Just wondering........, page-11

As we're nearing the completion of the credit approval process, I decided to revisit some of the valuation metrics for DNK... both pre- and post-equity raising.

I've converted all USD values into AUD as of this morning so it's ~70 conversion.

Pre-CR  (SP today of $0.695)

SOI: 264m
Market Cap: $183m
Enterprise Value: $176m

Total Required CAPEX: $430m
Required Debt: $284m
Required Equity: $145m


Equity Raising
CR Price: $0.70
New Shares: 207m


Post-Equity Raising (Fully Funded) - Hypothetical SP of $0.80

SOI: 471m
MC: $376m
EV: $508m

Net Leverage: ~2x (low and totally acceptable)
Avg Annual EBITDA: $121m
EV/EBITDA: 4.2

This shows that if we achieve the above outcomes and only have a SP of 80c after all is done, the EV/EBITDA is only 4.2. For a long-life project, that's extremely low.

If we adjust the SP to achieve what I think is a realistic EV/EBITA ratio of 10x, then the SP would need to sit at $2.00 post-CR.

If we take the avg EBITDA of AU$121m and take off 40% for tax, interest, D&A etc, then we get approx. $72m net profit. At a PE of 10 (again, very low considering the long life), we could expect at price of $1.54.


Adjusting the values such as the equity price produces different outcomes but not as large as one might expect. For example, a CR price of $0.60 changes the EV/EBITDA to 4.4 - a small variation of .2.

All of this is hypothetical so please DYOR but IMO it shows that we can expect considerable upside if/when credit approval and ultimately full debt finance is secured. As we're valued reasonably well at the moment, the grand 'Disallowed' probably isn't going to happen here (based on Mod 1&2 anyway) but it doesn't need to be to make a tonne of money. ​

This project will delivery very strong cashflows for many, many years with the optionality to lift the production by a very large amount. ​

With project economics such as these, I don't think the risk of not getting credit approval is very high. In fact, with crappy junk bonds priced so high at the moment (producing such low yields and spreads), the appetite for yield is so large globally that I think we'll have no trouble getting this project into production. ​

I see DNK as a strong buy. ​