Curren & Co - 74c price target, page-5

It’s difficult to know what the share market will do going forward. From here we will see the market influenced by opposing forces of weak global economies for an extended period and the recent massive global stimulus and almost certain record low interest rates for many years to come. Those interest rates will drive cash into markets. Even a company with a 50% reduction in dividends from a 5% payout to a 2.5 % payout is still going to look very attractive compared to cash which will earn less than 1%.
Regardless of that, we have seen a strong rebound in markets and I stick to my view that this is now going to be a stock pickers market.
There are only two sectors right now that I am comfortable with.
The first is gold as I expect the gold price will strengthen over time on the back of the stimulus. The problem is that most gold stocks already factor this in. Gold has had a great ride for years.
The other sector I like even more is HPA. It is far less known by the market but will become more publicised as the market moves into deficit this year and the deficit continues to rapidly widen for at least the next decade.
When you look at the huge forecast growth in demand, then even halving that demand over the next five years due to weaker global economies would still result in a big and growing deficit. Demand is expected to be much higher than supply and demand is forecast to only be limited by the limits on supply. I.e. if supply could increase well beyond what is expected over the next 5-10 years, then that extra supply would easily be taken up. That is a great position to be in for A4N currently in the financing stage. That makes this a very reassuring investment in uncertain times. I take a lot of reassurance in the fact that Orica was involved in a technical review of our definitive feasibility study and the supply and sale agreement with such a company provides a lot of extra credibility. The work with our potential customers that include large battery manufacturers in South Korea and Japan adds further credibility. The fact that we have produced Boehmite and gamma HPA with properties better than any product currently available has to go a long way towards locking in customer off takes and for me this almost completely derisks locking in the financing without any significant delays. Delays can come about in times like this from uncertainty over the demand/supply balance- no uncertainty for the HPA market; whether the financials really stack up - no issues at all there after the definitive feasibility study; are margins good enough in case HPA prices fall unexpectedly- again a big tick with very wide margins and costs well below existing producers.
While there are risks with the global economy, the disks for this stock have fallen to low levels after the definitive FS and the continued excellent results from the pilot plant spanning more than six months, together with the excellent customer interest coming from customers across 5 countries, requesting multiple samples for testing, the agreement with Orica and the very high quality of all three products produced consistently throughout the six months of continuing pilot plant production.
A reminder of the outstanding HPA market fundamentals;

HPA Market Outlook to 2026:
The global HPA market was valued at US$1.1 billion in 2018. The HPA market is projected to reach US$5.1 billion by 2026 at a CAGR of 21.7% between 2019 to 2026 - Allied Market Research
HPA uses include Lithium ion batteries and static power storage, semiconductors, LED, plasma and smartphone display screens, phosphor and specialty glass, various electronics applications, optical lenses and bio-ceramics etc.
CRU estimated that 4N+ (99.99% Al2O3) demand would grow from approximately 19,000tpa to approximately 95,000tpa by 2025. CRU suggests the HPA market could grow at 30% GAGR to 272,000tpa in 2028 “...if sufficient supply were available. (CRU – HPA market report 2019).

A growth from 19,000 tonnes/year to 270,000 tonnes/ year. That is massive growth and leaves a lot of room for error in forecast and would still see very large growth. A4n is being very conservative in its HPA price forecast but prices will have to continue to be well supported going forward and be much more likely to increase significantly under any economic conditions.