Afternoon GRR'ers. I have put together a conservative valuation. The conclusion of my analysis and valuation indicates:
- GRR is conservatively valued at
= $0.516 (after a 2 cent dividend payment as of
March 2017.
This is quite a high level view of what I believe the company
should (emphasis on should) be valued come March 2017. Unfortunately, the market is imperfect and i believe we are still due for a re-rating. It really doesn't make sense being at these levels HOWEVER, my thoughts are the market is still not comfortable with the (IMO) unstable Iron Ore price.
Also IMO, management is not very good at PR (whether intentionally or not). There does not seem to be any motivation for a higher Share price.
Some important assumptions before i go into my figures:
- This does not take into account expenditure for the South Deposit Tailings Storage Facility.
- Assumption of a 2 cent dividend (i am being optimistic with this and may not be actual however, i am hoping for this to be actual)
- Any Lost time injuries which may occur.
- Replacement of the Autogenous Mill Commencing in March 2017 (unknown what this will cost)
- Obviously, IO would need to remain stable (as stable as possible) and be above my figures utilised below... Any upside in IO and this will continue to deliver for GRR.
- Stable AUD/USD exchange (lower AUD would be nice!)
Production Estimates
Below are the production estimates per quarter used for the initial part of the valuation. Obviously very difficult to estimate the pellets producd during the quarter but sales are generally consistent. I would hope production is ramped up to help reduce Cash costs and obviously increase profits during this period of higher IO prices:
View attachment 477950
Profit Numbers
Here are the profit numbers based on Actual (March, June & Sept 16 quarters) and estimates (to Dec 2017 quarter). It shows the actual profit made for March, June & Sept 16 quarters and provides estimates going forward. There are alot of assumptions in this calc regarding the IO prices and AUD rate.
View attachment 477953
Cash / (no debt) position!
Now for the best part about GRR... No debt! I have assessed the estimated cash position based on the production numbers and estimated operational profits above. I have assumed a reduction of 10% in Trade receivables each quarter (which i would like to see) and added 10% to cash balance for this collection. As you can see below, GRR is a cash printing machine.
I have also inserted a provision for a 2cent dividend payment.
View attachment 477956
Valuation
For valuation purposes, a PE of 5 has been used on total expected operational profit of $77mil (to March 2017) + expected cash position at March 2017.
View attachment 477962
(20min delay)