Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
https://www.youtube.com/watch?v=p80BX63qIIY
The presentation contents you may already have read, but there are some analyst questions and company answers at the end of the presentation.
https://www.investorschronicle.co.uk/news/2021/08/18/kenmare-triples-payout/
In my opinion, the current share price doesn't at all price in the further improvements in output, realised sales prices, product mix and debt reduction that we will see in 2022. This is not even mentioning the strong possibility of a special dividend, share buyback, or takeover bid.
Davy said it will likely upgrade Kenmare's full-year EBITDA forecast from $174m to around $190m.
Good point Contango. At the current market valuation, someone wanting secure long term supply could probably snatch a bargain, but a bid would have to be closer to £1bn to be successful. Even at that sort of price it would be a bargain fo the buyer.
NicetoMichu, August market illiquidity could be an issue but the fact is that this stock is not attracting new investors. My interpretation is that the FY2021 performance is already priced into the current market price. I think that we can expect something like $100m as a FY21 net profit, and dividend yield should be comfortably above 5%. For the share price to reach the 700/800p that we both expect and hope for, investors are waiting to see the 2022 performance, in particular, net profit being closer to $150m; realised sales prices getting closer to spot prices; more zircon in the product sales mix (currently on track to achieve only two thirds of what was previously forecasted); reduction in net debt; and delivery of a special dividend or the commencement of a share buyback. It is strange that in the past, the market valuation reached £1.2bn, but is little more than a third of this at present.
The share price was 466p on 11th May. Today (now) it is 424p. Can anyone explain why it has not passed 500p yet?
EBITDA up 121%, Net profit after tax up 278%, Dividend up 217%. Positive results, and mainly as expected. Will be interesting to see where the share price finishes at the end of this day and week.
Sorry, please allow me to revise my previous post. For FY2021, I am hoping for a dividend of $0.25 to $0.30 (30 cents), on the basis that in 2020 the company paid a dividend somewhat higher than the 20% minimum. Net profit should easily exceed $150m in 2022, and if the dividend payout is increased to 35%-40%, shareholders will have plenty to look forward to in 2022.
2020 dividend was $0.10 per share based on a 20% distribution. Net profit in 2021 should be at least five times higher than 2020, and the distribution will be 25%, so FY 2021 dividend should be at least $0.50 (fifty US cents). Plus, if MC, is keen to keep his promises to shareholders, then we should see a special dividend and/or share buyback in 2022. It seems that the market is waiting for confirmation that the company delivers on its forecasts and promises. If it does, the share price could double very quickly.
If Merrion's forecast is too old for you, let's consider something more recent, in fact, figures put out by Kenmare via a "marketing communication" (Hannam's words, not mine) published by Hannam & Partners in October 2018. For FY2021, the forecast was EBITDA of $211.8m based on 1,246t of ilmenite @ $215/t and 93t of zircon @ $1,097/t. So, let's do some variance analysis based on current estimates of 2021 production and market prices. What EBITDA are we expecting folks for 2021?
Will the company achieve the $211m EBITDA it guided two and half years ago?
Based on data provided by the company, Merrion Stockbrokers in September 2013 forecast EBITDA of $306m for FY2016, based on 1,150t of ilmenite @ $280/t and 90t of zircon @ $1,200. Based on these types of figures - production and realised market prices - what EBITDA should we expect in 2021 and 2022?
According to Argus Media (24 June 2021): "Zirconium silicate prices have climbed to eight-year highs as rising demand and disruptions to zircon output are tightening the market, with prices expected to continue increasing. Australia's Base Resources reported a "significant" price increase for June-quarter contracts. Iluka boosted its price for standard and premium zircon by $70/t from April this year, and it is set to raise the price further. Australia's PYX Resources, which produces premium zircon in Indonesia, has hiked its price for the third time this year, by $210/t to $1,750/t for July shipments, representing a total increase of $355/t so far this year." Again, it will be interesting to see what price Kenmare is achieving. If the company cannot achieve EBITDA of at least $200m next year (2022), then when will it? The major shareholders should be asking questions.
At the end of May 2021, Hannam Research wrote "Shifts in consumer behavior continue to support upward pressure in the TiO2 market, with paint and coating demand sustained by an uptick in DIY sales globally and low housebuilder inventories. Industrialisation should underpin demand in the long-term as GDP grows in emerging economies in tandem with
urbanisation. Based on ilmenite indices available on Bloomberg, Chinese domestic pricing is now around US$330/t, while import prices could be as high as US$405/t." It will be interesting to see what realised price Kenmare announces with its H1 results next month. If they're not achieving close to $300/t in H2, shareholders should be asking questions about the marketing department's competence.
NicetoMichu, I also believe that the company should be valued at something like £7 - £8, but I don't think we will see this until net debt comes down closer to zero and until the company delivers the special dividend or share buyback that was promised. Also, investors were expecting dividends to be 40% of net profit rather than the 25% being paid this year. With the H1 results, the BOD have to offer reassurances on these points if we are to see any progress in the sp.
Share price now = 416p; Highest share price achieved in 2017 = 360p. Hardly any progress in the last four years !!!
On Monday, there was a general stock market decline, with many companies losing 4-5%. Now, on Friday, most companies have regained what they lost, but not Kenmare. It has continued to slip lower. I thought 2021 was the year that Kenmare shareholder were supposed to be happy. Any explanations from anyone?
In my 12 years plus as a Kenmare shareholder, this is possibly the most positive update ever. Record production, record grades, and still rising market prices, as well as Covid under control. In my view, the current share price is still greatly undervaluing the company. By the end of summer of 2022, I would expect the share price to be much closer to 700p - 800p.
As a long term holder of 12+ years, it has been noticeable that Kenmare's realised sales prices are always way behind the curve on the way up, but they fell very quickly on the way down. Maybe they could learn a lesson or two from some of the copper miners, bearing in mind that the copper price usually correlates quite closely with the ilmenite price. For example, Codelco achieved $8,500 in Q1 2021 against $5,640 in Q1 2020. Freeport-McMoRan increased output by 25% and managed to achieve a realised average price of $8,686, which was ABOVE the LME average. It would be nice to see Kenmare negotiating the next round of ilmenite contracts at $300 or thereabouts (against recent spot of $330).
Thanks Richorpoor for the update on the ilmenite price (330 usd). I knew that the spot figure had passed 300 usd, but didn't realise the price had gone as high as this. Hopefully, the marketing team can negotiate future contracts at 10-15% below spot, which would be a fair bit higher than the 250 you mentioned :)
If Simply Wall Street have a fair value price of £8.73, THEY obviously think that the current share price is a giveaway :)