Sylvania Platinum Share Discussion Threads

[farnesbarnes] 05/5/2021 10:12

50%+ in 15 months no good for you Martin?

Two of the three PGM graphs in the header have all taken a breather over the last few months - as per SLP.

[martinfrench] 05/5/2021 09:57

fast growing ???

he def has that wrong, yes pgm's are but slp are not

maybe he means ths ?

[hpcg] 05/5/2021 09:28

Investors are getting more comfortable with higher Rh prices, with recent Pd strength a useful kicker. The latter shows how vulnerable PGMs are to any disruption. Miners or equivalent are limited duration assets so they should rightly trade at modest multiples; the entire point is to get back ones money and make a return on top.

The potential for Iridium and Ruthenium is starting to warm up. The former goes in to high value products and despite its vertical rise so far this year there is so little produced that it could go much higher still. The irony is that Pt itself has been much more pedestrian.

[manrobert] 05/5/2021 09:20

thank you.

[farnesbarnes] 05/5/2021 09:18

Not in the last 24 hours. 130 was always going to be a short term ceiling, but it's fresh air upwards after that. Bodes well for THS and JLP.

[manrobert] 05/5/2021 09:14

has somebody else tippes this?flying from the off!

[farnesbarnes] 05/5/2021 06:31

Trinity (TRIN)

[juuunx2] 05/5/2021 06:04

Which was the other share recommendation please

[whitefish] 05/5/2021 04:29

Numbers for 2021 clearly understated by broker and Simon, just treat Q3 revenues as likely for Q4 and add to the first 9 months and u get USD234m (much higher than the USD209m included in ST article). Knock-on from this is higher profit and cash flow!
With PGMs much higher than Q3 the aforementioned $234m seems achievable.

[risa5] 04/5/2021 21:29

Profit from the commodity boom

Our stock picking expert offers two anomalously priced small-cap value opportunities to play the upside in commodity prices.

May 4, 2021
By Simon Thompson


Commodity prices have been on a tear for the past year, and are likely to stay buoyant as the global economic recovery gathers pace. While investors have rightly been focused on likely corporate winners from green energy focused stimulus programmes, there is a strong tailwind driving commodity prices and profits in other end markets. It certainly pays to have some exposure to the upcycle. Two small-cap companies on my watchlist offer exactly that.

Sylvania's eye-catching profit surge

Third quarter net profit doubles to US$41.3m.
Net cash soars 52 per cent to US$102m.
Windfall dividend of 3.75p a share paid.


Sylvania Platinum (SLP:125p), a cash-rich, fast-growing, low-cost South African producer and developer of platinum, palladium and rhodium, has released eye-watering third quarter results to 31 March 2021.

Buoyed by a 38 per cent quarter-on-quarter rise in its average basket price to US$4,576 per ounce (oz), of which the rampant rhodium price accounted for 80 per cent of the increase, revenue soared 36 per cent to US$55.3m on five per cent lower production of 17,400 oz (reflecting the Christmas break and seasonal factors such as bad weather). The quarterly results also revealed an 11-fold increase to US$15m in the sales adjustment. That’s because the actual selling price of PGMs delivered was significantly higher than that recorded in Sylvania’s second-quarter accounts. This meant that total revenue increased 70 per cent to US$72.4m. To put the performance into perspective, Sylvania reported revenue of US$116m for the whole of the 2019/20 financial year.

Moreover, with cash costs of US$745 per oz equating to only 16 per cent of the basket price, and quarterly direct operating costs only rising by 6 per cent to US$13m, then both quarterly cash profit and net profit more than doubled to US$58.7m and US$41.3m, respectively. In other words, Sylvania made as much profit in the third quarter as it did in the first six months of the financial year. The bumper cash flow generated boosted net cash by more than half to US$102m (27p a share).

Importantly, management have maintained full-year production guidance at 70,000 oz, the implication being that at current PGM prices the company is on course to lift annual revenue from US$116m to US$209m. With the benefit of a relatively fixed cost base, operating profits are on course to surge from US$54m to US$143m in the 12 months to 30 June 2021. On this basis, analysts at house broker Liberum Capital expect earnings per share (EPS) to rise from 14.5c to 37.4c (27p), implying the shares are rated on a cash-adjusted price/earnings (PE) ratio of 3.5.

Furthermore, at current PGM prices and production rates, Sylvania is set to enter the 2021/22 financial year trading at a run rate that suggests annual revenue could surge again to US$275m and make the company an eye-watering operating profit margin of 74 per cent. This implies a net profit of US$149m (£107m) and closing net cash of US$203m (£146m) in the 12 months to 30 June 2022.

Deduct forecast net cash from Sylvania’s current market capitalisation of £337m, and effectively its £191m forward enterprise valuation equates to 1.8 times net profit forecasts for the 2021/22 financial year. In anyone’s book, that represents compelling value especially since the PGM pricing complex is well underpinned.

Demand for PGMs well supported

Stricter emissions standards for passenger cars in China, new EU legislation limiting nitrogen oxide emissions in on-the-road driving tests (from September 2022), and rebounding China car sales are the key drivers behind the booming price of rhodium, a mining by-product used as a catalyst in three-way catalytic converters in cars. Rhodium is two to three times more effective than platinum in an autocatalyst, hence its appeal to car makers which account for almost 90 per cent of global rhodium demand. As a result, there is limited scope for value destruction (due to the higher commodity price) to free up supply from other market segments (chemical, glass and electrical).

A lack of new mines coming on stream also means that global supply is incredibly tight. That’s because majority of rhodium supply is a by-product of platinum production in South Africa, so can only increase along with production of all the other PGMs. Johnson Matthey predict the rhodium market is likely to be in a 60,000 oz deficit this year, or 5 per cent of estimated market demand, a key factor behind the near doubling of the rhodium price since the start of 2021.

Sylvania is also benefiting from its exposure to palladium and platinum which are widely used in autocatalysts for petrol powered vehicles. Lower sales of dirtier diesel vehicles is buoying demand from that market segment, so creating a deficit in the palladium market and fuelling the recent price increase.

It’s worth noting that PGMs are used in hydrogen fuel cells such as the proton exchange membrane (PEM) fuel cell, which contains platinum catalysts. PEM fuel cells can be used in power generation for buildings and in mobile equipment (replacing batteries and generators) and as replacements for the internal combustion engine (ICE) in a vehicle.

Shift to electric vehicles unlikely to dampen demand

Unless green stimulus is targeted on purely electric vehicles rather than hybrids that still require high PGM loadings, then it is difficult to envisage a scenario where there is demand destruction for PGMs anytime soon.

Analysts at research consultancy LMC Automotive forecast an 11 per cent decline in sales of gasoline and diesel vehicles globally between 2019 and 2027, but a quadrupling for hybrids, leading to a 9 per cent increase overall for vehicles needing PGMs in the catalyst. It’s worth pointing out that car makers make a far better margin on petrol cars than on electric vehicles, so they have an incentive to maximise ICE sales and extend their life.

Interestingly, analysts at Liberum have quantified the price point at which car makers will earn a better margin on a battery electric vehicle than an ICE vehicle. Research consultancy McKinsey estimates it costs roughly $12,000 (£8,800) more for an electric vehicle than a comparable ICE vehicle in the small to mid-size segment. However, car manufacturers can charge a premium as an electric vehicle has lower running costs (around $650 per year) and consumers tend to factor in three years’ worth of savings into the price they are willing to pay. Liberum calculates that car makers earned about US$7,000 higher margin on ICE sales than on electric vehicles in 2020.

McKinsey estimates that through various levers this margin could drop to zero by 2025, particularly through cost reduction of the battery pack. This would be an inflection point in electric vehicle demand as mass adoption should follow thereafter, albeit without the requisite charging network in place then many buyers are still likely to opt for ICE vehicles, thus dampening demand for new electric cars.

Bearing this in mind, for rhodium to absorb the entire margin differential for ICE over electric vehicles, prices would have to go materially higher at current loadings (US$100,000 per oz until 2024) to make a difference to the economics of car manufacturing. The current spot price of rhodium is only US$28,000 per oz.

In other words, there is an incentive for car makers to continue to absorb the current rhodium price on ICE vehicle sales given the far higher profit margin they earn over electric vehicles. This is good news for PGM producers.

Compelling valuation

Sylvania’s shares have produced a 800 per cent total return including dividends of 6.48p a share since I suggested buying, at 14.5p, in my 2018 Bargain Shares portfolio, and the re-rating is far from over. In fact, I am raising my target price from 180p to 200p to value Sylvania on a 2021/22 cash-adjusted PE ratio of 4.

Investors should note that having paid a 3.75p a share dividend last month, Liberum expect the board to declare a further dividend of 4.85p a share at the full-year results, implying the shares offer a 6.9 per cent prospective dividend yield. Strong buy.

[farnesbarnes] 04/5/2021 21:00

Kazoom - you can access 3 articles a month for free. Quite cool. Alpha is well worth the sub.

Re: source. ST's word is as good as Nostradamus.

[eggbaconandbubble] 04/5/2021 19:14

Not Lawrence Olivier then! :-)

[cordwainer] 04/5/2021 19:10

@eggbaconandbubble
It originates from a boxer called Larry Foley in the 1890s, before boxing was fully legalised. He won the biggest prize of about $150,000 dollars and a newspaper article in New Zealand had the headline “Happy As Larry” and the phrase stuck.

[kazoom] 04/5/2021 18:56

Interesting that IC article is outside of the paywall.

Do they regularly do that? And is there any source for what they have published there?

[epicsurf] 04/5/2021 18:06

Incredibly cheap and a opportunity to
add more,
Interesting article from the telegraph

A commodities supercycle is set to make a generation of investors rich

The demand for green metals such as copper, nickel, aluminium and platinum is likely to soar

[toptomcat] 04/5/2021 17:43

Not only a new target of 200p, to value Sylvania on a 2021/22 cash-adjusted PE ratio of 4, but a Strong Buy conviction. Hold tight

[mfhmfh] 04/5/2021 17:19

just tipped by ST in IC. new target price 200p.

[freddie ferret] 04/5/2021 15:43

I think it is now reasonable to say that Pd has broken through $3000 and is currently up and running.
Note also that Ruthenium which is still very low priced has again risen today.
Ruthenium in financial terms is a very small %age of Sylvanias income however in weight %age terms it is large. Ruthenium needs to be watched. I know little of the uses and market.

Though I am not a fan of the Platinum market, Pt is also up today.

[manrobert] 03/5/2021 11:20

hopefully s.t.willbe updating his views after the 3rd quarter figures

[slopsjon2] 01/5/2021 18:15

Liberum note.

"Given the stellar performance of PGM prices, it is no surprise that Sylvania have achieved another record quarter with EBITDA of $58.7m and cash balance increasing 52% to $102.1m. Annualising this past quarter, the stock trades on a ridiculously cheap EV/EBITDA of 1.5x. Production of 17.4koz was inline with expectations and guidance of 70koz for the year remains in place. We remain very comfortable on rhodium on a five-year view (see here) and expect the abnormal cashflows to continue (30% FY22 FCF yield)......"

Target price still £2.00.

[eggbaconandbubble] 30/4/2021 22:23

Well I never! With Vivienne no doubt! "O my darling little love I do long for you so,"

[bbluesky] 30/4/2021 20:55

In spite of a heavy disguise, a few days' growth on my face, dark glasses, a beret and one of William's jackets that fitted me not at all, as I emerged from a hotel in Lecce, a young fisherman pointed me out to his friends and said "Lavrenche Olivaire." It was not all that amazing; if you're not known in Italy, you're not known anywhere.

[eggbaconandbubble] 30/4/2021 20:42

some heavy duty stuff being posted here!
If the share price goes up 3.6p per day. I'm as happy as Larry.

Who was Larry???????