NIKL: Sale of Coral Bay to boost profits and cash flow for new investments NIKL signs agreement to sell stake in Coral Bay. NIKL disclosed that it has signed an agreement to sell its 15.625% shareholdings in Coral Bay Nickel Corp. (CBNC) to Sumitomo Metal Mining Co., Ltd. NIKL said that the selling price is based on the carrying amount of CBNC on NIKL’s financial statements as of September 30, 2024. Positive for profits in the near term. NIKL’s losses from its investment in CBNC amounted to Php503Mil in 9M24 (NIKL’s 9M24 net income amounted to Php1.44Bil). Given the continued weakness in LME nickel price, we believe that the sale of its stake in CBNC will be positive for NIKL’s earnings in the near term. Meanwhile, NIKL will not be booking any loss from the sale since its selling price is at par with the carrying value of CBNC on its balance sheet. The amount raised from the sale could be utilized to develop NIKL’s new mines as well as investments in RE power generation projects. Reiterate BUY rating. We reiterate our BUY rating on NIKL with a FV estimate of Php5.18/sh. As discussed earlier, the sale of Coral Bay HPAL will give earnings a significant boost since NIKL’s 9M24 profits would have been around 35% higher excluding the Php503 Mil worth of losses incurred by its investment in Coral Bay. Furthermore, we remain positive on the longterm outlook for nickel due to rising EV battery demand. In addition, NIKL’s plan to expand its RE power generation business comes at an opportune time given the strong cash flow generated by its nickel mining business, as well as the tight power supply situation in the country. At its current price of Php2.26/sh, upside to our FV estimate is significant at 128%.
Courtesy of COLFinancials
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