This announcement shows that a 1c, half yearly dividend will continue. This puts ATP on a 15% yield, fully franked. The market will pick up on the consistency of the dividend at some stage. I’d say that will happen when they announce a dividend policy. But that’ll send the SP to 20c - a 10% yield ff.
So IMO there’s 50% upside here based on the dividend alone.
Additionally, I think there’s a high chance that the average pearl price continues to rise, getting to $80-$90 by the December auction. If they sell ~100,000 pearls at this auction, the first half numbers start to look exceptionally good, especially considering the comments made in this most recent announcement about good prices being received for lower grade pearls, as well as the utilisation of other sales channels.
If this all goes to plan, then the market has to start pricing ATP as a growth company, not just a dividend play. At 13.5c we’re on roughly 3 x NPAT. As a growth company that has a 10% yield, this should be on at least 6-7 times NPAT, which sits us around a 30c SP. This still feels very conservative to me.
There are definitely risks here (natural disaster, weak pearl price, sovereign risk), but these can’t/won’t be factored in so severely if the company shows that it can consistently make ~$17m NPAT each year, and return a significant chunk of this to shareholders.
Such a great opportunity here IMO. Management continue to impress, exceptionally strong balance sheet, and their statements are becoming increasingly positive and confident. Will be adding to my positions during the week. GLTAH
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