Final word from me. Promise.
Fitch, July 2022, assume Rhodium at :
$13,500/oz in 2022
$7,500/oz in 2023
$6,000/oz in 2024 and
$4,500/oz thereafter
Therein lies the reasoning for negative growth it seems.
Let`s hope they are wrong in their assumptions!
GLA
Before I get lambasted (or worse) I should point out I remain optimistic simply because as of today the market is valuing SLP from a base of say $60m earnings assuming no growth at all, quite the reverse: negative earnings "contraction" of (7%) annually over next decade, on a discount rate of 17.5% and a terminal multiple of today`s PE of 3.5.
That is implying utter meltdown (no pun intended) of PGMs. So somebody`s story is woefully wrong. Either they are right or we are all wrong. Or vice versa.
Time will tell of course!
Net Profit 2022 $Ms| `23 | `24 | `25 | `26 | `27 | `28 | `29 | `30 | `31 | `32| Terminal Value | -7.00% Y1-5
** $60.8** |56.54| 52.58| 48.89| 45.47| 42.29| 39.33| 36.57| 34.01| 31.63|29.42| 102.98 | -7.00% Y5-10
Present Value (PV): |48.12 | 38.08| 30.14|23.85| 18.88 | 14.94| 11.82| 9.36 | 7.41 | 5.86 | 30.47 | 17.5% Discount rate
Sum Net PV: 238.97 | 3.5 Multiple
I don`t think it is as simple as basket price measurable as against P/E. In 2016 for example, LSE shows SLP PE at 7.46. In that year the Group reported a basket of $850 on sales of $39,510,771 and net profit of $ 3,733, 535, a net profit margin of 9.45%.
Fast forward to 2021 where the basket was 4.33 x higher than in 2016 (it was $3,678) and we all know why. So if you do the math, 4.33 times 2016 earnings = $16.15m. That is like for like and ought to have been reflected in the PE all else being equal.
But SLP actually earned 6x that amount - $100.4 m and yet their PE dropped to only 3.2!!!
This - to my mind - makes no logical sense at all. It tells me the market hates the fact that SLP don`t get paid for 4.6 months (5 year average). They have zero pricing power. They lack growth ambitions. They are at the mercy of macro factors 100% outside of their control.
I agree with Luna and have said it before and have been shot down.
The market values growth. It values pricing power. Or it values a quick buck - just look at the scam which is SYME and how a legal Ponzi Scheme just keeps rolling them suckers in with another 60% + blue day yesterday.
SLP have smashed the numbers out of the ball park. They have a fabulous management with skill and discipline. They are exemplary. I love their accounts and transparency.
And yet the PE has not budged commensurate with earnings. At least not on the numbers above.
For me this is disheartening. I really hope we get some positive news about the projects and a direction of travel as to what BoD intend to do with their cash pile.
GLA
FY net profit of 40% is pretty heady, unbelievable really. [$60m net against FY sales of 146.2m]
I think Bang is taking gross basket price of $2,589. X production of 18,837 oz to give a gross basket revenue of $48.7m against reported 6E rev of $37.6m (being 77%). The inverse of that - 23% - gives a net basket of $1,994. At least that number is pretty near $1,804.
Broker estimate of FY sales of $166m looks a bit high.
CorrectAmundo! TT :)!!!!! lovin` it
I plugged in some numbers on a 5 year DCF assuming perpetual terminal value equivalent to modest GDP of 1.5%
with assumptions:
FCF: $35m
Discount rate: 15%
Growth rate (%): 5, 5, 3 ,2 ,2 (with 1.35% GDP equivalent for terminal year)
Cash: $20m
Debt: $60m
So hardly aggressive with a conservative discount rate/cost of capital
Value of equity in common stock: £264.5m
Estimated value/share: 100p
Taking growth down to 2% p.a. and 0.5% terminal = 93p
GLA
One way to do this would be to look at comparable oil companies (not an easy task) and look at their EV/2P ratio.
We know the 2P is 24m
Rift puts the EV at 180M
The EV/2P then is 7.5
You would then compare to this market. If comparable ratios were (say) 20, then this might indicate that the EV is on the low side and vice versa.
I have no idea what comparable oil companies would be. I`m sure the information is out there if you have tools to find it.
JHC !!!...if you are right, that brings me a 157% profit and I expect all LTHs on here are in the same, or similar, boat.
That would more than off-set my other losses to bring a decent return on what has been an awful bear market year so unless you short (I don`t) then hard to make any returns at all.
Remember, the S&P 500, that the brightest and the best people working for the top 500 companies in the World`s richest country, over the last 55 years on average, all those crème de la crème peeps working like bees and ants working flat out efficient, the average return of the S&P 500 is about 10% p.a.
Most, by far the vast majority, of hedge funds don`t come anywhere near that.
So the decision has to be made: Stay in, exit, or top slice???
Respectfully, it is not stupid which is a baseless position plucked out of the thin air not supported by facts.
Just look at the cash flow statements.
I never gave reasons. I simply stated two observed facts. When I see a man with an umbrella up I infer it is raining. Of course it might not be and he just likes walking around like that on his day out of the local asylum.
No doubt there are a million and one things which move markets in your "random walk" what are you going to do?
Well do what you want. I need a quick and dirty short cut. So I look at the cash flow statement. Both went down. The SPs went up. Those are facts. You can ignore if you wish. Your point (I think) is that there is no correlation between the two.
I disagree. I think it is plainly obvious that cash flow is important to valuation. Revenue is vanity, profit is sanity, cash is reality
But lets` beg to differ. When the SP falls and I`m convinced it will it always does it will I hope will be for short term. SLP is by far my biggest holding. It is in my interest to see it rise, me proved wrong, and I hope I am!
You are assuming logic and rationality. I wish.
Tesla cash flow down 5.1% - SP up 9.7%
Netflix cash flow down 3.2% - SP up 3.4%
SLP cash flow will be up - by how much is anyone`s guess, but what do you think will have to the SP!!?
I`m hope I`m wrong I really do and my pea-sized brain goes back to reading comic books
So that is:
RIO on a multiple of 5,
AMS on 4
SSW on 3.5
and
SLP on, wait for it - 8 !!
Oh and er, with 9% growth over the next 10 years discounted by 8% on earnings (net profit) of $68.3mm as base.
I feel an R Kelly moment coming on - NO! not that !!!
Summut about flying.
Well pigs can, apparently according to Wall Street
"Are they honestly suggesting this stock is worth 400p+?"
That equates to £4.32 on a SP of 84p. Depends on what valuation you start with. If we take earnings of $73mm as base year they are assuming growth rate of 9% for the next 10 years with a 7% discount rate and an exit multiple of 6! My view that is fairy land. It is an algo spitting out.
It is also cloud cuckoo when the risk free rate is running at 3% and inflation is near double figures so the ERP must be 8% or 9% at least. Then there is the country risk to factor in.
Discount rate of 15% is nearer the mark and assume growth nearer GDP levels - 5% max even if at all and optimistic given a start base of 73mm.
The market is not assuming any growth rate at all it is pretty much flat if you run the numbers.
That said I think a couple of quid is very realistic and if this gets to 150 soon I will top slice
GLA
https://www.tradingview.com/x/XHnilIvt/
From May 2022 J&M report, I put together some data of supply and demand deficit and correlation with Rh spot averaged from 01/01 and 01/06 data points - the jaws of that crocodile will snap back together! Well, that is what we all want and desire of course!
GLA
You might well be right but a couple of points:
(1) that is not how this RNS is written. The "INA Transaction" is a defined expression in the RNS: it means BOTH the 4% for Block 3/05 and the 5.33% for Block 3/05A:
`Afentra plc ('Afentra' or the 'Company') is pleased to announce that its wholly-owned subsidiary, Afentra (Angola) Ltd, has signed a Sale and Purchase Agreement ('SPA') with INA - Industrija Nafte, d.d. to acquire a 4% interest in Block 3/05 and a 5.33% interest in Block 3/05A, offshore Angola
(the "INA Transaction")`
“Upon completion of both the Sonangol [20%] and INA transactions [9.33%] , Afentra will have initial 2P Reserves of c.24 million barrels (20 and 4 mmbo respectively) and daily production of c.4,680 bbl/d. (3900 and 780bopd respectively).”
In other words, 3900 for Sonangol and 780 for the INA Transactions - the 4% AND the 5.33%
(2) if you mean $20 bbl/d (low for a 2021 average) then that gives $5.7mm revenue p.a. on production of 780 yes but revenue is not EBITDA!
Agreed: the 9.33% interest generated the EBITDA of 5.3mm.
My question is how did that happen with a production of 780 bbl/d and a presumed OP of $65?
The AET site page - enquiries investor relations - cannot be reached unfortunately
Just going over this RNS:
“4% interest in Block 3/05 and a 5.33% interest in Block 3/05A, offshore Angola (the "INA Transaction")”
[right, so that = 9.33%].
“The asset interests being acquired under the INA Transaction generated an EBITDA of US$ 5.3 million for the year ended 31 December 2021, as extracted from unaudited management information for the year, with EBITDA being defined as "earnings before interest, tax, depreciation and amortisation".
[remember that – $5.3m]
“Upon completion of both the Sonangol and INA transactions, Afentra will have initial 2P Reserves of c.24 million barrels (20 and 4 mmbo respectively) and daily production of c.4,680 bbl/d. (3900 and 780bopd respectively).”
[That is a lot but to simplify the last para abbreviated[
"Upon completion of INA transactions, Afentra will have daily production of 780bopd"
Assuming average bbl/d price for 2021 of (say) $65 gives 780 [bopd] * $65 *365 [days] = $18.5mm
AET have a 9.33% interest = $1.72mm [$18.5mm*0.0933]
So how is the EBITDA of $5.3mm arrived at?
https://www.tradingview.com/x/oy2PPq1w/
Agreed - shaded area shows last year`s favourable impact in ZAR/USD
I understand that about 85% of RH is for use in cat converters. About 1/4 of (that) supply is provided by recycling - presumably used cars as scrap? So the price of second hand cars is an input into that supply curve.
Liberum look to the Manheim US used vehicle value index:
https://publish.manheim.com/content/dam/consulting/ManheimUsedVehicleValueIndex-LineGraph.png
The theory (I think) is that as the index rises means second hand car prices are rising - means less scrap cars, means less recycling = rise in spot price of Rh.
Well, I did a little back test using XRHO DB tracker of Rh against that index and the TTM are as follows:
Manheim /Rh
July: (2.6)/(4.8)
Aug: (0.36)/(16)
Sep: 5.3/(10)
Oct: 9.3/(0.04)
Nov: 3.9/(15)
Dec: 1.6/5.09
Jan: 0.04/28.36
Feb: (2.1)/7.1
Mar: (3.3)/(3.8)
Apr: (1.1)/(2.07)
May: 0.7/(12)
June: 1.3)/(10)
From this it appears that Rh pics up a few months after the Manheim index rises. Are any of you guys monitoring this? I mention as Liberum use it as a tool/indicator.
I`m thinking Liberum has a rather high basket price for this quarter of $4,125.
This is how I calculated it.
For 21/22, Q3 we know the actuals.
So I started by multiplying the reported:
basket price for Q3 of $3,327 p/oz. X the reported production (oz.) of 15,840
Multiply them gave me a “Basket 6E Revenue” of: $52,699,680
The Actual Reported 6E revenue was $41,300,000.
The delta (difference) between the two is obviously some sort of cost. And that delta was 78%.
Modelling the same for Q2, the delta was 73%, and in Q1, it was 71%. So fairly consistent across Quarters. For Q4 model then, I took an average – 74%.
Liberum estimates FY 21/22 rev of $166m.
Q1A-Q3 actuals were $108.6m. This implies a Q4 rev of $57.4m
From this, we can work backwards to calculate the Basket 6E Rev for Q4 by using the 74% delta: $57.4m/74% = a Basket 6E Rev for Q4 of $77,567,000.
With production at 18,800 oz that implies a basket price of $4,125.90
Summut disney wurk thar laddie ... that basket seems a bit on the high side!
I will look forward to the published results
What do you guys estimate the basket price to be?
"the $6m sale of Grasvally should both add to the $138m showing at Q3"
**payable as $393,334 x 15 over 3.75 years**
"Brokers Revenue forecasts of $144m for the year"
**Broker Note ("Note") has it at $166m**
"net net for the year approaching £70m"
** I posted on 1/7 estimated earnings of $73m. The Note has it at $94m before tax. I assumed a normalised 5 year average tax rate of 22% which would have aligned very close to that at $73.32m. However, the Note has assumed a 30% tax rate to bring earnings down to just shy of $66m. Adding back depreciation expense of $5.5m gives: $71m. Maintenance capex, I put at £4m. Deducting that, gives Owners` Earnings of $67m or 21 pence per share for a Cash Yield of 26%. **