LYC - the new valuation paradym

I have been born and bred on DCF, NPV & !RR. My traditional investment strategies have been based on seeking out value based on a comparison of NPV to SP.  This has worked wonderfully for many years BUT the winds of change are blowing hard and fast. The most significant change is the increasing involvement of ETFs in specialist resource sectors. This is no more apparent than in the Li sector where constituent companies within Li ETFs are having their SPs driven to levels which are longer connected to traditional economic valuation models. For instance:
1. Share prices many times greater than NPVs based on Ore Reserves only. In one case 20 times
2. Share prices many times greater than NPVs based on a full conversion of resources to reserves.
3. FCF multipliers at least > 20 times.  I'm seeing 25, 30 and even higher now.

Once you are admitted to the hallowed halls of an ETF your economic fundamentals don't matter. Money comes into the ETF  and this cash is used to purchase equity in the constituent companies. Now Li is a sexy sector so a lot of money has been flowing into Li ETFs and the result has been significant SP rises for all constituent companies. The disconnect between the SPs and traditional economic valuation models just keeps getting wider.

Now I don't see this as a problem I see it as a wonderful opportunity. REE is a sexy sector and will become more so.  LYC is in pole position and its SP will be leveraged up by REE ETFs. (Even more so after consolidation because of fewer shares on offer). So I am going to hang up my traditional hat and put on my new age hat! Let us play with some numbers:

	Column 1	Column 2	Column 3	Column 4
0		Units	FY2018	FY2019
1	FCF	A$m	180	278
2	FCF multiplier	times	10	10
3	EV	A$m	1800	2780
4	EV per fully diluted share	A$	0.25	0.40
5	FCF multiplier	times	20	20
6	EV	A$m	3600	5560
7	EV per fully diluted share	A$	0.50	0.80
8	FCF multiplier	times	30	30
9	EV	A$m	5400	8340
10	EV per fully diluted share	A$	0.75	1.20

So wearing my "new age hat" where do I think LYC SP will get to:
1. FY 2018: A$0.50 to A$0.75
2. FY 2019: A$0.80 to A$1.20

Now the fundamental assumption in the above numbers is the NdPr price. I've assumed it remains at current levels in both FY2018 and FY2019. If it increases then it all gets even better.

I haven't even mentioned NPV because in the new age it appears to be irrelevant particularly for a long life operating company. Well there it is I've stuck my neck way out  and no doubt somebody will chop it off!