We have an unrisked, after tax NAV valuation for EGR of A$752 million, or A$1.35/share. This uses a conceptual funding scenario, is based on a DCF valuation of the Kwinana EcoGrafTM facility and Epanko, and assumes EGR keeps 100% of the projects. However such scenarios may change, and thus this NAV valuation should be treated as conceptual. There is also upside, particularly with the development of additional EcoGrafTM facilities.
This is not investment advice and I hope we can have a good debate about the report and assumptions. There are many variables that will impact the valuation of each project i.e graphite prices. An example would be the current flake graphite price are lower than Epanko's BFS figures.
EcoGraf's projects
Ecograf - 20,000tpa Spherical Graphite production facility, is currently advancing US$35 mil in funding for EcoGraf's first production facility in Kwinana (Western Australia) with Export Finance Australia (Australian Government), according to the companies announcement, all of the required documents were submitted to EFA in March 2021. And;
Epanko - 60,000 tpa graphite Project in Tanzania, EcoGraf is currently awaiting on the Germanies KFW IPEX bank to approve a US$60mil loan,
Ecograf's valuation is based on these two projects and assumes EGR will raise an additional $108mil in equity. Investors should note, the Valuation below, details EGR only has $19mil in Cash where the March QTR cashflow report detailed we had $51.5 mil. https://www.ecograf.com.au/wp-content/uploads/2021/04/2206605.pdf
IMO Ecograf already has the equity required to develop Kwinana and will not need to issue $46mil in new shares for its development, this will reduce the fully diluted shares down to 510mil (from 558mil) and will increasing the valuation per share for Epanko and Kwinana to $1.47.
The report has no valuation for EcoGraf's spherical graphite expansion plans to develop a production facility in Germany or the USA.
In the 25th of March EcoGraf ASX announcement, EGR disclosed they have been working with German Trade and Invest, which had provided 20 potential locations for a Germany production facility, EcoGraf had narrowed this down to 5 sites. The announcement also detailed there are attractive financial incentives including access to development bank funding.
Upside What is EGR's like share valuation based on the Germany production facility?
A very simplistic way to work out the valuation is to use EcoGraf's Kwinana's after tax funded value $342mil,
Kwinana Production facility $399 mil + Epanko $338 mil + German Production facility + 342mil = Total Valuation $1,022 mil divided by shares on issue (558mil as detailed below plus ~50mil additional shares for the equity of the German production facility- 608k total shares = $1.68 per share
You could use the IRR reports higher assumption of $399 mil for the production facilities, which gives the valuation of 1,136 mil / 608mil shares = $1.86 per shares
If EGR does not require the additional $42mil in equity for Kwinana, the Valuation per shares is 1,022 Mil/ 560 mil shares = $1.82 per share
Higher valuation figure calculation $1,136 mil / 560mil shares gives us @unicrumba 's $2 price target.
EGR Price at posting:
61.0¢ Sentiment: Buy Disclosure: Held
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