RE: Back to work18 May 2020 14:16
Hi HighAndDry!
This is my take on it...
There are some similarities between CEY and SLP - both are debt free, unhedged, cash rich, and profitable precious metals producers. But, of course, SLP is much smaller in size. Its financial numbers are simply stellar - by Jim Slater's old investment methodology, it is a Zulu company. In terms of current revenue, it is a rhodium producer first, a palladium producer second, and a platinum producer third. The market for the first two of these metals is mainly catalytic converters for cars and trucks, and it is supported by a raft of recent regulatory changes (Europe6 and China 6 emissions standards). I make SLP's "current P/E" about 3!
As for management, SLP have just had a change of CEO. The old CEO, Terry, was dour, wryly humorous, responsible, and all in all a glass half empty kind of guy, even as the profits were rolling in. I liked him a lot, but then I have a lot to thank him for (I first bought SLP shares back at 8.2p). I think the new CEO (his former number two) is cut from the same cloth, but time will tell. Do note how SLP report their results in full every quarter - it's a model for other AIM companies.
The top co is indeed a Bermuda registered company, with South African operating subsidiaries. This arrangement has never been a problem in my experience.
As for dividends / buybacks / future investments, we are all waiting for the annual results (out in August). The house broker (Liberum) has predicted a mammoth dividend of something like 15 US cents. Personally, I think it will be less than that, but that it will still be a multiple of last year's payout. Certainly, the company needs to clarify what it intends to do with all the cash it has been generating. (It's a nice problem to have in these hard times!)
The biggest risks? South Africa could well increase corporate taxes. Palladium and rhodium prices could fall - though the supply of both is either balanced or in outright deficit. A wide variety of causes could affect production, from the dreaded virus to electricity and water shortages. Etc.
For what it's worth, my own opinion is that this is the best share I know, bar none.
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