Afternoon all,
Been playing around with some P/E ratios since the quarterly come out yesterday. Great quarterly re: the amount of information provided and the amount of updates provided by PLS on a lot of their growth projects. Bit unfortunate with previous production downgrades, but hey I guess that will further feed (or not feed) the disconnect between supply and demand of LCE.
Anyways prior warning my P/E ratios make a few assumptions, simply because even management don’t really know some things at the moment (let alone this small fry retail investor). I’ve tried to be relatively cautious with my calc’s, however will disclose the assumptions below regardless so you can be your own judge:
-Using current AUD/USD exchange rate on google.
-Updated my bond repayment schedule based off the additional $20 mil drawdown – as announced in quarterly.
-I’ve not assumed any cost for capex on growth projects (think POSCO, CALIX, P680, P1000). Note: Happy to update my calc’s (and share here) if any of you have figures you want me to throw into my calculator. However trying to keep the amount of unknowns to a minimum.
-I’ve not assumed any revenue from POSCO or CALIX. Note: Happy to update my calc’s (and share here) if any of you have figures you want me to throw into my calculator. However trying to keep the amount of unknowns to a minimum.
-I've assumed that offtake agreements over the course of the calc attract a $2,600 USD SC6.0 price (as per bottom range of quarterly). I've then discounted my figures back to be SC5.5 pricing. This also assumes no further price increases - as per Ken on the call yesterday, he is still expecting further increases.
-I've assumed that BMX sales over the course of the calc attract $3,000 USD SC6.0 price (as per upper range of quarterly for offtakes). I've then discounted my figures back to be SC5.5 pricing. This also assumes no further price increases - as per Ken on the call yesterday, he is still expecting further increases.
-Only the 200k tpa output from Ngungaju goes onto BMX. Any and all other increase in tonnages go to offtakes.
-I’ve assumed costs at $805 AUD per dmt – as per latest quarterly.
-I've assumed just over 3.02 Billion shares on issue as per the following: https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02478373-6A1073477?access_token=83ff96335c2d45a094df02a206a39ff4. Note this is inclusive of outstanding shares + all outstanding options being converted.
-I’ve assumed 30% company tax rate, and have not taken into account ANY tax deductions (ie. Think employee wages, cap expenditure on growth projects etc). Nor have I taken into account any carried forward losses from previous FY’s. Also tax is hard – I’m not going to that much detail – will leave that for Mr. Lynn.
P/E outcomes:
Note I’m not going to show the actual ratios, as I’ve worked pretty hard on these, however will provide my analysis on the share price of PLS at various points, as that’s what we’re all really interested in.
-Current price (apx $3.28 – at writing): We seem to be currently overvalued, assuming production is at the lower end of guidance of 400k for this financial year. Fair value price, based on this quarters offtake prices and assumed BMX would be around $2.80 per share currently.
oObviously the market is currently factoringin PLS’s future projects.
-Implementation of P540 (Note: I stole PLS naming convention for what our production should be once at nameplate for Ngungaju – expected in Sept QTR and Pilgan – expected in March QTR). 540k dmt is the lower end of the production guidance that PLS announced to the market. Fair value price at this production level should be about $4 per share.
-Implementation of P680. Fair value price at this production level should be about $5 per share.
-Implementation of P1000. Fair value price at this production level should be about $7 per share.
My main message is that we have to wait for our growth projects to be brought online. Note: Ken outlined (on the quarterly call) that P1000 could be up and running as early as late next year till 2024. FID expected to occur for P1000 in December QTR this year – so we will have more clarity then (Note: FID for P680 expected early June QTR).
NOTE: IF PRICES CONTINUE TO INCREASE (AS THEY HAVEBEEN) ALL THE ABOVE CALCULATIONS WILL BE BLOWN OUT OF THE WATER.
Full disclosure: at this stage of my trading life I’m as good as all in on PLS.
Please excuse formatting, copied this from word.
Note: P/E ratios are only one metric of valuing a share, so don’t take this as gospel. All of the above are my own assumptions and is not financial advice. DYOR.
(20min delay)