Fosters Stockbroking has always kept a close eye on PLS. I note...

Fosters Stockbroking has always kept a close eye on PLS. I note their appointed advisor, Mark Fichera has over 1/4m shares, so he has balls in the game.

I note from their most recent update of 29Jan18 (which can be downloaded from Blueskymine01's post of 30Jan18) that they have upgraded their earnings forecast from their update of 23Oct18.

EBITDA
2017 Oct -27.9
2017 Jan -28

2018 Oct -20.6
2018 Jan 1

2019 Oct 124.5
2019 Jan 260

2020 Oct 189.9
2020 Jan 255

NPAT
2017 Oct -25.9
2017 Jan -26

2018 Oct -35.1
2018 Jan -13

2019 Oct -94.8
2019 Jan -188

2020 Oct -115.5
2020 Jan -156

Yet their risked valuation has only increased from $1.04 to $1.12.

2019 projected NPAT is now AUD188m. Now that is for a 2mtpa operation and I doubt it would have operated fully at nameplate capacity for the full year. A reasonable P/E for a public listed company would be 15.

However valuations are generally made as a function of "future maintainable earnings" and ... ahem, cough, cough ... by a "reasonably prudent purchaser", ... y'know, like us!

P/E's adjust earnings to reflect the value seen in "future maintainable earnings" much like A2M's P/E is 40.64%. Then there's SQM with 37.27% and FMC with 62.64% and even though its share price has plummeted some 30% recently, ALB still has 39.79%.

My point of course being that a P/E of 40 applied to PLS's 2019NPAT of AUD188m is NOT exaggerating. It also determines a PLS SP of $4.42 or thereabouts.

Actually, considering 2019 NPAT is only for partial 2mtpa earnings, a projected full nameplate year would give an NPAT much higher ... and SP too accordingly.

To really extrapolate, 2019 NPAT would be closer to AUD280m if full year nameplate 2mtpa and further adjusted for 5mtpa at a reasonable P/E of 15, would provide a PLS SP of ~ $6.18.

Then of course there's Stage 3 possibility, Mt Francisco, SC6+ prices skyrocketing and also downstream processing participation which could lead to that 15 P/E being adjusted back to 40 (or more).

As far as I'm concerned my valuation post of 13Sept17 is still in play and the only thing I'd change is the 2nd last paragraph to:

"This is my best case scenario but I assign a 70% good/30% bad probability to this eventuality."

I used 2019 NPAT because I question Mark's 2020 NPAT forecast. The recent corporate presentation shows the Stage 2 Delivery Schedule and it projects Stage 2 commissioning in 19 months, ie from 1Oct19. So surely we can expect at least 6 months of 5mtpa operation in the 2020 financial year?