on the other hand went through a huge restructure of moving from a contractor operated to owner operated model, with brand spanking new yellow fleet. This is and will to start to pay massive dividends (pun intended), on top of some very substantial growth prospects that SLP simply do not have:
THS mine life open pit to 2033, 40yrs underground thereafter v SLP 8yrs, possibly 10yrs
THS PGM production 160K 6E PGMS versus SLP 70-75k 4E PGMs (100k 6E PGMs)
THS Chrome 1.5MT, expanding to 2MT annualized by Oct 2021 and thereafter 200k 6E PGMs in 2022
THS has further expansion plans in SA (PGM Smelting + Refining) and Zimbabwe (Karo Resources 96 Moz 4E resource (platinum, palladium, rhodium and gold) grading at 3.2g/t)
Yes SLP does have lower AISC per oz and Capex, however through THS’ larger size and quantities, they are now making far more free cashflow than SLP. Last calendar Q4 2020 report already shows this with THS making $25m free cashflow in 1Q alone, when PGM basket was $2,400 and Chrome $136tn. Imagine now what the free cashflow would be at $4,000 and Chrome $180tn. This is far in excess of anything that SLP can generate based on their size. We will soon find, unless THS expedite growth opportunities through cash, that THS will quickly catch up with SLP’s cash position of $67m.
I would tend to agree a $4,000 oz 6E PGM basket may be unsustainable, but THS was undervalued when basket was $2,400 and the THS sp has not chased the PGM basket up. So a softening of the PGM basket should not scare anyone. The cash will soon do the talking. THS will release their next Q report on 12-Apr, Interims 27-May.
"[t]he end is near" - in two years? (the midway between one and three).
Hell, at these PGM prices, I will take that cada dia y dobles los Dominges as they say in Havana !
S
Gosh you are a knowledgable lot here. Yes Rance is a subsidiary of New World which seems to be an essentially Chinese company which owns 15% of Tharisa, and a Chinese stainless steel maker has another 7%. They and the family own two thirds.
Back in the pre-listing 2014 THS statement, Rance Holding was listed aa a subsidiary of NWS Holdings Limited, listed on HK stock exchange https://www.nws.com.hk/EN/About-Us
Now whether Rance was sold since then post 2014, I couldn't say.
On another note seeking alpha on SLP over a month ago, and since then the bubble has shot up further: The main factor behind Sylvania’s high valuation are palladium and rhodium prices and their levels aren’t likely to hold in 2020.... The growth phase of minor metal super-cycles typically lasts between one and three years, so the end is near.I don't think these high prices will last for much longer. ..A major characteristic for minor metals such as palladium, rhodium and cobalt is that they tend to soar in price in the short time before falling back to earth just as fast. The minor metal super-cycles typically include spectacular growth over the course of one to three years, followed by a swift crash to where they started 6-12 months later.
Also I notice there is a big family holding Phoevos and the wonderfully named Adonis Pouroulis, own over 40% and a company called Rance holdings 15% - anyone know what that is? Plus institutions take the figure to 80%
SLP has been growing fast with Tharisa fairly static, SLV profits have gone from 8m to over 40m over last 3 years while THS has fallen from 67m to 54m, so form 8 tomes SLV to just a third more. Moreover SLP metrics have grown consistently year by year THS hasn't, the market values consistent growth. THS has to demonstrate that it is back on track for a while, the market judges miners that are hit with problems, like Cey and Hoc, badly. Hopefully the presentation and then results will help,.
Hi Sotolo!
I've not followed the Impala Platinum story closely, so I can't comment on it. It certainly got very cheap a couple of years ago - bankruptcy fears?
Hi Sirius!
The past is the past - and Tharisa certainly made some hard and costly decisions back in 2019. My point is that Tharisa is making far more money NOW than SLP. For more or less the same market cap, you have two companies producing PGM concentrate which has a very similar basket price. Only one of them produces 160K of 6E PGM ounces, and the other produces around 90K ounces (@ 70K 4E PGM oz x 1.3). And that first one produces 1.5 Mt of chrome as well. And it has a longer mine life, far better growth prospects, and no worrying dependency on Samancor. By any rational analysis THS's mcap should be at least 1.5 times as big as SLP's. Possibly two times as big.
THS may be bigger but is it more profitable?
Looking at RoA, RoE, ROIC, Gross Margin (GM), Operating Margin (OM), EBITDA margin, Net Profit, the answer is no if we take the trailing 4 years and TTM. (They had a very bad 2019 .) Current margins THS are RoA - 9.5, RoE - 13.6, ROIC - 12.9, GM - 42, OM - 34, EBITDA - 40.5, NP -16.
Compare with SLP current margins: RoA - 30, RoE - 35, ROIC - 35, GM - 67.9, OM - 66.7, EBITDA - 68.1, NP - 47.5
S
Tiger why do you think Tharisa’s price is what it was in 2018, while Impala is up something towards 20fold? Tharisa did issue a profit warning in autumn 2018 leading to a tumble, a bit like Centamin’s, but it shouldn’t be judged for that now? The chrome tax worry, but that wouldn’t create losses to outweigh the Platinum, Palladium Ruthenian? So why, or anyone else?
me too for a round 100,000
It’s been a barrage of buys today and lots of £10k+ buys too. PIs are loading up before the next uplift. Surely this seller can’t have too much left. I’ve taken another block myself this afternoon.
We're back in crazy town again - SLP's mcap (given today's rise) is only £10m or so less than Tharisa's.
SLP is an excellent company, and I don't think it is overvalued by any means. But there is just no way that it should be valued about the same as the much bigger Tharisa.