RE: Value Situations16 May '22
An update from Value Situations
KMR
Kenmare Resources Plc (KMR) held an analyst site visit at it’s Moma mine in northern Mozambique last Thursday & Friday, and published an accompanying presentation available here.
The main purpose of the visit was to allow analysts view KMR’s existing mining operations at Namalope and Pilivili, and to visit the Nataka ore zone, where KMR will commencing mining and production from in 2025.
The update presentation provides a very helpful recap of KMR’s operations but for me the key takeaways were management’s reiteration of previous FY22 guidance, noting that strong market conditions in terms of favourable supply/demand and pricing have continued into the YTD - KMR saw a sixth consecutive quarter of ilmenite price increases in Q1 2022, and management report that positive momentum has continued into Q2 2022, supported by continuing low global inventories and strong demand, particularly from Chinese pigment producers. This is both notable and encouraging in the context of recent events in China with regard to COVID lockdowns and consequent growth concerns.
KMR’s share price has pulled back ~19% from its high of €6.50 reached ~3 weeks ago, coinciding with an escalation of lockdown measures in Shanghai, so clearly this has driven KMR’s latest price action. However, looking beyond current news headlines KMR remains very attractively valued, trading at 2.7x NTM EBITDA / 3.4x FCF. At this level of valuation, it is an obvious takeover target in my opinion current in the current supply-constrained and inflationary environment.