Good News & Bad News, page-16253

Here's the thing. Many investors and analysts like to quote Mining sector behemoths like BHP etc, have PE ratio's of 5-6. That is far short of the BHP PE data that I put before you now.



So in the FY2022, the BHP PE ratio was 6.59 which is 38% of the average PE ratio over a set range (unknown, I'll assume 10 years)

So is assigning a PE ratio range of 6 -8 for PLS correct. IMO it isn't for two key reasons.

1. It doesn't stack up against the average PE ratio that BHP achieves
2. The Lithium sector is supplying a product into probably the most disruptive energy transition that we will experience in our lifetime.

So Lithium is labelled a commodity. Many analysts like to argue that point as supplying Li at Battery Grade and Quality is a hell of a process that many of the top LiOH and Li2CO3 producers can testify to. I think it's a long way from being a commodity at this stage. It is a specialty chemical and a PE ratio of 14-15, more in line with ORI would be more appropriate.

Then there is the Supply deficit that appears not to be going anywhere for at least the next decade and for it to reduce, all the best case scenarios like DLE will have to hit targets. Unlikely IMO.

Apparently PLS staff were seen shopping at Forty Winks in Suburban Perth recently. A number of mattresses were purchased. I take that as a sign.

So as a wrap, IMO, assigning a PE ratio of 6-8 for PLS is absolutely far short of where it should be. We'll see if Overseas Fund managers agree with this in time. It may force Aussie Fund managers to reassess their tired, outdated valuation models and bring this sector's PE ratios more inline with US Lithium stocks and indeed our own BHP, plus some.