look at my previous post and youll see that market is pricing the stock accordingly for now.
assumption for valuation scenario 1:
PON 40,000
P/E 5
production 5000
net profit margin AFTER TAX is using JBMs historic avg of between 35 to 40 percent (very good margin and JBM is highest grade/low cost producer)
AGM sells concentrate, but net profir margin after tax of 35-40% is VERY GOOD as its after tax.
Valuation scenario 2:
everything same , but we use PON of 30,000 instead of 40,000
heres my previous post:..................
" Markets pricing it accordingly:
5000 tonnes * 40,000 USD/tonne * 1.3=260mill
net profit margin AFTER TAX at 35%:
260mill * 0.35= 91mill
91mill/695.4=13.1 cps EPS
P/E 5= 65.5 cents current price
OK ........, im sure thats not the way everyone values the stock in the market :):), but using current prices , i get the exact mkt valuation using my way of valuing the stock short-term (not long term where Id use a lower nickel price to be conservative)
short-term valuation using 8500 tonnes:
8500 * 30,000 * 1.3(assumming prices drop a little by the time they produce 8500 tonnes to be a little conservative) = 331.5 mill revenue
use NPAT margin of 0.35: 331.5*0.35=116 mill
EPS= 116/695 = 16.7 EPS
thus short-term valuation once theyre producing 5000 tonnes and about to produce 8500 in next yr is 84 cents per share on P/E 5!
if we increase the margin to 40%: then EPS 19, so on propective p/e 5 its worth 95 cents
So valuation between 85 and 95 cents once theyre already producing 5000 tonnes and no screw ups and about to expand to 8500 .
If they have a HUGE exploration find then the P/E can increase and theres upside. "
So like I said in the short-term the market will value the stock around 65-70 cents as we've already seen!
once theyre in production and meeting milestones and management gains trust and confidence in terms of 'production', then the market will slowly start to give it more value.
When theyve gone thru a couple of quarters of producing target 5000 smoothly, the market might look to value it based on 8500 tonnes. Management will have to tell mkt exactly 'when' this will happen.
Itll take time, so dont get impatient.
I almost sold out of PEM in the past about a year ago cause I was waiting and waiting for market to give it better value than prospective PE 3; eventually it did re-rate and im so glad i never sold as I made good money.
***Many ppl are ALREADY getting impatient, but guys, the market is giving it a base-case valuation based on 5000 tonnes and the current nickel price at margins similar to the most efficient producers (JBM) and a prospective P/E 5.
65.5 cents is the figure and we're using 40,000 PON!
OK if margin is increased to 40% after tax I get 15 cents per share rounded.
So PE 5 we get 75cents.
I agree with ABNs - 75cents is my short-term valuation
AGM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
