Narratives are currently in beta
At current basket prices, using previously communicated basket prices, Rainbow stands to generate approx. £140M EBIT per annum on the Phallaborwa project alone.
Allowing for a worst case scenario (and in my view unlikely) of stock dilution (to serve purposes of initial set-up costs) of around 60% (meaning shares in circulation will be around 1 billion), at a PE of 12, the market cap should be around £565m. I consider this to be on a conservative basis.
Potential upsides: -
- Second project comes online (long term).
- Basket price increases as spot/hedged prices increase.
- Lower dilution of shares in circulation
With 1 Billion shares in circulation (therefore after dilution) and a 50% return to shares of disposable cash (~£40). I estimate a dividend of 10p per annum.
As internal ownership stands at around 27%, I expect dilution of ownership to be fair with a strong emphasis on keeping dilution as low as possible.
Risks: -
96% final extraction rate can't be improved upon. Meaning a discount rate on saleable product of between 10-15%.
Demand remains weak and therefore market prices for the basket remain low.
How well do narratives help inform your perspective?
