London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
With a heavy heart that is me out of SLP having taken a hit of about a third. I like the cash pile and I suspect the fall in Rhodium is overdone as a result of dumping of surplus stocks however worry that it will not recover much and could even go lower.
SLP is a pure PGM play unlike THS which has some offset from other commodities and yet they are down majorly as Rhodium has dropped. I fear that at present SLP is only being held up by the share buy back.
As Bangrak says it may take a quarter or two for the impact of the PGM falls to become apparent however at these levels there is not a lot of profit being made. The cash pile can cushion a bit but the current high dividend, which is I suspect the main element keeping people invested, looks under threat to me.
In the more immediate term I worry that the July results will start to shed a light on all of this and even with the share buy backs we may see a further fall in the SP particularly given the adjustment on previous quarter sales that Artrader refers to in his 07:21 post.
So those are my reasons for getting out. I might be wrong and kick myself - not an unusual occurrence. If we see a reversal in PGM declines I might be tempted however it would have to be significant and I am more likely to increase my holding in THS or JLP that are more diversified.
Good luck to you all whether in or out .
Best wishes,
Prof
Personally, i would sit out of this until the Rh price recovers above its 50-day which is 6854, there is a reason it's low and that is simply a lack of demand/oversupply. Alternatively cash per share plus 1-2 years eps at say 55p on 5k rh would for me be good value. As an example, TGA is cash plus 1 year's eps now. COST is trading around net cash sub TNAV. Lots of good things about but the sentiment in sectors is holding everything back. Everything has its time.
The question is has Rh bottomed? If so there is an argument to be adding / drip feeding at this level.
Hi Loggy,
That is the million dollar question and I hope it has but then I was hoping that at 10,000, which was below where a lot of analysts said this would be in 2023, and therefore why I have stayed in SLP for so long.
If you are confident that it has bottomed then there is a case for adding however I worry that with a small rise in Rhodium we may still not see a rise in the share price as it is the share buy back that is creating artificial demand at this level. A significant rise in Rh however which is not at all impossible if the current price is indeed due to excess stocks being dumped, would I suspect drive a strong recovery in the SLP share price.
Ultimately, as so often, how you anticipate some key drivers playing out are what will dictate how you proceed.
Good Luck,
Prof
Hi Bangkok,
Do I take it you are therefore out and watching as I now am?
If so are you still in THS?
Thanks,
Prof
Hi Bangrak,
Apologies for the 'Bangkok' in the last message - autocorrect strikes again.
Best wishes,
Prof
Prof, Bangrak is in Bangkok so no issues, that's where I live anyway but not in BKK I'm on the beach in Samui. I've been out for a long while. I bought meaningfully here at 35-40p in 2020 on the shortage I saw in RH after the China lockdown as I knew the broker & net profit was wrong on RH prices......current basket x production minus all costs does not justify a share price of 79p hence why the brokers stopped buying yesterday and the drop, i assume everyone reading has noticed the rh price and the 50% soaking up of sales some days? TBH i think many are totally oblivious to what happening hence the need to shoot the messenger who, to be honest, was messaging this months ago, if it saved someone a few pennies then good.....
Bangrak,
Many thanks.
Best wishes,
Prof
Sorry Bangrak I don't agree, by my workings at current PGM prices and 72k production I have profit of about £27m earnings 10p a p/e of 4 gives about 40p share price plus cash balance of roughly 37p so at today's lowly PGM prices 77p seems reasonable.
I don't hold at moment but I am watching how far this falls, all the forecasts for PGMs are higher than current prices and with car production increasing from the lows of the chip shortage and pandemic something doesn't add up.
Huge stockpiles by the car manufacturers to work through maybe, increase in supply from somewhere Russia maybe, forecast recession in the West depressing prices maybe.
At these prices only the low cost producers with a hefty cash balance are feeling comfortable.
Hi RaxFactor,
I agree with you that something doesn't feel right with PGMs at current levels so far below analyst consensus. Wrt Rh I read somewhere about the release of stocks from certain producers who had substituted other materials. If that is the case then hopefully we should see a reasonable rise once that flushes through.
At what level would you be tempted to go back in given your calculations?
Thanks,
Prof
Just watching the PGM prices it's possible this is not the bottom, if a recession hits perhaps the p/e might fall to 3 so in the sixties seems reasonable then patience with leeway to average down.
However even at low PGM prices slp is still making money you can't ask more than that in todays environment were reducing losses is seen as good form.
This is now way oversold. True that the current basket price has fallen significantly, but we are still making probably around $5-7M net profit per quarter. Once you factor in the cash in the bank and the reliability of our operations, the SP does not make any sense. Happy to buy some more as we wait for PMs to recover.
Hope this bounces of 70p as does look oversold
ATB
One thing I didn't mention was the dividend unless slp are happy to see the cash pile dwindle away, which I feel they won't want to do expect a dividend cut at current PGM prices it's unsustainable.
AS SLP have stated they will pay the dividend as a % of FCF, that is the reason I sold up, as I think they will not change this stance and suddenly pay it out of existing cash, that would not be the prudent way they manage the business. With the fall in PGM price the FCF falls with it.
The cash pile is dwindling away - The Company have to change some of their policies. They hold their cash in ZAR and that is just going one way against the mighty dollar-in-war, last adjustment was 15% loss and the next one will be even higher. They also make adjustments against prior sales; if the price of PGMs falls/rises they alter the already invoiced sales, at the moment they have a huge downward adjustment to make that will actually affect the profit they have already banked in their quarterly figures. They need to cease this policy as it does nothing to encourage debtors to pay and many are taking over 100 days to settle whilst presumably benefitting from lower prices. They need to make strict payment terms at fixed prices. They have cash to see them through for a while so why not cancel the share buy back too? and if the PGM basket is below break even, which I believe its on the brink, then they should think about taking a holiday after all they deserve a break. They should also let the market know how they stand.
Postponing or cancelling the buyback programme is a certainty under current
conditions, when they officially announce that in conjunction with a significant dividend cut i expect the sp to respond accordingly downwards.
That imo is a buying opportunity in a rising inflationary world a company still making money with no debt is a good company to be in.
I note your comments on payments which would be wise to change, I don't however see them at close to break even at current PGM prices they are doing better than that.
i stand corrected on your statement of near break even on current pgm prices just looked at my *** packet calcs and missed a decimal point i had them at £27m for a full year but it is £2.7m, that's a shock old age and all that.
hope i am wrong i'll look again.
Luna will be happy. he/she loves falling SP. No they they are filling their boots..,!
(Be careful what you wish for it might come true.)
Just another ebb and flow it sinks it rises, put it in the drawer, forget about it, take some money in divs and wait or put your cash in a bank and watch it wither over time.
Simples, as they say.
I'm left wishing that I'd trusted my gut and sold out when they first announced share buy backs. I hate the things and it always strikes me as a management ploy to hit their bonuses, rather than something to benefit shareholders.
Now, do I wait and see if there's a dead cat bounce or get out and break even on my average purchase price?
I'm out but then I was always looking at the PGM price to guide me forward but I'm ready to jump back in as there is a safety net which will surely come into play and thats the net asset value of each share. The liquid assets value is roughly usd 184m in cash and receivables thats approx 56p a share and total assets of usd250m equates to 76p a share without goodwill and stock and other current and future explorations
It's actually an Arbitrage opportunity
SLP for many years has been a victim of its own success with ridiculous quarterly net prof margins consistently over 50%.
So it hits some reality and ONLY delivers single digit profit numbers.
It is a cycle. This is a low. But it won`t hurt you ! I should write a song about that haha.
I'm out at break even price based upon original purchase price.
I've done well in terms of dividends, but should have sold a long time ago.
Being busy with a young family isn't really compatible with AIM shares...
I'm seeing quite a few things fall to near cash per share or cash per share and 1-2 years eps, things seem rather odd. Most of my calculations are not on broker estimates but actual current cash estimates & spot prices. Once the bots have control of a downtrend they seem to be trashing anything, even good things. Falling prices are causing some funds to liquidate at crazy levels. applause to anyone who makes money this year.