Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
The company has often suffered with slime problems, and there is usually some maintenance or upgrading issue going on. But ilmenite selling price increased 13% in Q4 over Q3, with a similar increase this quarter. Other companies have reported spot prices into China approaching $400/t. Demand is sky high and stocks everywhere are lower than normal. I would expect EBITDA in FY2022 to be around $250m, and for the company to be debt free by the year end. A dividend yield in double figures would be nice given the current rate of inflation.
'now' not 'not'
Can anyone please explain why the share price has not yet gone above £5? By my calculations it should not have passed £6 too.
Rich, my point is that for 12+ years my yield on this investment was ZERO, while the banks that lent the company money usually received 5-6%. How I wish that I was treated like a bank. Then, when the company said the WCP B would not involve taking on new debt, I was relieved. But this was another BOD lie. Then, they promised to deliver shareholder value. Another lie. The current share price is a joke. The Kenmare stock in my ISA needs to see 800p just to break even! When analysts were predicting a 5-6% dividend yield for 2022, I hope that the BOD adds this to the current rate of inflation, i.e. to deliver a double digit yield, otherwise shareholders will still be net losers. If the BOD made the right decisions and took the right actions, the sp would not be where it is today. If the market thought the tender offer delivered value, the sp would have increased, but it has not. Enough said. Yet another poor decision by the BOD. And until I see a 10% yield and a 600p+ share price this will be my view (and it seems, the market's too).
Rich, they should not favour small shareholders, but the tender benefits only those who took advantage of an easy exit, and the BOD themselves, who will no doubt see their bonuses and options increase due to the increased p/e. I am not exactly a small shareholder and I will likely see no direct benefit. If only I had received the same rate of interest on my (very considerable) investment as the banks have received all these years ... ... ...
Rich, I have stayed invested in the company because all the fundamentals lead me to believe that there is value to be had that will eventually lead to a sp increase where sp = 6 or 7 x EBITDA. However, the BOD seem to be consistently misleading shareholders and making decisions that do not directly benefit the smaller investors. Why does the company even have debt? At one time the BOD promised that the WCP B move would be funded entirely from free cash flow. I am sure that at one time they promised to distribute 40% of net profit, but the current figure is 25%. Then, they promised to deliver shareholder value from 2020, and this tender offer is the best they could come up with. Saga, a higher dividend would benefit shareholders in two ways: first, the income yield (and BOD should note that any yield less than current RPI would be an insult) and attract new investors, thus boosting the share price. When Base's dividend produced a double digit yield, the share price near tripled.
So, the share price fell 7p on Friday. As I predicted, the tender offer has had no immediate posiitive impact for small investors. This was another self-interested action by the BOD. If the BOD had really wanted to deliver value to shareholders it would have used the £61.8m to pay a special dividend or to pay down debt or buy stock in the open market. Becoming debt free should be a BOD priority. Connor Maguire is misguided or is being briefed by the company. If the company cannot get the share price doubled in 2022, it never will. I have already experienced 15 years of 'jam tomorrow'. When will it ever end? EBITDA should exceed $200m in FY2022 and the sp should be > £800p. If these do not occur, we really need to replace the BOD.
Kenmare has been paying a higher rate of interest to the banks on the company's borrowings than it has been paying to shareholders in dividend. Why not pay off all debts this year?
The more I think about this, the more I feel it is one big con. "The Tender Offer is to be funded from the Company’s existing and available cash resources and BORROWINGS under the Group’s borrowing facilities and remains open until 1.00 p.m. on 9 December 2021." In the last 2-3 years, the company borrowed quite substantial sums, and has been paying a high rate of interest on these borrowings. Now these borrowings are being used to buy stock, while still leaving debt on the balance sheet, which will depress future net profit (and dividend payouts). This is not delivering shareholder value; it is theft from shareholders (imo).
All long-standing holders of this stock know that Michael Carvill, MD, never does what is best for the small investor, only what is best for him personally. This looks to be yet another example. I would have preferred paying off all debt, especially considering the interest rate paid on this debt; or a special dividend to all holders; or buying of stock in the open market, to increase the share price. I don't expect to benefit from this at all. It is another MC con.
Michael Carvill, Managing Director, seems to know. He sold some of his stock recently. Great timing for him. Never a good sign when directors start selling.
I must admit that I am also surprised that the share price has not moved higher given the increased output, higher grades, higher sales prices, reduced CAPEX, and problems with competitors. Obviously, the market wants to see the numbers first and find out exactly how high the dividend is going to be next year, and whether or not a share buyback will start.
BERENBERG RAISES KENMARE RESOURCES PRICE TARGET TO 580 (530) PENCE - 'BUY'. 580p would be nice :)
From Proactive Investors 14/09/21: Ilmenite prices are 14% yoy higher at CNY2400-2450/t (US$375/t) in China having recovered from a dip in August. While prices vary according to quality and content we are encouraged by a recent strong rises in ferro-titanium concentrate prices in Europe +11% mom, Russia +11% mom and the US +6% mom.
MC and the BOD have commented several times in recent years about the company's low market valuation. When a company is so undervalued by the market over an extended period it is the normal that eventually it will attract bid interest. When Iluka approached, they offered a ridiculously low price because the company was in distress at that time. Also, Moma was still work-in-progress at that time so an entrepreneur like MC would naturally want to see the project through to completion. But now he has achieved this, it may be better to leave when you are on top, enjoy retirement, life on your yacht etc. However, the decision on whether or not to accept a bid would lie with the Omani Investment Fund and M&G, since they possess half of the share capital.
Good point mrmoagi. According to Kenmare's website, the Omani Fund holds 29.1% of stock and M&G 19.5%. I guess the buyback/special dividend outcome may depend partially on whether the Omanis want to stay invested or whether they would prefer to realise some of their profit on this investment. I am sure that many long term shareholders - like me - are looking to sell down at least some of their holding.
The company repeated its commitment to a share buyback or special dividend in its analyst/investor webinars last week. While the company is so undervalued, a share buyback would make sense, if the purchases are conducted in the market so that all shareholders can benefit from the increased share price. Even without a special dividend, the FY2021 yield is likely to exceed 5%.
I do not particularly desire a takeover of Kenmare, but the longer the company remains so undervalued, the more likely this company will get noticed by other companies. Let's consider the numbers. Past M&A activity in the mining sector suggests that a bidding company has to offer about 6 times EBITDA to be successful. If Kenmare's EBITDA is forecast to be $190m for FY2021, this suggests a successful bid price of $1,140m. Today's market capitalisation is approximately $620m. Even if a cheeky bidder appeared and offered $930m, this would still represent a 50% increase on today's share price.
As MC rightly said, Kenmare is not presently considering any M&A or investment activity. The company needs to first prove itself with Moma. Now is the time to build up cash reserves so that Kenmare may have options in the future, like picking up a bargain (if desired) in the next commodity cycle trough. Unless Kenmare itself is taken over by a bigger operator, which is quite possible with market consolidation.
https://www.youtube.com/watch?v=UAE_mWS2WWg&t=2261s
I think that the retail investors asked better questions than the professional analysts. In the question and answer session at the end, I think MC and JD offered some very clear, transparent and informative answers. I will continue to hold and will top up if the dips get overdone.