Australia's largest stock trading and investment forum Australia's #1 stock forum

RES resource generation limited

0.00%

$4.61

Let's look at what we know..., page-7

First 7 Last

Share
Profile

Follow
fancypants

5,229 Posts.

543

06/06/19

08:06

Post #: 38931541
Share

Originally posted by alpha100 ↑

I’ve been trying to work out what RES might actually be worthin a production scenario which now appears to be a foregone conclusion. I hadsome research reports years ago from Shaw Stockbroking and Macquarie but I musthave lost them somewhere along the way. My next reference point was the company’sIndependent Competent Person’s Report on the website:
http://www.resgen.com.au/downloads/send/48-2016/549-boikarabelo-coal-mine-cpr
It’s fairly out-of-date (15 December 2016) but obviouslystill relevant. On page 88 they indicate “an 87.9% probability for achieving apositive NPV with a mean value of R2,464M.” At a ZAR/AUD exchange rate of 0.099this equals $243,936,000 divided by 581m shares on issue equals $0.42 pershare. However, on closer investigation this looks extremely conservative tome. For example, page 91 illustrates the annual Net Cash Flow After Tax and theaverage over the first 20 years of production from 2020 to 2039 (admittedlythis is now more likely to be 2022 to 2041) is R5,256M per annum. This Net CashFlow After Tax is EBIT minus capex, royalties and corporate tax so it appearsto my limited intelligence that the only difference between Net Cash Flow AfterTax and NPAT is interest (ie the cost of the company’s debt). My guesstimate attheir debt is $400m ($60m to Noble, $310m for the coal handling and preparationplant and $30m for other items – I may have significantly underestimated thisfigure – not sure what they have to pay towards the power plant and the raillink??) at say 12% per annum = $48m per annum interest cost. R5,256M at aZAR/AUD exchange rate of 0.099 equals $520m minus $48m interest equals $472mper annum NPAT. Multiply this by a very conservative P/E ratio of 4 times togive a market cap. of $1,888m then divide by 581m shares on issue gives avaluation of $3.25 per share. Subject to my guesstimate of the company’s debtnot being way too low, then this valuation appears quite conservative to me onthe basis that a P/E of 4 times is low (WHC is trading on a P/E around 7 times,although this is forecast to be considerably higher next year as their earningsfall) and also the company’s report referred to above is based on an export coalprice of USD $53/tonne (see page 96) compared to a current price for SouthAfrican export coal of USD $72/tonne (this price is cited as being the variablewith the greatest impact on the company’s NPV and hence ultimately the shareprice and the current export coal price is way above what is factored intotheir calculations, meaning the company’s value could be way higher than thevaluations indicated above if the coal price remains at this level going into production).In a “goldilocks” scenario like FMG is experiencing currently where the coal priceis strong, the company increases its resources and reserves, pays down debtrapidly and starts to pay large dividends, etc I can easily envisage a scenariowhere the share price is $6 plus, but $3.25 per share as referred to above soundslike a nice place to start! Any further input from better informed posters regardingthese numbers would be appreciated. Cheers.

Expand

If the dividend is $0.42, can you imagine what the share price would be!

RES Price at posting: 17.5¢ Sentiment: Buy Disclosure: Held
3 Upvote

0 Great analysis

Reply

Top Stories

BDM

Burgundy plunges -20% after turning to layoffs to navigate record-low diamond prices

HotCopper Highlights: Trigg; Droneshield; Lumos & more

DRO

History repeats for DroneShield investors but carnage so far subdued

SER

Strategic Energy extends its QLD copper-gold frontier with Diamantina acquisition

Listen: HotCopper Wire Podcast 018 – Potatoes, TACOs, and the $120M helicopter heist

SYR

Syrah jumps +19% as graphite tariff threat spurs optimism down under

AII

A new NASDAQ listing for a key player in the global critical minerals space

PSC

Prospect's Mumbezhi Project puts it at the middle of copper's megatrend. And FQM just bought in

STN

Saturn brings up seventh straight Apollo Hill upgrade on 'impressive' 300-hole drill run

ASX Market Open: Can we squeeze one more record reset into Week 29? | July 18

First 7 Last

Add to My Watchlist

What is My Watchlist?

A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.