Iofina Share Discussion Threads

[count chris] 22/1/2014 21:47

Bobbbyshilling- I'm not sure the water project could have been priced in as I don't think we had enough info to know if it was a significant project? I stand to be corrected - I'm a bit out of touch with IOF right now

[monty panesar] 22/1/2014 19:10

Thinking about it you have new management and a new broker. What easier way to cover yourself in glory as broker and new CEO/CFO than having low estimates in market that you can consistently beat and upgrade. If the new directors buy stock that will confirm my cynical suspicions.

At least the recent pictures on the website indicate that the next 3 plants should be running this quarter. Looks like 4 and 5 will comfortably be running in Feb.

[frog1] 22/1/2014 18:48

Investec reiterated their guidance last month so this new guidance from the inhouse advisor was not in the public domain, even if it was obvious the Investec numbers were garbage. The worry is that Investec were the in house advisors so where were their numbers coming from. I think the FD is driving more realistic and achievable numbers and this is certainly one of the reasons for changing advisors as there would have been more questions raised and more fall out if Investec had to make such a large change to their own estimates. It is obvious that either Investec were incompetent or more likely they had been fed garbage by someone in the company.

[woodpeckers] 22/1/2014 18:34

Missed targets are what is causing the revenue estimate drop!!!

edit... and the water isn't priced in anyway.

[woodpeckers] 22/1/2014 18:30

My point is that this should have already been priced in from the '2013 Review and 2014 Outlook'. It's not news.

[frog1] 22/1/2014 18:24

Owenga

Investec 2014 revenue estimate $77 million
Numis (Investec replacement) 2014 revenue estimate $39 million

Personally, I could never see where Investec were getting their estimate from but that was the inhouse broker's estimate. I suspect the new FD thought the same and this revision was inevitable at some point. So effectively the published revenue estimate for 2014 from the in house advisor has just been halved so a fall was inevitable.

[woodpeckers] 22/1/2014 18:19

I think the drop from 240p to 100p already covered 'the reality check'. Surely the market should see that the Numis note is a fair, if not conservative, assessment of the present situation and that there is plenty of upside to come.

[bobbyshilling] 22/1/2014 18:08

To be honest, after some of the huge numbers and comparisons to asos last year the Numis note will be a disappointing read for some and that could be behind today's share price drop. If the water permit is granted, in my view at least 50p can be added to their 156p. We do have solid photographic evidence that io4 & 5 are being completed, so should be up and running qtr1 as forecast. The iodine price is still a smokey area, and could surprise on the upside as events unfold in Chile. Still a good investment to my mind with visible growth to come as plants come on line. Also, Atlantis up the sleeve for the future. Things are still OK, but an asos we are not. (Yet) :0)

[woodpeckers] 22/1/2014 17:50

Yes, Numis said " We initiate on Iofina with a Buy recommendation and 156p/share target price, 56% above the current share price." ;-)

[owenga] 22/1/2014 17:21

GuysCan anyone tell me what caused the big drop today. Can't see any RNS. Thanks

[shroder] 22/1/2014 16:34

WRITZ - Although fairly detailed they didn't really add anything in terms of assessing the likely hood of granting/dismissing the application.

Incidentally, Iofina kindly asked if we would refrain from contacting DNRC as they had been inundated with requests from investors.
__________________________________________
WRITZ
22 Jan'14 - 15:22 - 14908 of 14912 0 0

Shroder, is the "detailed and exhaustive response" available to view? I may have missed some of the discussion.

[che7win] 22/1/2014 16:34

Frog,
Good work, I agree with your analysis.

[freshvoice] 22/1/2014 16:12

After very low volumes yesterday the seller(s) are back. Some seem to have decided this is not as good a prospect as they thought and opted out.

Impatient to patient?

[frog1] 22/1/2014 16:07

Bobsworth

Sorry, there's nothing there for water and I haven't looked at it. I have never thought they would get the permit and so it would be a big bonus for me if they did and then I'd look into it.

[bobsworth] 22/1/2014 15:59

frog1 thanks for that calculation.
Assume we are granted water rights and sell x barrels of water per day at x$ profit per barrel what would be the eps and in your opinion what would be the P/E? TIA

[frog1] 22/1/2014 15:23

Here's my estimate based on the Numis note.

Inputs (explained below), I'm looking for where the figures are wrong.

Iofina Chemical Revenue = $25 million
GP using externally sourced Iodine = 20%
Iofina Chemical uses 400 mt of Iodine
Iodine price = $45 per kg
Iodine produced by Iofina resources = 700 mt
Cost of Iodine produced internally = $21 per kg

In H1 2013 IOF Chemical did over $11.5m revenue. Missed on H2 after forecasting the same for H2 but a big order pushed into H1 2014. So should be $23m but add in some for pushed back delivery.

So first input, assume IOF Chemical will do $25 million in 2014 (original forecast for 2013 plus $2m pushed back from H2 2013).

2nd input - From the 2013 interims, Iofina Chemicals operates at a bit above 20% GP using bought in Iodine so use 20% GP.


3rd input is that Iofina Chemical will use 400 mt of Iodine, they have said over 1 mt per day being used by Iofina Chemical.

4th input is production from Iofina Resources of 700 mt of iodine. 400 mt of this goes to Iofina Chemicals leaving 300 mt will be sold.

5th input from the Numis note, cost of production for Iodine is $21 per kg. This should fall as production increases.

No idea what the price of Iodine will be but assume $45.

Using 20% GP for the $25m, that gives a cost of sales of $20.8 m if they used bought in Iodine. However, they now say they provide all iodine used by Iofina Chemical from Iofina Resources (400 mt). The COS for Chemical is reduced by 400000*(45-21) = $9.6 m. So COS for Iofina Chemical in 2014 = $11.2 m with a GP of $13.8 m.

If 300 mt sold by Iofina resources at $45 per kg gives additional revenue of $13.5 m. The cost of this is $21 per kg so total cost is $6.3 m and GP is $7.2 m


Admin cost are running at $5m per annum. Interest is $1 m from the Stenna deal plus say 0.1 m other stuff

Total revenue = $25 +$13.5m = $38.5 m
COS = $11.2 m + $6.3 m = $17.5 m
GP = $ $13.8 m + $7.2 m = $21 m

Admin = $5m
Interest = $1.1 m

OP = $21 m - $6.1m = $14.9 m

Shares = 127284398

EPS = 11.7 cents

FX = 1.65

EPS = 7p


This takes no account of the building activity going on and the operational cost of that - training staff, ramp up of plants and how those costs will be allocated etc.

Using a similar model and 1250 mt gives revenue that Numis uses for 2015 and an eps of 13p. However, it has been suggested by the company that Iofina Chemical could go to 2 shifts and use 800 mt iodine which would increase eps to 15.5p.

[writz] 22/1/2014 15:22

Shroder, is the "detailed and exhaustive response" available to view? I may have missed some of the discussion.

[phoenixs] 22/1/2014 15:18

superg, what do you think of the 720mt figure for production?

[superg1] 22/1/2014 15:14

Indications so far is that warm formation water comment is without foundation, so why the H they said it ?. If right, it throws in some doubt that some points in the note are not accurate.

I expect a few things not to be right (and can see the odd bit), but that was completely off track to what we know.


It is however by far the best report on the understanding of iodine and the industry I have seen, so a good read for those that don't get it.

[frog1] 22/1/2014 14:34

There was an error in my earlier post, it should say 7p 2014, 13p in 2015. I think these are based on production 700mt this year and 1250 mt next i.e. at the bottom end of the company's guidance for this year.