Sylvania Platinum (SLP) - Proposed Long-Term Hold
Industry Sector: - Basic Materials
How did I come across it?: - I was performing research on Hybrid car market and then came across Rhodium (it’s a platinum group metal). Platinum's main use is in diesel vehicles, whereas palladium tends to be used in petrol engines. But rhodium is the most effective catalyst for nitrous oxide (N2O) emissions in petrol engines, as much as seven times more effective than palladium. There is no substitute for rhodium, prices have risen from $2500 to $7950 last year.
Background: - Sylvania Platinum incorporated in Aug 2010, public company since Mar 2011.
SLP is a producer of platinum, palladium and rhodium (13%). Its mission statement is to be the leading mid-tier, lowest unit-cost, platinum group metals (PGMs) mining company.
It appears to be a stable small cap (market Cap £118M) operator with an operating margin of 28-30% which is good.
All of the Group’s assets are situated in various locations across South Africa’s Bushveld Igneous Complex (BIC), which is the world’s richest source of PGMs. (This bit is the main risk due to political uncertainty in SA, but money and jobs talk.)
For FY19, turnover increase some 12% and net profit by 66%, though this dose seem to be the trend since 2014, increasing activity and profit. The shares presently (Jan 2020) trade at 4.7 times PE, which makes the stock look good value.
Debt is zero, strong cash-flow, and the stock appears relatively cheap compared to others in the same sector (basically 6th out of 54 companies for the PE of cheapness)
Rough Technical: - The share price has been on a steady rise since 2012 18p to 43p (Jan 2020). An all-time high of 45p in Feb 2019. Support is between 33-36p with resistance around 41p which it has recently passed, next level is 45p.
Liquidity of Shares: - Average volume over 3 months is 1.4m shares, way above my threshold of 120K. Only 23% of the shares are in owned by holders holding below 5%, so you are along for the ride. The big holders are Africa Asia Capital 20% M&G 19%, and Fidelity International 9% - so some big players. The Directors have skin in the game, though these are mainly through exercise of options or warrants.
Brokers Opinion: - 2 brokers (WH Ireland and Liberium) that have flagged the shares have them as a strong buy, with a target price of 49p.
Dividends: - First dividends were in 2018 and 2019 is at a 1.7% yield with expectations for this to increase to 5% next year. Dividend cover is at 6.3 (my threshold is 2).
Spread: - This tends to be 0.5p
Accounts: - It is still a young company in a growth phase, fiscal year ended 30 June 2019, Sylvania Platinum Ltd revenues increased 12% to $70.5M. Net income increased 66% to $18.2M. Revenues reflect an increase in demand for the Company's products and services due to favourable market conditions. Net income benefited from Write-off of property, plant and equipment decrease from $427K (expense) to $0K, General and administrative costs - decrease of 61% to $136K (expense).
Balance sheet looks strong for the company standing at $153M 2019, also no debt.
Main Risks: - The main risks from my perspective geographic location (political risk), litigation involving Sunamcor (though this is over 12 years old) and power outages that have been suffered to the load-shedding process. Electric car market (though PGMs could be used as a cobalt, nickel replacement, though probably unlikely.).
Main Favourables: - PE ratio makes it a value share. Proposed increase in dividends for 2020, no debt, strong sales growth and good operating margins.
Declarations: - No interest in the share at the moment, though I am proposing the add it to my ISA long-term. Looking to buy at around 40p, SL at 34.8p.
How did I come across it?: - I was performing research on Hybrid car market and then came across Rhodium (it’s a platinum group metal). Platinum's main use is in diesel vehicles, whereas palladium tends to be used in petrol engines. But rhodium is the most effective catalyst for nitrous oxide (N2O) emissions in petrol engines, as much as seven times more effective than palladium. There is no substitute for rhodium, prices have risen from $2500 to $7950 last year.
Background: - Sylvania Platinum incorporated in Aug 2010, public company since Mar 2011.
SLP is a producer of platinum, palladium and rhodium (13%). Its mission statement is to be the leading mid-tier, lowest unit-cost, platinum group metals (PGMs) mining company.
It appears to be a stable small cap (market Cap £118M) operator with an operating margin of 28-30% which is good.
All of the Group’s assets are situated in various locations across South Africa’s Bushveld Igneous Complex (BIC), which is the world’s richest source of PGMs. (This bit is the main risk due to political uncertainty in SA, but money and jobs talk.)
For FY19, turnover increase some 12% and net profit by 66%, though this dose seem to be the trend since 2014, increasing activity and profit. The shares presently (Jan 2020) trade at 4.7 times PE, which makes the stock look good value.
Debt is zero, strong cash-flow, and the stock appears relatively cheap compared to others in the same sector (basically 6th out of 54 companies for the PE of cheapness)
Rough Technical: - The share price has been on a steady rise since 2012 18p to 43p (Jan 2020). An all-time high of 45p in Feb 2019. Support is between 33-36p with resistance around 41p which it has recently passed, next level is 45p.
Liquidity of Shares: - Average volume over 3 months is 1.4m shares, way above my threshold of 120K. Only 23% of the shares are in owned by holders holding below 5%, so you are along for the ride. The big holders are Africa Asia Capital 20% M&G 19%, and Fidelity International 9% - so some big players. The Directors have skin in the game, though these are mainly through exercise of options or warrants.
Brokers Opinion: - 2 brokers (WH Ireland and Liberium) that have flagged the shares have them as a strong buy, with a target price of 49p.
Dividends: - First dividends were in 2018 and 2019 is at a 1.7% yield with expectations for this to increase to 5% next year. Dividend cover is at 6.3 (my threshold is 2).
Spread: - This tends to be 0.5p
Accounts: - It is still a young company in a growth phase, fiscal year ended 30 June 2019, Sylvania Platinum Ltd revenues increased 12% to $70.5M. Net income increased 66% to $18.2M. Revenues reflect an increase in demand for the Company's products and services due to favourable market conditions. Net income benefited from Write-off of property, plant and equipment decrease from $427K (expense) to $0K, General and administrative costs - decrease of 61% to $136K (expense).
Balance sheet looks strong for the company standing at $153M 2019, also no debt.
Main Risks: - The main risks from my perspective geographic location (political risk), litigation involving Sunamcor (though this is over 12 years old) and power outages that have been suffered to the load-shedding process. Electric car market (though PGMs could be used as a cobalt, nickel replacement, though probably unlikely.).
Main Favourables: - PE ratio makes it a value share. Proposed increase in dividends for 2020, no debt, strong sales growth and good operating margins.
Declarations: - No interest in the share at the moment, though I am proposing the add it to my ISA long-term. Looking to buy at around 40p, SL at 34.8p.
Comment:
Always interested to hear the technical opinion for the best entry based on recent share price movements.