Sylvania Platinum Share Discussion Threads

[plat hunter] 30/10/2020 12:09

Low visibility of AIM... Market participation is a top down game

[brucie5] 30/10/2020 11:54

Yes, of course that explains it. So what's your best theory about the stalling of the share price , to acknowledge this valuation?

[plat hunter] 30/10/2020 11:49

Brucie... this is why Kazoom was saying you then need to drill down yourself to see why.Sales is excessive in slp's circumstances because of the growth in basket price, which can see in the receivables as an increase in value and not quantity.

[plat hunter] 30/10/2020 11:42

Keep up Deme... That was hours ago

[brucie5] 30/10/2020 11:41

Plat, just thought I'd sit through a recent video from Ed Croft on Stocko. He does highlight the beneish score which as you would know is tucked away rather invisibly under the heading of 'm-score' within the Earnings Manipulation risk. SLP comes out with 'low risk' though sales growth of 1.6 crosses the box marked 'is sales growth excessive?'. A further look at what this means, comes out with the following:
"In Beneish's study, the average Sales Growth Index for companies that were not manipulating earnings was 1.134, as compared with 1.607 for manipulators."

I don't regard this as a red flag, btw, and as stated, already hold SLP within a low churn income folio. But I'm foxed by the failure of the share price on the given value and growth metrics. PE 3.8; PEG .3; and Stocko gives a whopping 14% dividend. They must be rolling forward to include a special payout?

[deme1] 30/10/2020 11:07

funny that
I can buy £45k at 64.4

[mfhmfh] 30/10/2020 10:42

Liberium raise target price to 140p

[death by donut] 30/10/2020 10:18

Not personally , but target price raised to 140p from 115p and remains their top pick.Dyor :-)DbD

[plat hunter] 30/10/2020 08:51

Can't buy but can sell.

[plat hunter] 30/10/2020 08:06

1 share traded so far lol

[plat hunter] 30/10/2020 08:02

100% Kazoon

[risa5] 30/10/2020 07:52

There are some exhibits with this report...

Sylvania's Q3 2020 Results - I Love It When The Plan Comes Together

Oct. 29, 2020 3:44 PM ET

Summary

Sylvania booked revenues of $41.5 million and EBITDA of $29.7 million and is currently valued at just 1.3 times annualized EV/EBITDA.

The stellar performance can be attributed to strong rhodium prices, which are set to remain high over the next few years.

Sylvania plans to distribute a metal price windfall dividend after June 2021, which I think could surpass $80 million.

Introduction

On October 28, Sylvania Platinum (OTC:OTC:SAPLF) posted its production and financial results for the first quarter of its 2021 fiscal year, which ends on June 30. They were nothing short of stellar with EBITDA of $29.7 million and cash generated from operations before working capital movements at $29.8 million. What’s more, Sylvania confirmed it plans to distribute a windfall dividend after the end of FY21 as high rhodium and palladium prices keep filling its coffers.

Production and financial results

With operations restarting in May, Sylvania managed to produce 17,972 ounces platinum, palladium, rhodium and gold (4E PGMs) in the quarter ended in September. While this is 14% lower year-on-year, it’s still in line with the company’s FY21 production target of 70,000 ounces. As Sylvania warned in its FY20 financial report, scale-down of operations at the host mines at its Mooinooi and Lannex operations will lead to lower volumes over a period of 12-18 months. As a result, 4E PGM production will be likely down by 10-15% during this period.

As a reminder, Sylvania retreats tailings from chrome mines and among its partners is Samancor. This means its fortunes are tied to the chrome sector in South Africa. Earlier this month, the country’s Cabinet announced plans for an export tax on chrome ore, which should force some chrome ore buyers to purchase alloys production instead. The initial reaction to the proposal was a revived sentiment and a halted slump in ore prices, which is good news for the local chrome sector. Still, I think the government is making the mistake of focusing on the symptoms and not the cause. The reason South Africa’s ferrochrome and ferromanganese producers have their backs against the wall is an increase of electricity prices by over 500% since 2010.

Back to Sylvania’s results, revenues, EBITDA and cash flow soared as its PGM basket price rose to $2,834 per ounce compared to $1,654 per ounce a year earlier. The main driver of this is rhodium, which could be the metal of the decade.

The company’s cash balance rose by just $5 million during the quarter and this is mainly due to an increase in trade and contract debtors as a result of the increased production compared to Q4 FY20 when operations were disrupted due to COVID-19. Payments from the smelters which Sylvania uses come in around four months, which leads to the buildup of a large amount of rolling trade receivables.

Rhodium and Sylvania’s zenith

Around 90% of mined rhodium in the world comes from the upper group two (UG2) orebodies, which predominantly exist within South Africa's Bushveld Complex. It's a by-product of palladium and platinum mining and is used mainly to control NOx emissions in motor vehicles.

With supply remaining stable and demand increasing due to tightening global NOx emission standards, the rhodium market has entered a structural deficit and prices have skyrocketed to record levels.

There’s no viable alternative to rhodium in autocatalysts and higher loadings in motor vehicles could push gross demand to around 1.4 million ounces in 2025, which provides strong support for prices.

It’s very hard to forecast prices when structural deficits exist, but I think it’s safe to say rhodium is likely to remain volatile and sell for over $5,000 per ounce in the near future. This means that South African companies with strong exposure to the metal will reap record profits in the coming years. As I mentioned in my previous article on Sylvania, the metal accounts for around 13% of the company's production compared to 5-7% for the major South African companies in the PGM sector.

The windfall dividend

Windfall profits are large, unexpected gains resulting from lucky circumstances. Such profits are generally well above historical norms and may occur due to factors such as a price spike or supply shortage that are either temporary in nature or longer-lasting. - Investopedia

What sets apart Sylvania from many PGM producers is its lack of debts. The company currently has a cash balance of $60.9 million plus a significant amount of receivables. There are no significant capex plans for FY21 and Sylvania wants to distribute a large "metal price windfall dividend" after June 2020.

If rhodium and palladium prices remain close to these levels, I think the dividend could be higher than $80 million.

Sylvania has 286,845,657 issued shares, but a total of 15,368,967 shares are held in treasury. This means that the number of shares is actually 271,476,690, giving the company a market capitalization of £182.4 million ($237.9 million). If my dividend expectation are met, the dividend yield is set to be over 33%.

Conclusion

The next few years should be stellar for rhodium, which means that Sylvania Platinum and PGM miners with strong exposure to UG2 will likely reach their zenith in terms of revenue and profits. Sylvania also plans to distribute a large part of its windfall profits as a dividend sometime in the summer of 2021.

At the moment, Sylvania has an enterprise value of $177 million but I think you can decrease that by at least $20 million in order to account for the large sum of receivables from smelters. With annualized EBITDA standing at $118.6 million, this means that Sylvania is valued at just 1.3 times annualized EV/EBITDA. I think this one is a value investor’s dream.

Keep in mind that the main listing on Sylvania is on the LSE and that volumes in the USA are low.

[jon4567] 30/10/2020 07:21

Does anyone have access to the updated research note from Liberium?

[corrientes] 30/10/2020 00:00

If you're unsure.always read the accompanying notes to the full audited accounts. If you have a probing mind, anomalies can be spotted, but PI's haven't the time to do that sort of thing, and it's a bit boring.

[kazoom] 29/10/2020 23:16

Worth noting that the Bemish M-Score throws off shedloads of "false positives" (ie companies flagged as manipulators who in fact are not).

The value is that if a company is flagged as a POTENTIAL manipulator, you can then dig down into the detail to check whether they are clean.

[kennyp52] 29/10/2020 23:14

Plat .. probably for those that do not understand what they are looking at when they read a set of accounts ? This held up during the last few days and also going ex. div . New to it but liking the look of the figures and that big fat cash balance .

[plat hunter] 29/10/2020 22:53

Nope, it's a scoring system for accountancy so transferable to any company that reports it's accounts.Https://en.wikipedia.org/wiki/Beneish_M-scoreIf you haven't got time to work it out yourself, I mean who does, I certainly don't? Stockopedia include as a metric on every stock screen.

[death by donut] 29/10/2020 21:20

Any sectors Benish M doesn't work on Plat?

[plat hunter] 29/10/2020 18:13

Essentially companies that book earnings but don't retain the cash and don't depreciate the book value of their assets is a big red flag of earnings manipulation.

[plat hunter] 29/10/2020 18:11

It's very much part of stocko... check it out

[brucie5] 29/10/2020 17:40

Nope. I daresay it'll be on stocko?

[plat hunter] 29/10/2020 16:48

Brucie, are you familiar with the Beneish M-Score?It can very useful for avoiding Quindels

[brucie5] 29/10/2020 16:08

I'm not comparing them, except for the similar batman ears.
But Quindell had brilliant value metrics from what I remember.
Just that they were largely fraudulent.

[plat hunter] 29/10/2020 16:06

Quindel was a basket case of lies.It's far harder to manipulate cashflow and and cash at hand... You can see them for one.