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Valuation
Pending more details on the FY23 capex programme, we have not yet rolled forward our DCF by one year. We have taken a more conservative view of Henry Hub prices in 2023 but this does not have a material impact on our ReNAV (£0.19 per share). While Zephyr continues to provide exposure to high impact drilling activities, we also forecast that the company will generate free cash flow representing ~20-40% of its market cap from 2024 each year based on the Cane Creek reservoir alone.
Very positive interview with LC - emphasising the tremendous short term growth potential via Copper and Cobalt in Zambia.
https://audioboom.com/posts/8247637-midweek-takeaway-with-leon-coetzer-ceo-of-jubilee-metals-aim-jlp
Buoyant trading continues with same-store sales +10%
FY 2021 and 2022 saw very strong trading results with sales up 21% and 23%, respectively. Today’s statement detailing H1 2023E same-store sales up 10.3% is, hence, very encouraging and provides further evidence of the long-term potential. Sales growth was driven by prices up 9.2% and occupied space up 2.6%. If these conditions persist, there is potential to upgrade our FY 2023E same-store sales forecast of +6%. However, with the macro uncertainty and general cost inflation, we leave our sales and EBITDA forecasts unchanged at this stage. We have updated our interest cost assumptions and assumed a further 25bps base rate rise which reduces our FY 2023E EPS by -4% and 2024E by -10%. NAV at July 2023E is expected to be broadly unchanged at 972p as operational progress offsets an increase in valuation yields and interest costs. With the current pipeline expected to add +49% to owned space (up from +44% at July 2022) and continued clear evidence that Lok’nStore is weathering the significant pressures in the UK economy well, we reiterate our view that there is very material upside to the current share price, in line with potential NAV driven by the current portfolio maturing and completing the development pipeline.
- Development pipeline will add +48.8% to owned occupied space. Building and fit-out work continues at the new Landmark store developments in Bedford, Peterborough, Staines and Basildon, all of which will be open in calendar 2023. Kettering is also on site for a managed store client and due to open in early 2024.
- Target price 1438p (+51% upside) based on potential NAV. We believe short-term valuations have reduced by -3% to -5% in response to the interest-rate hikes. This is evidence of the attractions of, and demand for, self-storage assets by investors given the scale and speed of the rate rises. Lok’nStore is valued at a -2% discount to historic NAV, which is expected to broadly hold this year, vs Big Yellow at a +2% premium and Safestore +16%.
Q123 results improve on those of Q422
Q123 improved on good Q422 results, with a slightly higher basket price, PGM 4E production up 2% to 19,194oz, cash costs/4E PGM oz down 5% and all-in sustaining costs (AISC) are 5% up in South African rand terms and down 4% in US dollar terms, reflecting the 9% weakening of the rand over the quarter, but also thanks to the 5% higher PGM plant feed.
Valuation: 179p/share; Volspruit may add 64.3p/share
We value the Sylvania Dump Operations (SDOs) at 164p/share on a discounted dividend model at a 10% real discount rate. We include exploration assets at book value of 14.9p/share, with a total valuation of 178.9p/share.
However, if rhodium is included in the Volspruit NB valuation, this could lift it by a 64.3p/share, with further upside for the FNL and Volspruit South Body (SB) projects, not tested in this report.
18 October 2022
Caerus Mineral Resources PLC
('Caerus' or the 'Company')
Cyprus Joint Venture Termination
Caerus Mineral Resources PLC (LON:CMRS), the exploration and resource development company focused on developing mineral resources to support the global 'Clean Energy' initiative, would like to announce its intention to terminate the Bezant Resources Plc ("Bezant") and Caerus joint venture covering Troulli, Kokkinopetra and Anglesides ("Troulli JV").
As stated in its interim results dated 30 September 2022, the Company made a credit loss of £303k in the first half of 2022 due to Bezant not having contributed its proportion of Troulli JV funding. By now Caerus should have received at least US$500k from Bezant.
After conversations with Bezant this morning, it was mutually agreed to terminate the Troulli JV.
Chris Lambert, Chairman of Caerus Mineral Resources, said:
"It is with regret that we have mutually agreed to terminate the JV agreement. Whilst this may seem to be a set-back, I see the JV termination as a positive development for Caerus shareholders as it enables us to reclaim 100% of Troulli and the other projects in the joint venture. The JV agreement was poorly negotiated by the previous board and was certainly detrimental to the Company's interests. To give away 80% of the Troulli project, whilst having to contribute 50% of the initial US$1m work programme funding, was not a fair commercial transaction.
The JV agreement also allowed Bezant to put any new Cyprus project acquired or pegged by Caerus into the JV, thereby gaining a potential 80% interest. This clause left the Company with no incentive to expand its footprint in Cyprus. In addition, the terms of the processing contract between Caerus and Jubilee Metals Group were once again heavily biased towards Jubilee, and detrimental to any potential early cash flow to Caerus.
As indicated in the interim results, the board will continue to implement more robust corporate governance structures to ensure historic governance breaches cannot be repeated, and the Company operates to best practice standards with all its stakeholders.
Caerus is focused on developing the significant opportunities that can be generated through its relationship with EVM group. It will update the market later in 2022 with an overview of this strategy."
"Our forecast EV/EBITDA multiples for FY22 and FY23 are 1.4x and 1.2x respectively, PER multiples of 2.3x and 2.3x and our P/NAV is only 0.18x. We maintain a PT of 300p"
Strong rental market offset by margin pressure
Residential-for-rent developer and manager Watkin Jones has confirmed in today's trading statement a strong operational performance in the second half of the year to 30 September 2022, with investor demand for rental assets remaining strong and good visibility going into FY23E. However, the group said it had encountered some pricing and margin softness as its institutional investors faced increased funding costs. We have reduced our estimates for FY22E and FY23E but remain confident in the longer-term prospects, driven by strong demand from tenants, which has boosted rents.
? Strong demand, but pricing pressure. Investor demand for residential for-rent assets has remained strong, with three build-to-rent (BTR) schemes and three purpose-built student accommodation (PBSA) schemes forward sold in H2, bringing the total for FY22E to £0.9bn, from £0.3bn in H1. While in H1 build-cost inflation was offset by increasing asset values, WJG saw pricing and margin softness on sales in the second half, with purchasers facing increased funding costs. Two forward sales that were planned to close in September have been impacted by the recent market volatility and are now planned to transact in FY23E. While H2 was materially stronger than H1, the Board now expects FY22E underlying operating profit to be c.10% below market expectations
Our forecasts. We have cut our FY22E EBIT from £60m to £54m and, taking a prudent stance, for FY23E from £80m to £55m. Our adjusted PBT goes from £55m to £49m for FY22E and from £75m to £50m for FY23E. Our dividend expectations are unchanged.
¦Long-term rental demand opens up opportunities. We believe that both the BTR and student accommodation markets offer substantial long-term growth opportunities, driven by the rising demand among tenants and the attractive income characteristics for institutional investors, for which WJG's forward-funding model offers lower risk for both parties. The group's £95m net cash could offer major opportunities in the land market.
? Unique capital-light, low-risk model. WJG develops BTR, PBSA and urban regeneration assets, forward-funded by institutions, which in our view reduces risk and cyclicality with low capital tie-up. The accommodation management division has relatively sustainable revenues (page 4).
Extract from today's RNS :
The discovery of three challenges for the company:
o The non-payment by Bezant Resources of its share of Troulli JV expenditures. The JV agreement provides for funding up to US$1,000,000 with each party agreeing to commit up to US$500,000. Funds were supposed to be provided by both parties in advance.
At 30 June 2022, the company had invested directly €1,140,000 into the Troulli project. As of today, the Company has received no funding for the venture.
o The Cypriot Ministry of Defence's confirmation that it will impose a buffer zone around installations in the Kalavasos region, resulting in notification from the Mines Service Department that our main Kalavasos license is effectively cancelled.
o A disputed A$2m claim by BMG Resources the original vendor of the Kalavasos Project.
Trader's Cafe with Zak Mir: Anthony Coombs, Chairman, Chris Redford, CFO, S&U, and Graham Wheeler, CEO Advantage Finance
https://embeds.audioboom.com/posts/8166004/embed/v4
Positive H123 results
S&U's total net receivables were £370m at the end of July, up 21% from H122. Within this growth, Advantage motor finance receivables increased by 13% to £280m and Aspen property bridging loans by 56% to £90m. H123 revenue was £49.4m (+15%) and pre-tax profit increased by 5% to £20.9m; the smaller increase in profit reflected a lower-than-normal level of impairment charge at Advantage last year following previous exceptionally high pandemic-period charges. The group reported that credit quality remained strong and improving in terms of bad debt, default level and collections against due. Earnings per share increased by 6% to 140.7p and a first interim dividend of 35p (33p) was announced.
Outlook presents challenges and opportunities
While S&U indicates that both businesses continue to perform well, it acknowledges the more challenging economic background with growing pressure on household incomes and the potential for a cooling in the housing market as rates rise. Advantage has adjusted its affordability criteria to reflect conditions, refined credit metrics and broadened its range of introducers, supporting its ability to address opportunities in the market that offer attractive risk-adjusted yields. Aspen is monitoring valuations and the availability of refinancing closely, but its high-net-worth borrowers are showing resilience and it stands to benefit if some participants withdraw from the market or act more cautiously.
Valuation
Our estimates for FY23 and FY24 are only changed modestly: increases in EPS of 1.9% and 3.5% respectively, with the latter reflecting a lower assumed tax rate. The shares have shown weakness (along with peers) as the macroeconomic outlook has become more difficult and trade at a price to book ratio of 1.1x compared with the 10-year average of 1.8x. An ROE/COE model suggests the share price discounts a sustainable return on equity (ROE) of 11.3%, compared with the historical five-year average of 15.8%. The 6.7% prospective yield is an additional attraction for patient shareholders.
MORNING COMMENT
CORPORATE
13 Energy
Interim Results - Positioned for Growth, Increasing Fair Value Estimate
Share Price
13 Energy's interims came in in-line with our expectations. We are increasing our fair value estimate to 66p from 60.6p mainly to reflect the collapse in the value of the pound (in addition to other adjustments) - we are now assuming a long-term USD:GBP rate of 1.20, down from 1.26. We will update our valuation further when initial production rates are provided in respect of the company's newly drilled wells and we define our estimates for 13 Energy's forward looking drilling program. We expect that analysis will further increase our fair value estimate for 13 Energy.
2023: In due course, we anticipate switching the basis of our valuation from 2022 to 2023, in
doing so we expect to see considerably more cashflow from operations due to both rising production and higher commodity prices. Currently we value 13 Energy's Canadian operations based on a 5x 2022 EV/CF multiple, which we believe is conservative.
Serenity: The company intends to imminently commence operations at the high-impact Serenity appraisal well (86.4 mmb 3C success case recoverable resource estimate net to 13E; success case valuation of 64p/sh of which 6.7p is included in our fair value estimate).
Although it is only just over two months since our last trading update, S&U is pleased to report that both its motor and property bridging divisions continue to outperform its expectations, both in transactions growth, and in the quality of its book and the new business it is writing. Current Group receivables now stand at approximately £370m against £340m in May, and profitability exceeds that of H1 last year. Debt quality is reflected in strong collection rates and supported by low levels of default at Advantage, our motor finance business, and at Aspen, our property bridging lender.
However, these results do not mean that S&U has become either hubristic or Panglossian. Current political instability and differing views on fiscal policy, together with persistent UK economic headwinds do not allow for any complacency. We recognise that a potentially shrinking economy, higher inflation and interest rates, historically low levels of consumer confidence and a possible technical recession in the UK, have all contributed to a manically depressed view of the future, particularly in the UK equity markets.
Hence, although growth currently exceeds budget and expectations, we judge it sensible in light of current uncertainty about economic prospects, to temper optimism with caution, particularly in our underwriting policy. Recent adjustments are designed to continue to ensure that our customers have sufficient comfort and headroom to withstand any pressure on their household disposable incomes, which might be felt later in the financial year. These will help protect our credit quality throughout the Group, whilst in the case of motor finance, anticipating the new outcome-based Duty of Care to customers, to be introduced by the Financial Conduct Authority in one year's time.
Despite last week's less than impressive results from Hargreaves Lansdown, analysts at Deutsche Bank and Barclays still gave them the thumbs up. Both banks increased their price targets for the stock. Deutsche thinks the shares are worth 940p (up from 900p) while Barclays raised its target to a punchy 1225p from 1175p. The shares rose 7.2pc, or 63.6p, to 949.4p.
Daily Mail 09/08/22
Lok'nStore's year-end statement details continued strong trading in FY 2022 and a positive outlook. Self storage revenue was up +17.3%, same-store revenue up +24.9%, prices up +13.0%, high occupancy levels were maintained and early trading from new stores has been strong. We have upgraded our EPS forecasts by +3% (increasing our assumptions on the managed stores) and highlight that the main drivers behind the strong progress in FY 2022 were the occupancy and pricing gains in FY 2021, meaning the +13% price rise in FY 2022 will provide very good support for growth into FY 2023. A further site has been added to the secured pipeline that will now, in total, add +44% to owned trading space and drive significant medium-term growth in sales and earnings. We reiterate our view that the current portfolio and development pipeline will support a share price of 1550p (50% upside), with further upside to come from future additions to the pipeline. In line with this theme, management has commented that an updated store valuation will be provided with the results, with values expected to rise reflecting the strong revenue growth and new store openings.
-Target price 1550p based on existing pipeline. We set our target price of 1550p at the time of the interim results, in line with our forecast for NAV per share when the pipeline was fully developed, opened and revalued. The new Bolton site will be accretive to this, and we expect the July 2022 valuation (to be revealed with the results on 31 October) to evidence good progress along the path to our target.
We see three key wins from today’s buy-down; (i) independent acknowledgement that the Newcrestauthored PFS, completed on just 4.4Moz / 2Mtpa / US$1,500/oz significantly under-valued Havieron, and (ii) bottom-up, this provides a healthy cash injection to Greatland, and (iii) drilling continues to support our 9Moz high-grade thesis with 86m @ 3.1g/t the deepest Crescent hole today, and 82m @ 3.0g/t showing similar tenor, potentially with an emerging base-metal component, in the Eastern Breccia. To be fair, we think the 4Q21 NCM represented NCM’s desire to ‘get into production quickly’ rather than a life-of-asset valuation, with the 4Q22 DFS to firm up the 3Mtpa scenario. The US$1.2bn asset valuation, plus cash, implies ~£300m for Greatland’s 25%, but based on a reserve of only 2Moz @ 3.7g/t AuEq (NCMs 2Q21 PFS), hence the subsequent 3Moz reserve alone underpins the existing market cap. Where it gets fun, albeit more speculative, is that if the Crescent Deeps infills and extends to 9Moz as our initiation works up here, even before an estimated 6Moz @ ~1g/t AuEq caveable resource, it would be >3x higher than the reserve on which the US$1.2bn was based on. Looking to funding, the JVA mandates that funds firstly repay (US$50m) Newcrest debt, resulting, if exercised, in GGP gaining US$10m cash, and the ability to secure its own debt funding. With Newcrest’s debt quite expensive at >10%, this should be a good trade as we expect competitive vanilla debt to be offered to Greatland. We previously saw A$93m of funding, with equity requirements to be lowered net of any debt and this sell down now. With the US$60m valuation near identical to our US$57m estimate (based on average of market cap / spot 3Mtpa NPV5%-1850), and our model based on 25% ownership already, we make no changes to our valuation, maintaining our BUY rating and our 17p/sh PT based on 1xNAV5%-1850 of a 9Mtpa SLOS operation at 668koz pa payable AuEq on a 9Moz inventory, plus a nominal valuation of half this (per ounce) on a 6Moz caveable estimate. We note the contradiction between Newcrest’s suggested tapering of high-grade based on a single new hole 150m shallower than the still-deepest 86m @ 3.1g/t could cynically point to their own M&A interest, further supported by their making no reference in their own release to the best hole today, 150m @ 2.9g/t in the Crescent zone, itself nestling perfectly into a gap in the 4Q21 MRE. With a near-deepest 82m @ 3.0g/t AuEq drilled in the E. Breccia, itself potentially pointing to a new base metal zone with 1% Cu, our own enthusiasm for depth extensions remains undimmed. Other than M&A, drilling and the year end DFS remain key catalysts along with potential debt/funding of GGP’s share of the build.
FIRST LIGHT
Jubilee Metals (JLP)-Corporate - Progress in Jubilee's Zambian copper strategy - an update
Market Cap £373m Share Price 14.1p
Jubilee today provides an update on its Southern copper refinery strategy in Zambia which includes the development of the Roan concentrator to provide raw material to the Sable refinery. Commissioning of the Roan concentrator on Run Of-Mine ore and tailings is well underway and expected to reach design capacity by the end of this month to deliver 10kt/yr of copper in concentrate to the Sable refinery. Sable is expected to produce 12kt/yr of copper cathode with the addition of some third-party raw materials. Jubilee has also installed a cobalt refinery circuit with a capacity to produce up to 1.2kt/yr of cobalt- although the actual production will depend on the feed grade from the third-party ores. Commercial production of cobalt is expected in August and we anticipate it being a useful revenue generator in its own right.
Construction at Roan began barely a year ago after logistical delays caused by the Covid pandemic and to manage and self-build the plant is testament to the management capability inherent in Jubilee - one of its key features in our view. This in-house capability will stand the company in good stead as it moves its attentions to the various raw material plants it has planned for its Northern copper refining strategy centred on an existing Mopani SxEw plant on care-and maintenance. Once in production these two refineries will make Jubilee a copper (and cobalt) producer of scale in Zambia and generating significant profits in our view.
WHI View: Jubilee has had a solid technical year (FY ending in June 2022).
It has built significant chromite treatment plants in South Africa and expanded its primary profit centre at the Inyoni PGM plant also in South Africa set up to treat expanded production of chromite tailings. At the same time it has self-built the Roan copper concentrator in Zambia and put together the longer-term, and bigger-scale plans for its Northern copper refining strategy. At this time, and pending publication of FY 2022 numbers we place our fair value of 29p/sh under review as we incorporate the many changes to Jubilees plans since our last research note published in December 2021.
#UOG Broker coverage on @UOGPLC’s Maria Discovery in the UK Central North Sea from @optivalondon
"We value the Maria project at £33.5 million or 5.2p per share on a risked basis. On an unrisked basis we value the project at £109.1 million or 14.0p per share"
Asset values, pricing, occupancy and margins all rising
Lok’nStore’s H1 results show continued strong trading and market conditions, with sales up +31%, EBITDA up +47% and adj. NAV per share up +48% to 843p. The interim dividend is up +16% to 5.0p, an eleventh consecutive year of increase. Loan to value is 8.3%, supported by the previously announced sale and manage-back of four stores at a 17% net premium to the July 2021 valuations. H1 pricing was up +18.5% and occupancy up +6.0%. Trading at the start of H2 has been buoyant and we expect continued valuation increases in this undersupplied market. We have raised our July 2022E NAV per share by 5% from 824p to 864p and target price from 1296p to 1550p, leaving our EPS unchanged, allowing for potential cost increases. We reiterate our view that there is significant long-term share price upside driven by the development of the secured new store pipeline, adding further stores to the pipeline, valuation yield compression and a removal of the NAV valuation discount vs peers.
ACQUISITIONS DRIVING SUPREME GROWTH
Insider Media - Manchester
Manchester-based manufacturer, supplier and brand owner Supreme expects another year of profitable growth as it eyes up further acquisitions.
The company said it remains "fully focused" on driving organic growth, closely balanced with strategic acquisitions, after agreeing a new £25m RFC facility with HSBC in March 2022.
In a trading update for the 12 months ended 31 March 2022, the business noted that it anticipated revenues in excess of £130m compared to £122m in 2021.
It expects to report an adjusted EBITDA of no less than £21m for the year compared to £19.3m in the prior period.
The business said it "performed strongly" throughout FY22, driving organic growth across its core categories. It also said it completed two strategic acquisitions financed by free cash and established product traction with UK grocery customers.
Looking ahead, the group expects increasing levels of cash generation, predominantly driven by Supreme's strong Vaping sales footprint.
However, it said this performance will be tempered by commodity price inflation within sports nutrition and wellness and the increases in the overhead base relating to wage and transport costs.
"Management has already taken steps to mitigate the external factors, including buying forward whey, and will also be continually reviewing potential price increases and ongoing manufacturing and distribution rationalisation," it added in a statement on the London Stock Exchange.
"The board remains confident that the group will continue to deliver both organic and acquisition led growth this financial year and beyond."
Supreme will publish its financial results for the year ended 31 March 2022 in July 2022.
Equity Developments
In a Trading Update for the year to 31 March 2022, Supreme PLC reports that it expects revenue of above £130.0m and EBITDA (adjusted) of no less than £21.0m based on strong organic growth in its core segments, augmented by strategic acquisitions. The Group expects continued profitable growth in FY23 driven by demand for its Vaping division products, partially offset by commodity price inflation impacting Sports Nutrition & Wellness division.
• The update indicates FY22 performance in line with our forecasts; our revenue estimate of £130.0m is revised to £130.4m. We have revised EBITDA outlook from £21.5m to £21.2m to reflect the impact of commodity price inflation in the Sports Nutrition & Wellness segment (12.1% of FY22 estimated revenue). Vaping remains the mainstay of performance, where Supreme expects to report 10%YoY growth in FY22 (33.4% of ED estimated revenue: 52.8% of ED estimated gross contribution) backed by the addition of Sainsbury’s and Morrisons to its customer base. The Group highlights 2%YoY growth in the Batteries division (26.4% of FY22E revenue) and +5%YoY in Lighting (20.9% of FY22E revenue) with gross margin improvement.
• For FY23 Supreme highlights “double digit” growth prospects in its Vaping division. Despite FY22 growth in Sports Nutrition & Wellness revenue of over 130%YoY(E), profitability in this division was impacted by a combination of the increased price of whey and additional wage and transportation costs.
Changes to estimates and medium-term outlook
• We remain fundamentally positive for growth prospects in Supreme’s leading Vape division where we expect the contribution to gross earnings to have risen from 45.1% in FY20 to just under 60% by FY24, propelling an increase in total (pre-forex) gross margin from 28.0% to 30.5% over the period.
• Our positive outlook for Vaping offsets near-term pressure on the Sports Nutrition & Wellness segment so that our revenue outlook to FY24 is unchanged. Our FY23 EBITDA (adj.) outlook is £22.0m from £24.0m, an 8.2% reduction, and in FY24 6.6% lower, taking a conservative view on the medium-term trends in energy and commodity prices which have already impacted a broad range of sectors. Taking these factors into account we adjust our fair value to 230p/share.