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I put some concerns to Ai (chat gbt)and got this response "I see why you are eagerly waiting for the quarterly earnings report, right? It's understandable, given the recent drop in the 4e basket value as of 31st March. The 4e basket value is significant because it's used to calculate the majority of unsettled invoices, which have increased significantly in the aged debtors pile. Surely there won't be a 25% credit on $39m worth of invoices will there?
I'm wondering too about the high level of debtors over 90 days and putting myself in the buyers position on a falling market as I think too that I would delay my payment, as the longer I wait the less I pay, right?
I can see why you're concerned about this situation. The 4e basket value floored at $1800 on the 31st of March, which was a 25% drop from the previous value of $2432. However, it will be interesting to see how SLP has managed to maintain its resilience despite these challenging circumstances.
Have you been following SLP's financial performance closely? Do you have any insights or predictions about how the upcoming earnings report might turn out?"
unquote
I thanked the Robot for putting this into Artificial Intelligence words and absolving me of anything ...
Should Q3 turn a profit of $4-5m this quarter I will be over the moon knowing its just a blip... imagine $5m profit during the worst trading period over the past few years and then seeing PGM's jump 10% since the accountable day. 4E Basket now $2000 and rising with Platinum going for new highs at 65% of the basket and 37% of the $value.
And where should the electricity come from?
One can hope on nuclear fusion. Or some other solution to the many questions that need to be answered and solved by the (arbitrary) cut-off date.
There are substantial affordability challenges as well....
Eventually, this will be solved. It's unlikely to happen in the proposed time-frame.
Never mind the footprint and resources needed for the batteries.
We'd be better of with a different fuel, for existing CBEs. Robert Zubrin (NASA) advocates ethanol and methanol as practical liquid fuels that can be handled by the existing fuel distribution infrastructure and produced at prices roughly competitive with gasoline.
He worked extensively with fuel cells during the space shuttle programme.
https://www.thenewatlantis.com/publications/the-hydrogen-hoax
I agree that the timescale for the changeover to happen is extremely optimistic, although it is inevitable.
Observationally, I would say that for the vast majority of people to make the change from one technology to another is multifaceted. The first of the two main reasons, and an obvious factor, is price - until electric cars are more affordable in comparison to alternatives then the change-over can't happen quickly. Secondly, what you are getting has to be significantly better than what you had before. Now despite electric cars themselves being amazing machines, the infrastucture is way behind - range, charging times and availability of charging stations will all improve but again the transition is slow. There are many more minor factors but I feel these are the main two.
Anecdotally I was thinking of replacing a run-around car that we have with a brand new electric one. I don't care what it looks like, I just need a box on wheels to get from A to B. Let me know the cheapest brand new electric car you can find - it's about the same price as an average UK salary!
Anyway, for what it's worth I added some SLP yesterday @ 89.39 to my core batch.
I spend nearly have the year in the USA and I am reminded because of the vast distances that its not practical to have an electric vehicle for many journeys such as the snow birds travelling from the Northern states to Florida. Anybody who believes that in a few years time that all vehicles with be EV not CBE's is in dreamland.
Similarly, I pointed out on several occasion that the hopes on moving our economies (speak transport etc...) from CBEs to EV is bound to fail. The sheer resources and political required are substantial. And when did we ever experienced politicians being efficient?
That should translate to a healthy RH price going forward.
I accept that RH price swings can be volatile. There isn't a lot of volume. It's easy to skew the picture with single event even.
When i first entered the room here in March 2020 (20-30p) what I saw was typical trader chat, that changed when more people got to grips with just how much the appreciation in RH was making to the bottom line. Oddly the RH price is now the same as it was back then but the share price is 2-3x higher. I look at 1-2 years but respect that the world is now different and things change constantly. Steel copper aluminum and Nicket (SCAN) all 4 at the top of the pile with regard to all major green transition metals.........copper is great apparently...electric cars are wonderful.....if you want to dig up enough ore to manufacture 79m electric cars (0.3% grade 70kg per car) you need to dig up Denmark each year........i was talking to a senior person for Volvo last week, i said what's your view on EV....he said bull*** its not going to happen. I agree but we can believe what we want to, we are marching towards a goal but the foundations ar not there to support it, another mistake ahead.
yep, critical thinking sure is the way to go......
Hi Bangrak,
I don't pay too much attention to broker hype/estimates/phanasies etc... We know they are not a highly probable outcome and prone to echo chamber effects.
Earlier on I tried to put the finger on the fact that there has to be more than just Rhodium price movement in order to make this a sound investment. My view is that solid, competent management will surprise and I maintain that stance with SLP.
As far as time-frame is concerned, yours might be shorter than mine. That's OK. Different approaches, different models. All good.
What is important however, is to see a CRITICAL point of view. And I applaude you providing that. Exposure to critical thinking makes us all better.
So keep it coming. There's always two sides of a coin.
What I noticed is that when we only see one side of this coin, we are prone running into trouble.
However this plays out is a much longer story in my books. My time frame is 8 years min.
Pls keep it coming. I do enjoy reading your musing.
Best
LN
Noticed Broker downgrades since my last post, eps is now forecast to be 0.19 & 0.16 almost the same as mine, supporting my previous post that it's insane to think this will make more money than before and brokers are slow. Once again third-year running brokers get it wrong, post covid they were bearish hence 100% gains were made, and the last 2 years were bullish resulting in losses for the faithful. 70-90p & reduced divvy, no doubt there will be a few range trades following breaks and reappearances from Gandolf and Rambo but they don't have a clue how to work out the net profit, I applaud the efforts of some who actually display some thought below. Won't be exact but the eps x historical average is 15p below where this is. Cheap???
And tax?
Sheff - who is upset now? haha. I simply took prior 4 Qs and averaged the net prof margin to get 40% (consistent with their long-term performance) so hopefully not too contentious.
We already know what the prod. oz. is likely to be - 72k. What we do not know is the basket of course. So I assumed a low estimate to be conservative: $1,580.
Last 4 Qs:
Basket price X Prod oz. measured against net revenue, the latter is on average 74%.
Q1: Basket $2,897 [A] | Prod. oz : 15,771 [B] | Gross rev. [A] x [B] = $45,688,587. 6E rev (actual): $32,300,000 i.e. 71%
Q2: Basket $2,892 [A] | Prod. oz : 16,605 [B] | Gross rev. [A] x [B] = $48,021,660. 6E rev (actual): $35,000,000 i.e. 73%
Q3: Basket $3,327 [A] | Prod. oz : 15,840 [B] | Gross rev. [A] x [B] = $52,699,680. 6E rev (actual): $41,300,000 i.e. 78%
Q4: Basket $2,589 [A] | Prod. oz : 18,837 [B] | Gross rev. [A] x [B] = $48,768,993. 6E rev (actual): $37,646,000 i.e. 77%
These 71%, 73%, 78%, and 77% numbers are facts and average out at 74% (this is again consistent longer term not just last 4Qs)
So using an estimated basket of $1,580 and Prod. oz of 72,000 gives $113,760,000.
74% of this is 6E rev estimate of $84,546,000.
40% of that is $33.8m or £27m (depending on exchange rate.)
It was this estimated $27m which I used to get to a cash-adjusted forward P/E of 4.7
Hopefully, that is clearer.
Today Rh has had a bounce $7900, Pt 1025 and Pd $1450
Car manufacturers worldwide have increased production figures since the start of the year, it seems only the UK has increased sales of EVs but they are way behind ICE sales as a percentage of sales however the increase is a suprise though considering the incentives to to buy EVs was dropped in January.
So is today the day we see recognition that the manufacturers are finally running through their stocks of Rh and other PGMs and are beginning to restock via the market?
If production continues at current levels then that increase will in time flow through to PGM demand and price increases, as suggested by Mining Weekly.
Germany also pushed back on the demise of ice vehicles in 2035 by getting the EU to agree and state if they run on e-fuels synthetic petrol and diesel then that's okay, expect more back tracking in the following years that's the first foot in the door to slow down the transition.
Quiggers52, I am wondering if you have read what has been said about your latest post on the ADVFN board.
Thanks Quiggers.
Prof
Agreed Pd is optimistic and nothing more than 1) I was a bit rushed and did not update my sheet; and 2), to counterbalance the Rh estimate, which is probably overdone at 5k.
Pd not THAT material as it is 17% of prill split (roughly).
Hope it holds at this until Thursday wherein I will buy back in.
(Luna will be happy.)
Hi Quiggers,
That is one of the most helpful pieces of analysis that I have seen on these pages. Thank you.
I like the fact that you have been so conservative with Rhodium. Why have you gone the other way and gone so positive on Palladium please?
Best wishes,
Prof
I took SP of 87p to give MC of £232,383,486.35. Cash less debt of £100m to give adjusted MC of £131,903,101.35 and assumed net earnings of £27.57m based upon 40% net margin on production of 72k oz multiplied by a basket price of $1,580 which implies:
$5,000.49 Rhodium (currently, $7, 850)
$950.10 Platinum
$1,974.49 Palladium
$4,150.79 Iridium
$1,850.00 Gold
$484.21 Ruthenium
This gives a conservative P/E of 4.78.
(Dividend of 9p - £24m - not included.)
Thanks Artrader. Rhodium is the big unknown at the moment!
50% of the basket in terms of rev split is RH.
Well the forthcoming news in Q4 may be amazing albeit the Rh price may dampen spirits.
From report: Lannex MF2 project scheduled for commissioning towards the end of Q4 FY2023;An updated MRE and Scoping Study to combine the Volspruit North and South Body and to include rhodium anticipated to be completed in Q1 FY2024
"As we advance into the second half of the financial year, I anticipate continued solid results as the Tweefontein MF2 capital project is optimised and as we work towards the commissioning of the Lannex MF2 in the latter part of the period. Additionally, we expect to provide further clarity on the significant potential at our exploration projects as we continue our studies and increase our resources.
Why focus on the RH price ? Just one of the 4e elements . Platinum is not far off highs .
This company is very nimble they can focus production to the higher margins.
ATB
Hi Arttrader,
Why do you say 'Q4 with news will be amazing' in your post of 21 Mar please?
Thanks Prof
RH averaged $15.44k in 2022 with a peak price of $19k in march the ttm net pfofit is $65m. PE 4.55 cash was building slightly.
Now its averaging $11k so far this year (currently $7.4k) down 28% & 61%
Enf of 2022 t3m rh was $13.3k T3m this year $11k
Production is pretty flat...things have changed here materially and some are missing it.
A quarter way in, analysts still predict net profit to be just 8% lower despite this huge decline in RH...........this is impossible look at the prill split & trend in RH, the analysts are way way out. The demand for RH has not risen as expected after china reopened and there is no supply problem like before as mentioned several times by heraeus, the $7.8k says this clearly. Recent examples of analysts getting it very wrong have been the substantial downgrades in Gas & Coal prices as a result of warm winters and energy reduction. To be really cheap in my view the SP here needs to be 40p area or RH needs to be $19k. Sorry if this is not what you want to read but these are facts.
If you are relying on a system to tell you the expected profit or the pe ratio then you're relying on a trailing profit or what an analyst thinks the profit will be based on an assumption. These 4ish ratios you mention are based on forecasts, forecasts are exactly that when the analysts finally admit to the fact that certain prices will not recover to their expectations you get these slow downgrades, and those that rely on these figures get caught out. rh is now sub 8k and it averaged $11k so far this year., last year it was $15.44k
That places SLP on a PE now of 6 using $11k and a big 8 if you use $8k. caution is needed here.
Hi Arttrader,
Thanks for sharing your thoughts. I noticed someone else, or maybe it was you, had previously mentioned the likely big sales adjustment come the quarterlies. I forgot to post that this morning but that is another factor that is holding me back. Do think the market has this priced in or will we see likely see a fall when it become explicit?
Best wishes,
Prof