Hi Ferncol, I don't think that is the reason. I still think it's nothing more than to simplify accounting by matching the financial years of the company with those of its overseas subsidiaries. The Angolan government was very generous with MNB regarding repatriation of profits as dividends.
From the announcement on 9 January 2023; "SIGNING OF AIPEX CONTRACT PAVES WAY FOR DEVELOPMENT OF THE CABINDA PHOSPHATE PROJECT
• The Project will receive a 90% reduction in Corporation Tax for the first 12 years of operations and, for the same period, have a 90% reduction in withholding tax on disbursement of dividends abroad. • Other tax incentives include a Tax Credit for six years, equivalent to 30% of the investment, and a deferral period on the payment of taxes."
While the government was very generous, allowing 90% of profits to be disbursed as dividends, we would benefit much more if profits from the first few years are reinvested back into the green ammonia project. When both projects are up and running, it is entirely possible that current shareholders could begin to receive dividends similar in magnitude to their current investment. That's based on phosphate annual earnings hitting A$80million per year in year six, growing to A$147mill per year three years later and remaining at that level and higher for ten years, plus green ammonia profits likely to be significantly higher than the phosphate profits. I.e. from year six, combined projects cash profit is likely to be A$160-200 million per year. A 63% payout ratio from year six could be a dividend of $100million per year which is more than the current mc. So if you have a $10,000 investment now, you could be receiving annual dividends of $10,000 in six years time. This is all theoretical of course, based on the DFS forecasts, the company regarding the phosphate project the smaller project, leading to my assumption that the green ammonia profits will exceed the phosphate profits, and an assumption of a 63% or higher payout ratio as annual dividends by year six. Even if the green ammonia didn't proceed, the phosphate after tax cash profit still reaches A$147mill per year and a 68% payout ratio still reaches $100 million per year, albeit three years later. If the green ammonia did not go ahead and there were no other growth plans then why not distribute at a higher ratio in earlier years? Why hold onto profits if not for growth? Even the first full year's after tax cash profit (for next calendar year), of US$23million is A$33 million per year. The fully diluted mc (diluted for all existing options and performance rights) is A$105mill. That puts MNB on a forward multiple of just 3.2 times after tax cash profit. Far too cheap given the exponential growth in cash profits over the next few years, followed by strong linear increases in profit for the next decade and that excludes green ammonia project profits. Once in operation (start of December this year or 9 months from now), the multiple should be at least ten times given forecast strong year on year growth and then the sp should grow with earnings each year - again excluding the green ammonia project. More likely, the sp should also reflect a significant part of the value of the green ammonia by then as we should have a disclosed NPV before the end of this year. Very hard to pick a sp target for year end but I still think it will be many multiples of the current.
MNB Price at posting:
11.5¢ Sentiment: Buy Disclosure: Held
