Sylvania Platinum Share Discussion Threads

[mr stephens] 07/9/2021 07:25

Simon Thompson IC part 2
Sylvania Platinum (SLP:101p), a cash-rich, fast-growing, low-cost South African producer and developer of platinum, palladium and rhodium, has rewarded shareholders with a better than expected 150 per cent hike in the final dividend to 4p a share (ex-dividend: 28 October) to add to the 3.75p a share special dividend that was paid in April.

The board can afford to be generous as the $29m cost of the 7.75p a share payout equates to less than a third of Sylvania’s $99.8m net profit in the 12 months to 30 June 2021. Furthermore, even after accounting for the final dividend payment, proforma net cash of $91m (24p a share) is still two-thirds higher than at this stage last year.

Admittedly, Sylvania’s share price has retraced the hefty gains made earlier this year, mirroring falls in the prices of palladium (down 19 per cent) and rhodium (43 per cent decline) as market fundamentals softened in the short-term due to the weakness in automotive production caused by semi-conductor chip shortages. The sector accounts for 82 per cent and 87 per cent, respectively, of end market demand for palladium and rhodium which are both used in catalytic converters. Auto inventories are currently at all-time lows, one reason why second hand car prices have surged.

However, Liberum Capital’s technology team believe that the chip shortage will peak this month and then ease for the rest of the year, a positive for Sylvania’s average basket price which has been dragged down by a third since May. Importantly, markets for both palladium and rhodium are still forecast to be in deficit this year. Furthermore, the group remains hugely profitably at current spot metal prices as Sylvania’s average basket price is more than four times higher than group cash costs of $755 per oz. Based on flat production of 70,000 PGM ounces, cash profits north of US$120m (£87m) should be easily achievable in the new financial year.

To put the valuation into perspective, strip out net cash from Sylvania’s £272m market capitalisation and the group is rated on an enterprise valuation of only 2.2 times cash profits at current spot metal prices. The holding has produced a 634 per cent total return since I included the shares in my 2018 Bargain Shares Portfolio and I continue to see scope for material further upside. Buy.

[saltraider] 07/9/2021 07:24

'XHR0' ???

[mr stephens] 07/9/2021 07:22

Simon Thompson IC part 1

Sylvania’s bumper cash return

Net profit increases 143 per cent to $99.8m in 12 months to 30 June 2021.
Closing net cash rises 90 per cent to $106m year-on-year, and up from $67m at start of 2021.
Final dividend of 4p a share beat’s Liberum’s 2.9p a share estimate.
Production guidance flat at 70,000 PGM ounces.

[johnhemming] 07/9/2021 07:07

XHR0 may be turning.

[alan@bj] 06/9/2021 21:25

Plat - I thought you might have been “rhetorical221;. I was just trying to give you credit for not being.

[nimrod22] 06/9/2021 21:12

its a no brainer, or you could read all the numbers, analyse the political aspects etc., but it looks like a money dance at a Nigerian wedding, with money come from all angles.

[toptomcat] 06/9/2021 20:47

ST in IC this eveningSylvania Platinum (SLP:101p), a cash-rich, fast-growing, low-cost South African producer and developer of platinum, palladium and rhodium, has rewarded shareholders with a better than expected 150 per cent hike in the final dividend to 4p a share (ex-dividend: 28 October) to add to the 3.75p a share special dividend that was paid in April.The board can afford to be generous as the $29m cost of the 7.75p a share payout equates to less than a third of Sylvania's $99.8m net profit in the 12 months to 30 June 2021. Furthermore, even after accounting for the final dividend payment, proforma net cash of $91m (24p a share) is still two-thirds higher than at this stage last year.Admittedly, Sylvania's share price has retraced the hefty gains made earlier this year, mirroring falls in the prices of palladium (down 19 per cent) and rhodium (43 per cent decline) as market fundamentals softened in the short-term due to the weakness in automotive production caused by semi-conductor chip shortages. The sector accounts for 82 per cent and 87 per cent, respectively, of end market demand for palladium and rhodium which are both used in catalytic converters. Auto inventories are currently at all-time lows, one reason why second hand car prices have surged.However, Liberum Capital's technology team believe that the chip shortage will peak this month and then ease for the rest of the year, a positive for Sylvania's average basket price which has been dragged down by a third since May. Importantly, markets for both palladium and rhodium are still forecast to be in deficit this year. Furthermore, the group remains hugely profitably at current spot metal prices as Sylvania's average basket price is more than four times higher than group cash costs of $755 per oz. Based on flat production of 70,000 PGM ounces, cash profits north of US$120m (£87m) should be easily achievable in the new financial year.To put the valuation into perspective, strip out net cash from Sylvania's £272m market capitalisation and the group is rated on an enterprise valuation of only 2.2 times cash profits at current spot metal prices. The holding has produced a 634 per cent total return since I included the shares in my 2018 Bargain Shares Portfolio and I continue to see scope for material further upside. Buy.

[1347] 06/9/2021 19:28

@TBTT Thanks Yes I was coming to that conclusion but haven't yet had time to go through the AR and todays's presentation in detail to fully understand it but it stacks up. Downside is spending Capex (and then more Opex) to stand still on PGM production by processing lower grade feed. Upside, as you say, is if the feed grade improves then there should be a bonus in PGMs produced. Generating decent FCF at the moment anyway, I hope they use it wisely.

[russman] 06/9/2021 19:00

$100m held for process optimisation projects.
the cash keeps rolling in.

[tigerbythetail] 06/9/2021 18:45

Hi 1347!
Samancor have cut back underground production at many of the host mines. This means that SLP are having to process a mix of ore freshly-mined from open pits and old tailings.
Both are a. lower grade and b. oxidised (which lowers recovery rates). You'll note that SLP actually processed 17% more ore last year for about the same result in PGMs as the year before - this is why.
Current guidance assumes the same mix of ore again. But chrome prices have now fully recovered ($180+/t at the moment). So Samancor may well be thinking about reopening some of the shut down underground mining operations. If they did this, SLP would benefit from better grade ore and better grade recoveries. It's a potential upside for FY 2022 not built into current guidance.

[1347] 06/9/2021 17:58

Had to drop out the presentation today but one thing is puzzling me which is why with Project Echno and the extra processing capability that gives them is PGM production pretty much the same in FY2022 as FY2021?

I still think they should have sorted out their own PV/Wind electrical supply ages ago to overcome the well known and long standing reliability and cost issues with Eskom. Yes they are lookig at it now but it should have been done much earlier in my view given that it will likely take them years to progress it.

[plat hunter] 06/9/2021 16:58

Lol Alan, it was rhetorical, my old mucker ;-P

[alan@bj] 06/9/2021 16:57

Check out www.sylvaniaplatinum.com

[plat hunter] 06/9/2021 15:37

Tiger... Where does the waste come from that SLP process?

[creditcrunchies] 06/9/2021 13:44

there's risk in smoking tobacco but millions still smoke

[tigerbythetail] 06/9/2021 13:40

That's the funny thing - the risks of operating in South Africa are not that high. But UK PIs seem to think they are.
SLP isn't even subject to the SA mining charter, as it's officially a reprocessing operation, not a mining one.
The risks of operating in Russia, the ex-USSR, Chile, Peru, Mexico, most other African states and so on are, IMO, substantially higher.

[martinfrench] 06/9/2021 13:30

its the nature of slp and ths that things dont go through the roof !

[unabkxb] 06/9/2021 13:24

Everyone seems to be ignoring political risks associated with opeations in SA. Anywhere else (except maybes the STANS and other ex USSR states) and the share price would be thru the roof on these results. IMHO

[moyle] 06/9/2021 13:11

3rd December Xs 28th October

[carcosa] 06/9/2021 12:55

"When is 4p dividend due?"

RTFI (RNS)

[dubai123] 06/9/2021 12:36

Live meeting just started on investor meet company

[maxplus2] 06/9/2021 11:52

When is 4p dividend due?

[stemis] 06/9/2021 11:32

The current valuation is ridiculous. It would be decent value on 2020 results, let alone these (2020 ebitda of $70m cp to current EV of $266m) when the 4E basket price was only $2,015 - it's currently at least 60% higher. Bear in mind that if the basket price did fall to this level then it would release ~$40m of working capital into cash, so it would be ebitda of $70m v EV of $226m.

[orinocor] 06/9/2021 10:35

Just remember these results are historical. There's been more than 3 months of cash generation since then.
strong buy

[martinfrench] 06/9/2021 10:06

i'm assuming, from the above note, that the net working capital of 59m dollars is the yet to be received payment in progress for pgms ? as in a receivable not yet booked ?