OMH: Grossly Undervalued Commodity Stock i) FeSi / MnSi Alloy...

OMH:Grossly Undervalued Commodity Stock

i) FeSi / MnSi Alloy Prices Surge >40-50%, GPM >50%

Stock Price is trading at 60% discount from its recent high of A$1.70.Currently, the stock price has not factored in the recent surge in commodity prices (FeSi/MnSi GPM >50%) since December 2020, which will generate expected gross profit of US$150-210m based on the recent alloy prices increase.

Projected profit for FYE2021/22 = > US$100m-US$150m (or about A$130m-200m).This is in the range of profit achieved for FYE 2018 (Profit A$160m) when the FeSi prices surge.

		Current Price (Mar 2021) (vs Ave 2020 Prices)	Gross Profit Generated (Current capacity)	Additional Profit Generated (100% capacity)
1	FeSi Alloy	U$1,500-1,600 (GPM 50% or US$550+/ton)	~US$70m Capacity:130k ton	~US$70m Capacity:130k ton
2	MnSi Alloy	US$1,100 – 1,200 (GPM 45% or US$350+/ton)	~US$80m Capacity:250k ton	~US$140m Capacity:400k ton
3	Expected Gross Profit		US$150m	US$210m

High FeSi and MnSi prices expected to sustain in the light of (1) China restricting domestic production to curb polluting industries (esp the smelting factories) and power shortage.China has ordered closure of more ferroalloy firms with outdated technology by end 2022 (2) New demand from global stimulus injection and additional infrastructure development (US infrastructure stimulus of US$2T).

ii) OMH is grossly undervalued at forward PE 5x (FYE 2021/22) compared to Press Metal (PE 80x), Lynas (PE 60x)

Based on the projected profit of >A$100m for FYE 2021/22, the PE is only 5x.Both Press Metal / Lynas has large PEs due to the fact that they are more well covered by analyst and institutional funds.The upcoming Bursa secondary listing for OMH (expected in May/Jun 2021) should bring about re-rating of OMH valuation as its current ASX listing was not able to attract any analyst coverage/institutional fund followings and thus suffer from low liquidity.

Even at PE 20x @ FYE 2021/22, OMH should be trading at $4-5.This could be a 7-8 bagger.

OMH should revisit its recent high of $1.70 leading up to the Bursa listing, while riding on high smelting profit margin in 1H2021.The upcoming Bursa listing will provide a further boost up for its share price as the stock is being re-rated by the Malaysia market with similar peers trading at PE 60-80x

iii) Catalyst Event:Bursa Listing Approved (Expected Listing is May/Jun 2021)

OMH Bursa listing has been approved on 31 Mar 2021 and should be the key catalyst event that will propel the stock price to a new high which could drive OMH PE valuation closer to that of Press Metal (PE 80x). Bursa listing will bring OMH into the spotlight and the path of liquidity flow.What OMH has been sorely lacking in the past many years has been the lack of publicity, IR coverage, and institutional investor interests, and liquidity, which result in the depressed share price and gross underpricing for OMH.The Bursa listing should be able to help OMH address the above issues while we see the profits for OMH rolling in in 2021/22 onwards as the commodity sector continue to shine.

UOB Kay Hian (Malaysia) and Affin Hwang Investment Bank were appointed for the Bursa Secondary Listing since Oct 2019.

iv) Commodity Supercycle has begun

A long-term boom across the commodities complex appears likely with Wall Street betting on a strong economic recovery from the pandemic and hedging against inflation.Everyone from Goldman Sachs Group Inc., JP Morgan, Bank of America Corp. to Ospraie Management LLC are calling for a commodities bull market as government stimulus kicks in and vaccines are deployed around the world to fight the coronavirus.The optimism has already driven hedge funds’ bullish wagers on commodities to the highest in a decade.

Commodities have seen four supercycles over the past 100 years -- with the last one peaking in 2008 after 12 years of expansion.The backdrop is now starting to look similar, with a broad gauge of commodity prices hitting its highest in six years.While that one was driven by the economic rise of China, JPMorgan attributed the latest cycle to several drivers including a post-pandemic recovery, “ultra-loose” monetary and fiscal policies, a weak U.S. dollar, stronger inflation and more aggressive environmental policies around the world.

OMH should also benefit from the rotation play into undervalued counters which has started in 4Q 2020.This should be an added boost for cyclical sensitive assets, such as small cap and value equity, laggards, out of favour segment.