Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
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Https://www.investorschronicle.co.uk/news/2024/03/20/kenmare-resources-strong-performance-belies-valuation/
Reiterating many views I've seen here.
Key for a buyer is the replacement cost of the asset ie cost to build now .. that’s got to be closer to $2 bn as MC said at the Cap mkts day. As prices rise to fill the supply gap such that building become viable again buying KMR at a reasonable discount to the RC could be attractive and cash payback would be reasonably quick. The supply demand chart in the webcast is important..
I have been holding back from comment in the hope that someone else might . The "key" factor in any takeover is return on capital. The value of the underlying assets whether actual or replacement is secondary. The attitude is always "I invest, but how quickly do I get my money back?" A workable Exit strategy is of the additional importance. Little point in investing unless you are able to cash in your chips at some future stage. MC had little or no incentive to think of either of these factors. Hopefully his successor will be appointed solely with these strategies in mind and we will see the quoted price returning to somewhere near its true value.
I discussed this exact concept with david robb (ex CEO) of iluka in 2015, regarding the value of an asset like KMR to an acquirer ..
Private Investor Webinar at 12.30pm today. Michael Carvill, Managing Director of Kenmare Resources and Jeremy Dibb, Director of Corporate Development and Investor Relations will present the FY23 results to 31st December which were announced on 20th March . Register
https://us02web.zoom.us/webinar/register/1217097076837/WN_-zLIKNlKS5eYmE-3dXyS6g
What about his shares in the company, surely they are an incentive.........................
Thought today's presentation was excellent plain spoken and covered all the bases, some good questions at the end.
As far as the sale of company goes I think Michael hit the nail on the head when he said no one has been banging on their door regarding a sale however if he was running the rule over the company he would wait until the wcp move had been completed before making a move, I get the impression that is the way that it will play out.
Tax, I agree and have previously said the same. It’s one heck of an investment at todays price if you invest now get dividends and it sells in 2-3 years
Another complementary article from IC.
The low valuation the market has stuck on Kenmare Resources (KMR) goes beyond simple ratios or putting cash profits next to its minute enterprise value. Often when a company’s assets far outweigh the market capitalisation there is a huge debt load or crash in underlying markets. But not with Kenmare. The titanium oxide miner values its dredging, mining and processing kit in Mozambique at over $900mn (£709mn), compared with a market value of just £269mn. Put this against the 2023 cash profits of $220mn, strong balance sheet and increased dividend, and the share price looks even stranger.
Granted, Kenmare has seen the average selling price of its ilmenite and other products drop 10 per cent on average in 2023, and this pushed Ebitda down a quarter compared with 2022. But the real valuation drop is probably due to the necessity of once again moving a whole processing plant to the next deposit. A detailed study on this is expected in the coming months, but the company has said the cost of shifting wet concentrator plant (WCP) A is $341mn, to be spent by 2027.
This is up from the $270mn estimate from a year ago, and Kenmare has already taken on a new $200mn loan to cover initial spending this year.
Even at that higher cost, broker Peel Hunt says this is an opportunity for investors, not a cliff from which the share price will dive further. “We do not believe the shares price in the sustained ilmenite pricing, nor the unlocking of a decades-long future via the WCP A investment programme that is just getting under way,” said the Peel Hunt analysts. Meanwhile, Kenmare managing director Michael Carvill is stepping down after almost 40 years in the job. His successor will have plenty to do but will be taking on a company in fine fettle. Buy.
Robb should regret not bidding more. It was a massive missed opportunity but it still looks cheap at 200-300% of our market capitalisation versus construction costs.