FY 21 Results: Smaller than Expected Preproduction Loss
- Renergen’s operating loss was smaller than expected despite a small revenue miss as lost production (due to the lockdown) was offset costs.
- The Group spent R125.7m on assets under construction, capitalized R21.5m intangible assets and made a second draw down on its US International Development Finance Corporation (DCF) loan to the tune of $12.5m. The Group’s short-term unencumbered cash reserves sit at R130m.
Progress Updates: Almost Entire Positive
- The Group has concluded a partnership with Total SA as LNG distribution is set up down the key N1 route.
- Drilling of P007 & MDR1 both reflect strong resource, flow & helium concentration data, highlighting potentially better-quality resources and/or lower capex intensity of Phase Two.
- The Group has concluded its first helium sales agreement with a global tier-one automotive supplier for Phase Two.
- Finally, The Group’s innovative cold chain storage solution (Cryo-Vacc™) made its first sale, moving post-revenue.
Forecast, Valuation and Implied Return: Appears Undervalued
- Since our Initiation, our major assumptions remain the same, albeit we have updated our model for the latest spot prices that, in general, have moved in Renergen’s favour.
- Our DCF-driven sum-of-the-parts (SOTP) valuation for Renergen implies Phase One & Two—offset by central costs, debt and (potential) dilution—are worth 4149cps (previously 3539cps). After options for Evander and Cryo-Vacc are added, we see Renergen’s share as potentially worth 4978cps (previously 4247cps).
- Rolled-forward by CoE, our 12m TP is 5850cps (previously 4977cps) or over double what the current share price is.
See our Initiation of Coverage here.
Courtesy of Blue Gem Research (Pty) Ltd
Share Code: REN – Market Cap: R2.7m – PE: -65.2x – DY: 0.0%
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