Sylvania Platinum Limited

[Carcosa]

The following is my updated view of Sylvania.


I have taken a negative view of where commodity prices might be going forward over the next 12 months. Very roughly speaking by end of the FY am targeting roughly 30% down across the board.

Plugging those numbers in, with a forecast 70,00 ounces production, I get a turnover of:



Which provides a waterfall chart as seen below. Note that the special dividend is included.



In terms of profit, P/E and EPS that throws out: (at 61p/share)



If it holds true then over two years will get around 50% back in dividends (31p) at 61p share price whilst holding a lowly valued share albeit heavily dependent on commodity prices.

[Carcosa]

Now that production is normalising and we have Q1 data I thought I would update my charts:

The two principal factors are production, and commodity prices.

Historic production volumes and my, perhaps somewhat not so challenging lower production volumes going forward are:




Couple with the above my historic and forecast (from Q2 onwards) commodity prices are
(Note that Rhodium price is on the RH scale)


In percentage change terms that equates to

Some may argue I am being overly pessimistic with my forecast prices.

So this results in a Turnover of:

Giving a 35% YoY increase.

In terms of cash however, I see it like this:

A few things to note.

Seems to have escaped a lot of investors notice that $25.3m trade debtors/Working Capital were seen in Q1 (hence only $5m cash added to the pile) This is the result of starting up operations again post COVID and the usual large time delay between selling the PGM and getting the 'cash' for it. This should unwind in Q2/Q3.

Foreign exchange losses are the result of the strength of the ZAR/USD at time of writing. The way it is going that could increase by another million.
Dividend costs are an actual cash cost the company has to pay to issue the dividend as per the AR. Somewhat unique as a result of the company structure.

The quantum of the Special Dividend is based on what the company has publicly indicated.

Total dividend is ~13% yield

Even after all that, we end up with a cash pile 36% higher than end 2020 FY

If commodity prices remain stable then add on another $7m in cash

Given those huge cash piles you can rest assured management will embark on something stupid.

[SteMiS]

Not realising there was an active thread on Sylvania I posted my views on another board. So I'll repost here

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Current share price is 113p valuing it at $420m.

In the year ended 30 June 2020, net after tax profit (excluding w/off of exploration assets and interest) was $49m. So, just on that alone, it's on a historic P/E of just 8.6

However at 30 September 2020 the company also had cash of $61m. That's likely to have risen to probably at least $80m by now. That would take cash adjusted P/E to around 6.9.

If that wasn't enough, the sale price of it's basket of products (essentially Platinum, Palladium and Rhodium) increased from an average of $2,107 in 2019/20 to $2,834 in Q1 2020/1, causing net profit to surge to $21m. If that price was maintained for the rest of the year, we'd be looking at a net profit (all other things being equal) of around $84m, reducing the P/E to 4.0

But the basket price hasn't stayed the same, it's now around $3,800 ! At that sort of level the P/E is probably below 3.

At these price levels the cash must be pouring into the company. Consequently they are planning a special dividend to reflect the windfall pricing currently being enjoyed. This should be announced in the 2nd quarter results, which last year were released on 31 January.

The shares have enjoyed a good run from 40p to the current 113p but if prices stay at anything like the current levels, or indeed don't fall substantially, it surely must have much further to run.

Has been mentioned on TMF

https://www.fool.co.uk/investing/2021/0 ... _id=197763

and also by Simon Thompson in the IC.

Here's an industry view on Platinum prices

https://www.miningmx.com/news/platinum/ ... h-2000-oz/

and on Rhodium demand

https://www.ft.com/content/42b17e6e-ff9 ... 9900a3f8b3
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No doubt some of this has already been mentioned

[johnhemming]

I do think SLP is a good stock. I initially bought in in 2019 then sold out around February, then I bought back in. I am selling some now simply because I do that when a stock price has gone up quite a bit. My theory is that I can sell and buy back and also it reduces risk. It does not always work as sometimes the price just goes up further.

They are holding shedloads of cash. I am not sure the management are that entrepreneurial and someone else may wish to take over, but that may come at quite a price. It all really depends upon the basket price.

[Carcosa]

SteMis,

I would think there would be substantially more cash than your estimate due to Q1 $25.3 million trade debtors unwinding.
I'll update my charts following Q2 report from SLP, due this month.

[Heinous]

If you refer back to your January 2019 projections, the company has not delivered as expected.
I suspect this reflects the flaws in any detailed predictions: it only takes one thing to go wrong, and whole basket is in doubt.
As the share price has almost tripled in the past 12 months, don't you think it has already gone a little further than the figures support?

After reading this thread, I considered investing, but the share price history suggests that the ship has sailed; if I'd invested before, I'd hold, but be watching closely for a fall.

[johnhemming]

If you refer back to your January 2019 projections, the company has not delivered as expected.

Could you please tell me what the variation is as a proportion of the projection?

Personally I am not kicking management who have coped adequately with things going through the pandemic period.

[johnhemming]

After reading this thread, I considered investing, but the share price history suggests that the ship has sailed; if I'd invested before, I'd hold, but be watching closely for a fall.

Earlier today I put in a limit purchase for 103.5 (the price was about 108) good for January. Lo and behold just after the close I got an emailed contract note (I don't watch the market continually) and it was SLP. Mildly surprising as I did not expect this.

However, I think this stock still has some distance to go.

[SteMiS]

If you refer back to your January 2019 projections, the company has not delivered as expected.

Which projections are you referring to, the thread only started December 2019?

[Heinous]

Which projections are you referring to, the thread only started December 2019?

Apologies, slip of the digits; I mean the Dec 2019 (the opening post in the thread).

[Carcosa]

I mean the Dec 2019 (the opening post in the thread)

Revenue $108.5 v 114.1 (actual)
Cash $50.9 v $54.6 (actual)

Well I thought I got it pretty spot on and my errors were on the low side. Each to his own...

[johnhemming]

Revenue $108.5 v 114.1 (actual)
Cash $50.9 v $54.6 (actual)

Well I thought I got it pretty spot on and my errors were on the low side. Each to his own...

The point about a market is that everyone can make their own assessments and decide whether or not to execute a trade.

December 2019 price around 35p
January 2021 price over £1.

[Heinous]

The point about a market is that everyone can make their own assessments and decide whether or not to execute a trade.
December 2019 price around 35p
January 2021 price over £1.

Of course they can; and I wasn't suggesting it had been a bad investment - far from it. I was simply reviewing the past, and looking at the present to throw light on decisions now. That's all. I had no intention of 'attacking' anybody, and I'm sorry that my post has been taken that way.

[johnhemming]

I had no intention of 'attacking' anybody, and I'm sorry that my post has been taken that way.

I don't think it was so much that you were 'attacking' anyone, but you said something that other people (including myself) thought was not true. Hence we wanted to find out whether we were wrong or not. It appears we were right.

One of the challenges in investment (or any other aspect of life) is to find out what is really going on.

My personal impression was that the management had done OK and the predictions were about right.

[Hypster]

I note from the Stockopedia news page today, that broker Liberium has upgraded its price target from 140p to 200p.

(I hold).

[SteMiS]

I note from the Stockopedia news page today, that broker Liberium has upgraded its price target from 140p to 200p.

(I hold).

I believe their comment is (although this is from a secondary sources so treat with caution)

Sylvania cheap on all valuation metrics – At spot prices, Sylvania is trading on an FY22 FCF yield of 29% and an enterprise value to EBITDA of just 1.9x. We believe that the group has vast re-rating potential as the market becomes more comfortable with the rhodium price outlook. We estimate that the current share price implies rhodium falling to $4,000/oz from over $20,000/oz currently. We see this as highly unlikely given the fundamentals at play.

However the EV/Ebitda of 1.9 accords with my own model.

Heinous of course reflects the view that some existing shareholders will have (that they'd like to protect significant profits) or potential share purchasers (that they'd missed the boat), so I'd expect to see some consolidation (and even volatility) at this level. But at the end of the days the numbers will speak for themselves.

[johnhemming]

I had been using a source for commodity prices that didn't give Rhodium, but I have now found one. I hope this is useful to someone (other than me).
https://www.metalsdaily.com/live-prices/pgms/

[GrahamPlatt]

SLP’s been on my “watch list” since last June (45.5p). Damn.

[SteMiS]

Half year results out today.

https://www.investegate.co.uk/sylvania- ... 00068612P/

Nothing much new in them, apart from the special dividend of 3.75p which was disappointing as it represents a distribution of just $14m, or little more than 2 weeks net profits at current run rate.

Nevertheless it's not particularly relevant to valuation, which on historic H1 numbers is around 3.3 x ebitda or (for those who don't like ebitda) around 5.5 x earnings. However with the current basket price up around 35% compared to the average in H1, those numbers are likely to be woefully out of date by the year end.

Edit: Liberium target price 200p (currently 117p) and their top mining pick.

[Carcosa]

Have reviewed Anglo American and SLP's PGM pricing over the last year or so.



Am surprised AAL have managed to get $24k for Rhodium but if SLP follows a similar pattern then the forthcoming production/results should be a blinder. However I have been working on an assumed $17,600 for my personal calcs.

Incidentally for daily PGM prices on a handy single webpage visit ROYAL BAFOKENG PLATINUM