I have been saying Lynas’s growth will not be large enough to keep stock up in the down draft caused by a major correction or recession.I did a chart on this months ago but I cannot find it. First lets look at multiples supported by different market attitudes. I still believe the primary factors for stock price is PE.Share price /Book value per share.Share price divided by revenue/ share. Many of the numbers I use come from the behavior of stocks during a correction.I like https://www.macrotrends.net/2324/sp-500-historical-chart-dataDo not look at just the first chart there are many others if you scroll down.Better yet find your own.So here is my chart based primarily on research but certainly influenced by experience.
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| Extremely optimistic Sector | Optimistic market. | Neutral market general long term averages | pessimistic market | Extremely pessimistic sector |
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| 1 | PE | 60 Plus | 25 ~ 50 | 15 | 10 | 5 |
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| 2 | Revenue to share price | 12 | 5~10 | 2~3 | 1 | 0.5 |
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| 3 | Book value to share price | 5 | 2~3 | 1 | 0.75 | 0.5 |
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Extremely optimistic Sector.Only 3 times in last 25 years Have I seen levels this high.Dot com stocks in the 1998 ~ 2000 period.Bank stock 2007 ~ 2008 period.Green stocks for last 2 years.Never have I seen the entire market this high.
Optimistic market.We are entering this right now.In spite of recent falls much of the market is still in this range.I have said this before how fast we Exit this range has more to do with what US fedOMC does on March 15 than anything to dowith Market.Just a .25% raise in overnight rate we may stay in this range for months.I believe it will be 0.5%.
Also have to look at bound replacement policy. Right now they plan to buy a bound for every one that comes due keeping deficit unchanged. Any decrease in bound buy back will make change happen faster.
Neutralmarket general long term averagesThese are the easiest to find.They are just the historical averages.In general the market is in this state almost never.The market is like a clock pendulum it goes through the middle very fast.It pauses before changing direction.Spending much more time at the sides.Easy to verify these numbers just look at long term historical numbers.
The Extremely pessimistic sector is only reached by stocks that were in Extremely optimistic.Look at amazon from Dec 1999 over 100.00 to $6.00 a year later.There are not many examples most companies went BK or were bought.Lynas will not go BK but if stock is at AUD $2.00 and falling, could they be bought?Simple explanation it is the Pendulum thing again the father they start from Center the father they go to the other side. People are emotional and they go through mood swings.
Now LynasProfits and revenue is certainly going to grow explosively.My guess is that a 100 % per year growth in profits and a 80% growth per year is not unreasonable.
Letsfirst look at long term NdPr price growth.I was going to use my recorded history but since Qs are a more reasonable time frame and numbers can be verified easily I will use Lynas Q reports.
This chart will be very useful as we add SAR, Q3 and Q4 to it andcompare what has happened to profit and revenue since Q4 2000.Yes I know about logistics and covid but has there ever been a half since 2011 when Lynas did not have some sort of extraordinary problem. I can only think of two.Please tell me if you know of more and I will check them out.
Now we can put this all together and come with estimates of impactof NdPr prices on Stock price growth.
I said I would use 100% growth for profits because of compounding thatis a growth rate of 1.445% per half.
80% for revenue that is 1.35% per half same reason.
| Lynas | Total shares. Millions | Share price AUD | Market Capmillions | PE | Market Cap/Revenue | Market Cap / Book | Book Valuemillions |
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| 1 | H1 2022 | 901 | 3.9 | 3514 | 88 | 17 | 3.7 | 964 M |
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| 2 | H2 2022*1 | 902 | 5.71 | 5150 | 56 | 23 | 6 | 1,080 |
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| 3 | H1 2023 | 902 | 10.4 | 9381 | 54*3 | 44*2 | 7.6 | 1,240 |
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| 4 | H2 2023 | 903 | 9 | 8127 | 33 | 30 | 6.3 | 1,290 |
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| 5 | H1 2024 | 903 | 9 | 8127 | 23 | 22 | 5.3 | 1,530 |
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| 6 | H2 2023 |
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*1Lynas does not publish H2 results.They are easily obtained by subtracting H1 from EOY
*2 If I multiplied H2 2021 number times 1.35 this number wouldhave been 9382M / 387M = 24 but we already know Revenue for Q1 and Q2 is only 242Mdown from H2 2022 287Mnot up.So I used a real number
*3 this number is low because I use a 1.45 Times H2 profits 116 =168 M.From Q2 report we know that revenue was 242 and expenses will be about 150 so I expect SAR profits to be about 92 M not 168 M but to avoid arguments I will use 168 for now and reduce with SAR.
I doubt Lynas will make any of these numbers.I will give updates as reports come out.I believe you will see I am very generous with these predictions.
So how do we guess SP when SAR comes out in FEB.There are three multiples, all three can give very different prediction so we have to balance them.
PE has a 5 weight this is most important.Profits pay the bills for expansion.Some day dividends.They are what increases book value.
Book Valueweight of 4.Many will disagree but this is what the company is worth.If the company is bought this is the starting point.Anything over book that is paid is good will which is not liked by banks or investors.It is depreciated much faster than hard assets hurting profits.
Revenue weight of 1.How important is revenue if they can make great profits on small amounts of Revenue that is great.If the company has a great book value how important is revenue.Many people put this second and if you want you may as well.What I think is unimportant.It is people starting to think that I want.A few well thought out arguments against me would make me happy.
I figure Lynas will keep a very optimistic rating till 4 weeksafter Fed march meeting.So impact is in mid April.If Fed does what I think then it will drop quickly So a average multiple of25 till mid to late April then a decline to 20. Based on a AUD 9 share price Lynas will have a multiple of 35.That is going to go up with SAR because Earnings will be much lower than what I entered. So 9/35*25= AUD 6.50 share price in mid April to early May. Now this is my estimate I stand behind it.A key factoris the US Fed OMC committee raising Rates ½ percent in March 15 meeting.I am responsible for that assumptions.If they don’t do it I will be wrong.I will not do what many on this board do and saythe assumption was wrong so I am not responsible.I just think it is important to know this so you can interpret the news.
I will update chart and prediction when SAR comes out.
So to all those that say I do not consider REE prices why don’tyou make some charts and show what you think price will be.I have asked this many times and never had a data based answer.Lots of answers with lots of insults but never a well thought out argument.
If FED only raises ¼ % it does not mean what I say will nothappen.Just means it will happen slower.
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