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SLX silex systems limited

1.88%

$4.33

SLX valuations, page-2

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zog

3,372 Posts.

1098

19/12/17

12:10

Post #: 29735372

Originally posted by zog ↑

I promised to provide an update on my valuations for SLX based upon nett present value (NPV), I have also done it on the basis of EPS with a P/E ratio of 10. Please do not place too much value on my guestimates - they are based on lots of assumptions and approximations which are almost certainly wrong. I also may have made a typo or an incorrect assumption - please treat them as my musing, DYOR and take them with a large pinch of salt.

I have made the assumption that SLX ends up with 51% of GLE, that the current royalty arrangement is preserved and that SLX/GLE only gets one project (Paducah tails) and all other development (i.e waste processing, Wilmington etc) is NOT valued. As I see it if SLX/GLE does proceed with Paducah tails then it is in the box seat for a lot more but it has to survive to this stage. The difficult period will be financing the pre-development work for Paducah and making a success of phase II and eventually (~2024) Phase III with operational running of Paducah. In terms of Technology Readiness Level Silex appears to be at about TRL level 5 right now (I disagree with the DoE (Pg 35 of Tritium & Enriched Uranium Plan to 2060 that GLE are at TRL 3). The objectives are to get to TRL 6 by ~2021 (this is phase II) and with the completion of Paducah tails project TRL 8 by ~2024.

Based upon these objectives and with the assumptions provided below I calculate SLX fair value to be (on both NPV and EPS basis @ P/E 10 to be:

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7

1 SLX Share Value estimates (A$)

2 SLX royalty 7% 8% 9% 10% 11% 12%

3 NPV share value (SLX only) $0.90 $1.00 $1.11 $1.22 $1.33 $1.44

4 NPV share value (GLE only) $1.00 $0.95 $0.91 $0.87 $0.83 $0.79

5 Combined NPV fair value share price $1.90 $1.95 $2.02 $2.09 $2.16 $2.23

6 Fair Share Price (on average EPS)

7 P/E multiple for EPS 10

8 EPS share value (SLX only) $0.62 $0.84 $0.94 $1.05 $1.16

9 EPS share value (GLE only) $2.16 $2.20 $2.25 $2.29 $2.34 $2.38

10 Combined EPS share price @ P/E multiple $2.78 $2.20 $3.09 $3.23 $3.39 $3.54

Assumptions are:
SLX position

Column 1 Column 2

1 SLX current Market Cap $92,070,000

2 Current Share Price $0.54

3 No of SLX shares 170,500,000

Exchange Rates

Column 1 Column 2

1 Date 17-Dec-17

2 US$/A$ 0.76

3 GBP/A$ 0.57

GLE position after re-structure

Column 1 Column 2 Column 3 Column 4

1 After re-structure assumed GLE shareholdings Cameco SLX Newco

2 Shareholding in GLE after restructure 24% 51% 25%

3 Assumed re-structure date (after government approvals) 1-Jan-19

SLX financial position from ann rpts

Column 1 Column 2 Column 3 Column 4 Column 5

1 Financial Year 2016/17 2015/16 2014/15 2013/14

2 Research and development materials (A$) $207,498 $60,107 $154,296 $560,854

3 SLX Employee benefits expense (A$) $3,676,747 $3,091,636 $4,017,953 $5,552,858

4 GLE Development reimbursement (A$) $6,668,102 $2,550,261 Previously paid by GLE

5 Additional contingent liability under PSA (pro-rate to 31/12/2017) $2,368,421

6 Consultants and professional fees $914,782 $951,041 $642,304 $817,515

7 Printing, postage, freight, stationery and communications $72,897 $99,574 $117,893 Comms in other

8 Rent, utilities and property outgoings $411,461 $433,766 $474,107 $473,459

9 Net foreign exchange losses $155,223 $143,418 $37,665

10 Other expenses from continuing activities $383,912 $429,193 $595,775 $762,300

11 Total $14,859,043 $7,758,996 $6,002,328 $8,204,651

SLX consolidated Cash Flow

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6

1 Year 2016/17 2015/16 2014/15 2013/14 2012/13

2 Payments to supplier & employees (GST incl) $13,496,091 $13,157,109 $13,835,072 $24,718,382 $28,773,788

3 Less est GST rebate -$95,382 -$97,797 -$92,967 -$122,006 $163,328

4 Director/KMP remuneration (2016 & 2017 rem rpts) $1,670,445 $1,189,684 $2,151,205 $2,344,553

5 Expenses from cash flow (above) $5,515,628 $5,822,520 $5,208,735 $6,002,328 $8,204,651

6 Overhead $6,214,637 $6,047,108 $6,382,165 $32,943,257 $37,141,767

7 Recurring expenses (less GST) $13,496,091 $13,157,109 $13,835,072 $24,718,382 $28,773,788

8 Bank Interest rate received 2.65%

9 Interest 1/7/16 to 30/6/17 $1,449,905

Extra-ordinary 2018 expenditure

Column 1 Column 2

1 2018 est.

2 PSA contingent payment - pro rata US$1.125m for 15 mnths to 24 months (note 5 (i)) $2,368,421

3 GLE Dev expense for Jul - Dec 2017 - note 7 $6,500,000

4 Total $8,868,421

Column 1 Column 2 Column 3 Column 4

1 Expected Term Payments US$ A$ Exp. Date

2 Engineering tranche 2 payment $5,000,000 6,578,947 1-Jan-21

3 Paducah tranche 3 payment $15,000,000 19,736,842 1-Jul-21

4 Expected Newco welcome payment $15,000,000 19,736,842 1-Jan-19

5 IQE payment $5,000,000 $6,578,947.37 1-Apr-18

Column 1 Column 2 Column 3

1 Realizable Assets 30-Jun 17-Dec

2 No of IQE shares 6,113,029 6,113,029

3 IQE share price £0.175 £1.4811

4 Value (A$) $1,876,807 $15,884,223

5 Cash at Bank (30/06/2017) - less current liabilities $40,199,069

Column 1 Column 2

1 IQE Revenue (Edison Research) 2018 £140,241,000

2 IQE Revenue A$) $246,036,842

3 IQE growth 2.36%

4 % cREO products of total 10%

5 cREO growth rate to 2018 to 2022 10%

6 IQE cREO royalty rate (average) 3.0%

Column 1 Column 2 Column 3 Column 4

1 Uranum prices/cost US$/kg A$/Kg Ref

2 UF₆ price (US$) $62.08 $82 UXC price

3 UF₆ Tails costs (US$/kg) $1.70 $2.24 DoE

4 SWU price (US$/SWU) $39 US$/SWU UXC price

Column 1 Column 2 Column 3

1 Paducah Tails

2 Puducah tails tonnes/year 7,500,000 Kg/yr

3 Paducah tails cost (A$) $5,007,860 /year

Column 1 Column 2 Column 3

1 Paducah Revenue/costs Amount (A$) Unit

2 Paducah full year revenue $240,625,347 /year

3 SLX royalty income from Paducah (@7%) $16,843,774 /year

Column 1 Column 2 Column 3

1 DCF parameters

2 Life of Paducah Project 40 yrs

3 Discount rate 8.50% Discount factor (same as PDN)

4 Dividend payout ratio 0.00%

5 Paducah on/off 1 1 on/0 off switch

Column 1 Column 2

1 Construction costs breakdown Costs (US$ x10⁶)

2 Site Preparation $13

3 Process Plant $252

4 Process Utilities $105

5 Services $133

6 Infrastructure $54

7 Total Directs $557

8 Indirects, including EPCM $145

9 Owners Costs, including spares and first fills $159

10 Capital Cost, excluding contingency $861

11 Contingency (16% of Directs/Indirects) $139

12 Total $1,000

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9 Column 10 Column 11 Column 12

1 Cash Flow/NPV calculations (SLX Only)

2 Year 2018 2019 2020 2021 2022 2023 2024 2025 2063 2064 Total (A$)

3 Revenue of Excl License holders

4 GLE Paducah Revenue $120,312,674 $240,625,347 $240,625,347 $9,504,701,207

5 IQE cREO/GaN revenue (guess) $24,603,684 $30,472,956 $42,496,267 $66,728,098 $68,302,692 $1,281,994,123

6 SLX Income

7 Paducah Term Income $6,578,947 $19,736,842 $26,315,789

8 Paducah Royalty $8,421,887 $16,843,774 $16,843,774 $665,329,084

9 IQE Term payment $6,578,947 $6,578,947

10 IQE Royalty (est) $738,111 $914,189 $1,274,888 $2,001,843 $2,049,081 $38,459,824

11 Dev expense recovery from GLE + overhead (est US$15m) $19,736,842

12 Interest income $1,449,905 $1,237,751 $1,087,247 $758,413 $614,766 $333,402 $89,904 ($87,135) $24,776,702 $25,790,233 $447,484,661

13 Total SLX Revenue $21,186,747 $7,816,698 $1,087,247 $8,075,470 $1,528,955 $1,608,290 $2,091,747 $30,120,675 $41,620,476 $42,634,007 $1,203,905,148

14 Cash at bank EoY + IQE shares $53,455,623 $47,776,230 $35,367,387 $29,946,767 $17,979,631 $8,791,048 $85,923 $23,458,553 $974,903,350 $1,014,163,335

15 IQE Shares $15,884,223 $15,884,223

16 SLX Staff Cost reduction 100% 100% 100% 100% 80% 80% 50% 50% 25% 25%

17 SLX Costs $22,364,512 $13,496,091 $13,496,091 $13,496,091 $13,496,091 $10,796,872 $10,796,872 $6,748,045 $3,374,023 $3,374,023 $244,375,200

18 Dividend $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

19 Dividend per share $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

20 Nett Cash Flow (NCF) ($1,177,764) ($5,679,392) ($12,408,844) ($5,420,620) ($11,967,136) ($9,188,583) ($8,705,125) $23,372,630 $38,246,454 $39,259,985 $959,529,948

21 Discount factor 1 0.915 0.837 0.766 0.701 0.641 0.587 0.537 0.018 0.017

22 Nett Present Value (NPV) (1,177,764) (5,196,644) (10,388,994) (4,152,525) (8,388,312) (5,893,238) (5,108,596) 12,550,333 702,329 659,660 83,427,222

23 Cumulative (incl current cash & shares) 68,162,081 62,965,437 52,576,443 48,423,918 40,035,606 34,142,368 29,033,771 41,584,104 152,107,407 152,767,068 5,035,048,087

24 EPS (0.00) (0.02) (0.04) (0.02) (0.04) (0.03) (0.03) 0.07 0.11 0.12

25 SP based upon P/E multiple (0.04) (0.17) (0.37) (0.16) (0.36) (0.27) (0.26) 0.70 1.14 1.17

Column 1 Column 2 Column 3

1 Paducah Parameters

2

3 Urenco Calculator parameters for Paducah https://urenco.com/swu-calculator/

4 Assumed Assay

5 Product assay 0.711% U₂₃₅content

6 Tails Assay 0.100%

7 Feed Assay 0.340%

8 Calculator Results

9 SWU amount/yr 3,420,070 SWU/yr

10 Nat Uranium UF₆ product/yr 2,945,800 Kg/yr

Column 1 Column 2 Column 3 Column 4

1 Cost Parameters

2 Amount Unit Ref

3 US$ Cost/SWU $20.00 /SWU http://www.wise-uranium.org/edumu.html

4 US$/yr Paducah costs $68,401,400 /year

5 Debt amount (US$) $1,000,000,000 US$ CIC rpt (see breakdown below from typical plant)

6 US guarantee loan rate 4.45% % US published rates

7 Repayment period 40 years SLX announcement

8 Repayments US$/yr $53,955,855 /year Mortgage repayment schedule

9 Sustaining Capital (all years) 1.5% % guess

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9 Column 10 Column 11 Column 12

1 GLE cash flow

2 Year 2018 2019 2020 2021 2022 2023 2024 2025 2063 2064 Total

3 Paducah revenue (A$) $120,312,674 $240,625,347 $240,625,347 $9,504,701,207

4 AISC costs (A$) ($45,000,921) ($90,001,842) ($90,001,842) ($3,555,072,763)

5 Loan amount (A$) $407,894,737 $434,210,526 $473,684,210.32

6 Repayments (A$) ($22,008,309) ($45,436,510) ($70,994,546) ($70,994,546) ($2,768,787,297)

7 Sustaining Capital (all years) (A$) ($1,804,690) ($3,609,380) ($3,609,380) ($142,570,518)

8 Stage payment to SLX (A$) ($19,736,842) ($19,736,842)

9 SLX stage payments ($19,736,842)

10 SLX royalty (A$) ($8,421,887) ($16,843,774) ($16,843,774) ($665,329,084)

11 Cost of tails (A$) ($2,503,930) ($5,007,860) ($5,007,860) ($197,810,470)

12 Construction Capital Costs (A$) ($372,368,421) ($355,263,158) ($367,105,263)

13 Nett Cash Flow (NCF) $13,518,007 $33,510,859 $35,584,401 -$47,886,985 $125,162,490 $125,162,490 $2,356,710,022

14 Nett Present Value (NPV) $9,475,389 $21,492,702 $20,882,680 -$25,713,734 $2,298,388 $2,103,025 $333,337,271

15 EPS $0.04 $0.10 $0.11 -$0.14 $0.37 $0.37

16 Combined EPS $0.00 -$0.02 -$0.04 -$0.02 $0.00 $0.07 $0.08 -$0.07 $0.49 $0.49

17 SP based upon P/E multiple -$0.04 -$0.17 -$0.37 -$0.16 $0.05 $0.73 $0.80 -$0.73 $4.89 $4.92

Expand

I forgot to put tax into the valuation calculation - corporation tax (under the new US tax changes 20%) will be payable on GLE profits - although I suspect that they can put this off for many years due to claiming back prior tax losses. Withholding tax would also likely be due on SLX royalties going to Australia; as I understand withholding tax on royalties cannot be offset against prior losses but I don't really know.

SLX Price at posting: 54.0¢ Sentiment: Hold Disclosure: Held

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(20min delay)
Last $4.33		Change 0.080(1.88%)		Mkt cap ! $1.030B

Open	High	Low	Value	Volume
$4.28	$4.33	$4.22	$1.758M	410.4K

Buyers (Bids)

No.	Vol.	Price($)
1	842	$4.25

Sellers (Offers)

Price($)	Vol.	No.
$4.34	9396	2

View Market Depth

No.	Vol.	Price($)
1	842	4.250
1	10000	4.230
1	500	4.220
1	500	4.200
2	870	4.190

Price($)	Vol.	No.
4.340	9396	2
4.350	2300	2
4.360	460	1
4.380	1000	1
4.420	512	1

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