Alright ladies and gents, thought i'd do some number crunching before the 9-5 starts.
I will be investigating our valuation on 2 metrics:
1. Comparing our valuation against our 2017/18 peak, vs other asx lithium companies valuations and their 2017/18 peak
2. Comparing our valuation against the lithium carbonate 99.5% battery grade spot price.
1. ASX Peer comparison
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
| 1 |
Company |
Current Price |
2017/18 Peak |
% peak |
| 2 |
PLS |
$1.365 |
$1.17 |
116.67% |
| 3 |
ORE |
$5.72 |
$7.46 |
76.68% |
| 4 |
GXY |
$3.19 |
$4.50 |
70.89% |
| 5 |
AVZ |
$0.215 |
$0.375 |
57.33% |
| 6 |
AGY |
$0.18 |
$0.48 |
37.50% |
We usually track GXY and ORE the most.
(Ore 76.68 + GXY 70.89%) / 2 = 73.785%
AGY peak price $0.48 x 73.785% = $0.355
I think our
fair valuation at this stage is ultimately
35.5c
I have no doubt we will catch up to our peers relative valuations.
Our progress / advancement since the peak is probably more than any of the others as well.
We weren't even Battery Grade yet during the 2017/18 peak.
Juniors tend to lag behind for a while, however... as the industry demand peaks investors like to invest in the lower cap stocks because they move the most and it takes less money to move them and send them upwards. Throwing $1m into AGY will make it move a lot more than $1m would to ORE or GXY. I suspect at the end we will become actually more overvalued relate to the others. (Hypothesis)
2. Spot Price vs Valuation
Lithium Carbonate 99.5% battery grade spot price valuation:
2017/2018 peak - 171,000 Yuan
Aug/Sep 2020 Low - 39,500 Yuan
Argosy's Valuation
2017/2018 peak - 48c
Aug/Sep 2020 Low - 4.5c
(i have made the 2.5c corona low an exception because that was because of a Corona liquidity crisis not the fair underlying value)
A difference of 131,500 Yuan of price (171,000-39,500) caused a different of 43.5c of price (48c-4.5c)
43.5c = 131,500 yuan
Divide both sides by 43.5c
1c = 3022 yuan.
because 39,500 yuan caused a valuation of 4.5c we can subtract 4.5 x 3022 yuan to get our base yuan where price = 0
Base Yuan = 25,900
Old price relationship: 1c of price per 3022 yuan - 25,900 yuan.
Current Spot Price 64,500 Yuan
According to the old spot price vs AGY valuation relationship we should be at:
64,500 Yuan - 25,900 Base = 38,600 Yuan
38,600 Yuan / 3022 Yuan =
12.77c
However.... Clearly there's a new price relationship because the ASX lithium companies are way over their relative spot price to valuation ratios. The spot price has only just begun to rise....
3. Let's figure out the new price relationship shall we?
If we were 4.5c at 39,500 Spot price.
Now we are 18c at 64,500 spot price
25,000 Yuan caused a difference of 13.5c
= 1,851 yuan increase = 1 cent increase.
Yuan base price where valuation is 0: 39,500 yuan = 4.5c
subtract (1,851 x 4.5)
= 31,170 Yuan where Price is 0.
With this equation and
new price relationship a return to 171,000 yuan price would put us at:
171,000 - 31,170 yuan base = 139,830
139,830 / 1,851 (per cent)
=
75.5c valuation peak, instead of 48c peak. (and thats with no fundamental change)
The spot price relationship is more aggressive in this equation because the EV adoption rate is a lot more, hence there is more opportunity.
