The reason for the sell off...

FY18 Result: Share price sell-off exposes even greater value
The FY18 result was below our forecasts due mainly to non-cash items. EBITDA was $122m, below UBSe of $141m, but free-cashflow was inline. Non-cash items and cash costs that were expensed rather than capitalised drove the difference of $19m in EBITDA vs UBSe. The only negative news in our view, was the recurrence of water reliability issues during Aug-18. While negative, Lynas has a number of initiatives to improve water reliability and still posted record monthly production of NdPr in that month. So in summary there was nothing in the FY18 result that materially alters the fundamental value of Lynas assets. We view the 9% share price decline today as not fundamentally backed. Lynas's assets are strategic, having the best global Rare Earth deposit, in our view, exploited through the only active non-China processing facility. Lynas's key product, Neodymium-Praseodymium (NdPr), is exposed to robust demand growth from Electric Vehicles. We maintain our Buy rating.

UBS