Decided to share my analysis/calculations. I've used KDR assumptions as much as possible. Calculations and approach used may have flaws. Certainly appreciate comments.
My 2 to 5 year price target is in the $2.64 to $3.45 range ( assumes 2 years to full production ).
Key risks are the pending minister's decision, financing the project and KDR successfully implementing their development/production strategy. T/O is certainly a possible scenario as the project approaches or enters production.
It's getting clear that the industry is having trouble ramping up production to levels needed for battery production for a growing market for EVs. Oversupply risk is a furphy!
The study assumes a 3-year payback period. I've used 30% contingency on KDR share of CAPEX. Contingency assumption is from the study. I've made my own assumption of 9% interest on debt capitalised with debt + interest progressively paid down over 3 years. This means that KDR's share of total CAPEX will be in the order of AUD $520M or AUD $685M with interest capitalised.
For depreciation I've assumed a 20 year life of assets. The study identifies mechanical assets as USD $98M (AUD $130M or approx AUD $6M depreciation pa over 20 years).
Link to study: https://wcsecure.weblink.com.au/pdf/KDR/02036949.pdf
ASX average P/E is 7.5. Foster's stock-broking in their research report for PLS arrived at P/E 7.6 for 2019 and 8.8 for 2020.
I've broken down potential contribution of LiOH and Concentrate sales to the share price, based on production levels forecast in the study. Uplift in SP shown below is due to progressive paydown of debt over 3 years. This is the result and it's generally in line with price targets that we've been seeing from research houses:
These are the assumptions used:
Capital structure to arrive at fully-diluted share issue:
and the earnings estimates and valuation:
