When I started simplifying my WAK model a few days ago, I grabbed an old spreadsheet that had most of the logic that I wanted to use. As a parameter setting it had EBIT margin at 16%, which surprised me as being too low as a high-end parameter (remember that my model has a scale-back factor, so one should start on the mildly high side). I was focused on ensuring that spreadsheet logic worked, so I gave the 16% no thought at the time. Today I stumbled on a a 01/07/2022 spreadsheet that I had used to convert the CIF-based EBIT margin to an FOB revenue base, and the high-end EBIT margin should have been 32% to equate to the CIF-based EBIT margin of 26.6% that I had found in the DFS.
The parameter settings that I used in the recent past were: FOB price per tonne = $290; EBIT/FOB Revenue = 16%; and a scale-back factor of 90%. As an aside, for an FOB price of $260, and EBIT/FOB Revenue = 20%, one ends up at a share valuation of 24 cents. The crucial issues for my model are: the FOB price per tonne; the FOB-based EBIT margin; the date chosen as base, and the tonnage at that date.
I suggest using EBIT/FOB Revenue = 32%, FOB price per tonne = $260; and a scale-back factor of 95% (to get greater granularity between 32% and circa 16%). This delivers the following table below based on 400,000 tonnes as at 31/12/24, and the second table based on 600,000 tonnes at 31/12/25. If I included anothe plant to have 800 tonnes a year by 31/12/27, the model throws up a value of circa 60 cents if one sticks to the 32% FOB Revenue/EBIT margin. To a degreethis makes Breakway's 60c not surprising within the framework of their tonnage assumptions. When investors know what is likely to happen in respect to plant expansion, future revenue and EBIT margin the share price could get to 60c if reality reflects the current dream. For now, I would lower my hope to a more modest SP of 25c as a 12-months target.
