Worst case scenario
- MNS's graphite bombs out in end user commercial scale testing (very unlikely as we have already independently shown that on a scaled up level our graphite performs as good as or better than synthetic)
- users of synthetic don't care at all about the environment and decide to stick with what they know (possible but unlikely as those who don't care about 'green' would care about their bottom line and choose MNS graphite as a synthetic substitute because it's cheaper)
Logical scenario
- MNS graphite will begin to replace synthetic, if not because it is greener, but because it performs as well as and is cheaper... is just a matter of time
- once the first end user chooses to substitute its synthetic with our chemical free graphite what will logically follow:
- others will want in on the action for fear of their competitor having an advantage... Magnis, could very well be dealing with a stampede!!!
- personally, I don't think that in the short term we will likely find enough takers for all the super jumbo (aerospace is a small market) and jumbo (will probably sell some for expandables) that we have, but we will definitely have more than enough takers for our battery feed-stock.... solution - grind down our glorious fat flakes to sell to battery end-users (hey, we are still pocketing $1500/ton!!)
- also, once we sign up the first synthetic replacing end-users, what will happen to our SP???.... a western household name (or Korean or Japanese, I'm not fussy) will double our SP, no doubt about it.... so, if we need to raise some equity finance, issuing shares at $1 is very realistic, even conservative!!!
Based on my own expectations, I thought I would do some SP calculations. I'm more than happy to hear that I'm way off track, but thought I would post this anyway just to show why I think MNS will either die (slim chance only) or be a minimum of $3 next year (conservative worst case scenario).
Based on different basket compositions and financing arrangements:
Column 1
Column 2
Column 3
Column 4
Column 5
Column 6
0
$US unless otherwise stated
MNS 70/30
MNS 100/0
MNS 100/0
MNS 70/30
MNS 100/0
1
Production <300 micron
200,000
200,000
200,000
200,000
200,000
2
Production Jumbo
5,000
5,000
10,000
15,000
15,000
3
Production Super Jumbo
0
0
0
5,000
5,000
4
Price <300 micron*
1915
1915
1915
1915
1915
5
Price Jumbo
2500
2500
2500
2500
2500
6
Price Super Jumbo
4000
4000
4000
4000
4000
7
<300 micron revenue $M
383
383
421
421
421
8
Jumbo revenue $M
12.5
12.5
25
37.5
37.5
9
Super Jumbo revenue $M
0
0
0
20
20
10
Total revenue $M
395.5
395.5
446.3
478.8
478.8
11
OPEX per ton
510
510
510
510
510
12
Total OPEX $M
105
105
117.3
122.4
122.4
13
EBIT $M
291
291
329
356.4
356.4
14
Profit after tax and royalties $M**
204
204
230
249
249
15
Profit after debt repayment $M***
157
137
163
203
182
16
Profit after gov. free carry
149
130
155
192
173
17
Fully diluted after equity finance****^
675
560
560
675
560
18
Earnings per share AU cents^^
31.5
33.1
39.6
40.7
44.2
19
Share price $AUD (P/E ratio 10)
3.15
3.31
3.96
4.07
4.22
20
Share price $AUD (P/E ratio 12 (Graphite frenzy))^^^
3.78
3.98
4.75
4.89
5.31
*BFS $2125 - 10% discount (N. American end users may demand it) = $1915
**A 3% government royalty allowance and a district service levy of 0.3% was applied to the price (basket price). Thus, these are already accounted for (BFS p.26). 30% company tax
***CAPEX $269 x .7 = $188.3M, 5 year loan at 9% (very high, S. Korea reserve rate is 1.5%) = $46.91Mpa
****30% finance equity = (US$80.7M at $1SP: US$1 = AUD$0.7: AUD$115.23M (558485684 + 115230000 = 673715684 shares, round to 675M (easily another 1.28M unlisted options))
^0% finance equity, US$269 at 9% over 5 years = $67.008Mpa
^^US$1 = AUD$0.7
^^^ why a P/E ratio of 12?? Valuations somewhat go out the window when everyone wants in on the next big thing!
Sunday ramblings.... big week coming up... and a massive year ahead
MNS Price at posting:
59.5¢ Sentiment: Buy Disclosure: Held
(20min delay)