Sylvania Platinum Share Discussion Threads

[bookwormrobert] 19/2/2020 14:47

Mr. Stephens,
What is wrong with this simple calculation?
Taking Liberum's figures at face value:
21c per share EPS for year = 16.2p EPS approx.
110p broker target price = implied P/E of 6.8.
That seems a stingy P/E, but not outrageously so. (Average mining sector P/E about 13, but African miners trade at a discount, and so do smaller producers. I think a P/E of 8 is more reasonable.)
And, REMEMBER, Liberum have made quite low assumptions about the average price of PGMs until the end of the financial year. So, if you are basing your figures on today's spot prices, which are much higher, you will get a much higher figure for EPS.

[mr stephens] 19/2/2020 14:36

I used 33% to be prudent as the SA tax system is not as straight forward as the uk
Just to add to this
ST from IC picked up on the liberium forecast and his own target price in an article last year
His target was 60p based on profits of $20m
But he was aware and highlighted the PGM basket increasing
At the time he thought this would lead to a 79% increase in the forecast and his target price
That would equate to around $32m net profit and an ST share price of £1.08
He’s no fool
Nine of us including the experts forecast the incredible rise of rhodium which whilst only 14% of the PGM in ozs is 54% ish in revenue
So I am still not in agreement with the target price and a p/ e of 2.5
The sector is in 13
Previously liberium were forecasting in. P/e of 6
Something is not right
But honestly I don’t know what

[risa5] 19/2/2020 14:32

Sylvania posts strong interim results despite challenges; McConnachie to retire

17th February 2020

Aim-listed Sylvania Platinum achieved a record performance for the six months ended December 31, despite disruptions relating to the holiday period shutdown and power and water supply constraints, outgoing CEO Terry McConnachie said on Monday.

He said it was evident that the corrective action and implementation of various improvement measures to address challenges experienced during the previous financial year were now showing results.

Sylvania expects its operations to achieve the previously announced production guidance of 74 000 oz to 76 000 oz of platinum, palladium, rhodium and gold (4E).

“While the results for [the interim period] are excellent, the board is mindful of the potential challenges ahead and has, therefore, decided not to increase guidance until further clarity is obtained,” McConnachie noted.

For the period, Sylvania Dump Operations delivered 40 003 oz of 4E.

Revenue was $59-million, net of pipeline sales adjustments, an 84% improvement on the revenue of $32.1-million earned for the six months to December 31, 2018.

Group earnings before interest, taxes, depreciation and amortisation increased by 197% year-on-year to $36.7-million, while net profit was up 244% year-on-year at $23.9-million.

CHALLENGES

Sylvania is grappling with a number of challenges, including the availability of stable electricity supply in South Africa, which not only affects the company’s existing operations but also its expansion plans.

Moreover, intermittent rainfall and water shortages remain a key focus of the group, with mitigatory measures continuing to be explored to assist in the reduction of overall water losses in tailings.

Further, potential retrenchments at some of the host mines owing to the depressed chrome market, have necessitated the review of the group’s plant feed strategy.
However, the group also sees a number of opportunities.

Firstly, the current platinum group metals (PGMs) basket price is contributing to higher-than-planned profits and cash balances.

Moreover, post-commissioning evaluation of PGM grades and recovery optimisation projects, incorporating proprietary modifications at Millsell, Doornbosch and Tweefontein, identified an opportunity to roll this circuit modification out to the Mooinooi and Lannex plants to improve the upgrading and recovery of PGMs.
Further, the group remains debt free and continues to generate sufficient cash reserves to fund capital expansion projects.

[whitefish] 19/2/2020 14:28

I think they calculate a TP of 110p based on a detailed NAV calculation.

If I was u, I would focus on Average spot prices from Jan 1 2020, decide on likely production to June30th and then calculate adjustments to latest company forecasts. Then calculate EBITDA with the first half your starting point, use a 28% Tax rate (stated by the company - I have no idea why u have used 33%) come up with an Net Profit and EPS and then do your estimations of correct share price.

[srichardson8] 19/2/2020 14:26

from The Times market report on Tuesday Feb 18th market (hope this isn't a repeat post!)
'Palladium is a star performer
The price of palladium soared to a fresh high yesterday, extending the silver-white metal’s extraordinary rally over recent years. The price of an ounce of palladium rose to $2,585, more than triple what it cost five years ago.

The metal is used in everything from jewellery to dental equipment, although it is perhaps best known for being used in catalytic converters, which help to remove toxic emissions from vehicle exhausts.

Prices have been propped up by a supply shortage at a time when demand is booming. The world’s carmakers bought an estimated 9.7 million ounces of the metal last year as they battle with stricter emissions tests. Supply, from countries including South Africa and Russia, hasn’t been able to keep up. Another issue is that palladium typically is mined as a by-product of platinum and nickel, metals that haven’t been popular among mining companies of late.

[bookwormrobert] 19/2/2020 14:25

So, taking Liberum's figures at face value:
21c per share EPS for year = 16.2p approx.
110p target = P/E of 6.8.
That seems stingy, but not outrageously so.
Personally, I believe that the EPS for the year will be substantially higher than Liberum estimate, simply because palladium and rhodium prices will hold higher for longer than most people think. But that's another story.

[mr stephens] 19/2/2020 14:22

In other words folks the profits are going to be treble our original forecast but we only think the share price will be 56% higher than our forecast at $20m

What am I getting wrong

If they think the profits are going to be 3x their original forecast then why is their target price not at least near 3x at £2.10

I need help before I go mad

[mr stephens] 19/2/2020 14:18

Whitefish appreciate the correction
Then why such a low target share price
When they forecast $20m for the whole year the target price was 70p
Now the forecast is 3x original the target share price has risen to £1.10
I accept I don’t have sight if the report at present but something here does not add up
Would that not equate to a p/e of around 2.5?

[whitefish] 19/2/2020 14:10

Incorrect Mr Stephens, Liberum is forecasting:

Revenue (to June 2020) USD134.157m
EBITDA USD91.305m
Net Profit USD59.358m
Underlying EPS (US$) 20.99 cents

[whitefish] 19/2/2020 14:10

Incorrect Mr Stephens, Liberum is forecasting:

Revenue (to June 2020) USD134.157m
EBITDA USD91.305m
Net Profit USD59.358m
Underlying EPS (US$) 20.99 cents

[mr stephens] 19/2/2020 13:50

Val
I’ve just checked with a couple of other shareholders and their view is that 37.5m is liberiums full year fc

[mr stephens] 19/2/2020 13:32

Apologies working from memory as not in a position to look up things at present
But my understanding was that the corrected $37.5m is a full year forecast net of costs tax capex and dividend
If they are as you say around the $60m mark net net then that makes a shambles of the target price of £1.10
If on their initial forecast of $20m the target price was 70p then surely on $60m it should be nearer £2.10
I’m pretty sure earlier feeds said it was $37.5m for the whole year

[thelongandtheshortandthetall] 19/2/2020 13:01

Cheers someuwin!

[someuwin] 19/2/2020 12:57

CEO Video: Jaco Prinsloo, Sylvania Platinum

(19.02.20)

In these five short videos incoming Sylvania Platinum CEO, Jaco Prinsloo discusses his recent appointment as CEO, the challenges for everyone regarding the power situation in South Africa, dump material life spans and spot prices, the current palladium and rhodium markets and his preferred use of surplus cash. Click below to watch the videos.

[valhamos] 19/2/2020 12:10

Mr Stephens - You don't have the Liberum forecast and neither do I so I am curious to know how have you come to the understanding that Liberum are only forecasting $36.3m for the year?

Someuwin in post 2010 quotes the report "Sylvania reported net income of $23.9m, up 244% Y/Y, inline with estimates. We expect profits to drive a further 56% higher to $37.5m in the second half on the back of stellar price performance of palladium and rhodium."

Therefore based on that the full year forecast would be $61.4m - considerably higher than the $36.3m you are stating?

Dangersimpson2 also said in post 2076 that Liberum are forecasting $59m PAT which was the same as you. Likewise Redtrend above $59.4m (not sure why the difference between $61.4m and $59.4m but it is hardly material)

So why do you persist in saying it is only $36m?

[mr stephens] 19/2/2020 11:53

No I’m long
Just nice to see it hit the first ST target

[chrisatom] 19/2/2020 11:01

60 has no relevance apart from being a round number. It could also pull back to 53p at some point. Are you day trading it?

[mr stephens] 19/2/2020 10:47

Being a cheapskate I’m relying on info posted here
I believe the profit forecast after tax so net profit was 36.3m
The $54m was net cash profit before tax and dividend payout
If they were quoting 54m net then based on their own logic the target share price should be 1.85
When they quoted 20m net for the year the target was 70p so x 3 = 189
Pretty sure their full year net net forecast is $36.4m
My net net forecast is $55m

[albanyvillas] 19/2/2020 10:36

PEB

The Board is excited about our future and looks forward to providing a further update in our audited results for the year ended 31 December 2019 which will be announced in late March 2020

Should get the date announced soon

[mr stephens] 19/2/2020 10:20

Dropped back to 59.4
Thought it would hold once through 60
Hang on in there

[redtrend] 19/2/2020 10:18

Mr S - I'm not sure where you get $36m Net Profit from?

The financial model at the back of Liberum's broker note has $59.4m Net Profit for FYE 2020.

[mr stephens] 19/2/2020 10:15

Broken through 60p

[mr stephens] 19/2/2020 10:12

Great insight red
But liberium forecast of $36m profit for the full year is woefully short of reality therefore the target price is also too low
Net profit will be over $50 after costs tax capex and dividend
So we should be at least quadrupling

[redtrend] 19/2/2020 10:04

Based on a share price of 54p, the latest Liberum broker note forecast dividends:

FY Jun 2020: 8.8% (Nov-20 div payout if stick to same timetable as last 2yrs)
FY Jun 2021: 22.1%
FY Jun 2022: 30.1%
FY Jun 2023: 29%

So you would double your money with the dividend and if SLP can hit the Liberum target of £1.11 you would more than triple your money.

Liberum's forecast has more upside as it is based on:
- significantly lower 4E PGM basket than now (e.g $1,980 for FY Jun 2020, when 1H we were at $1,830 and now at $2,800)
- no expansion plans. If chrome market picks up in couple years time, Liberum's note from April 2019 could come back in to play where there are 3 key sites of expansion for Samancor with potential to add 30-50K Oz which Liberum equated 29p/ share.
- Volspruit sale/ development/ JV not included: $43m on the books, but more if all approvals secured and ready for sale/ dev. Liberum forecast $50m disposal at 15p/share
- Third pass material viable not included, which would extend steady state life of production past 9-10yrs. SLP current mine plan is to process all dump material and current arisings twice.

Edit: forecast dividends are based on Liberum's financial model at back of their broker note. I'm not sure if for this particularly item, how closely SLP management may have been involved in their house broker's modelling of said dividends. As example, if SLP now have big JV plans for Volspruit rather than a sale, even if they're a minority non-operator partner of let's say 45%, they would still have to stump up a lot of Capex which I would personally prefer over dividends. However if they plan to sell it for $50m to payout a mammoth special div, I'm not going to look a gift horse in the mouth either.

[mad foetus] 19/2/2020 09:33

Liberum were forecasting 17c and 21c dividends I think, so near on 28p in diva over the next 2 years. That is astonishing.