MNK | A bumpy ride
Since our last report “Regulatory blissâ€, Montauk Energy's (MNK's) share price fell c.42% from ZAR86.10ps to ZAR49.99ps. While the U.S. renewable natural gas (RNG) regulatory environment remains a risk to our investment case, we believe the price drop offers an attractive entry point into MNK.We estimate the counter is trading at an 11.0x rolled forward PE (0.9 PE relative). Our DCF valuation methodology delivers a one-year target price of ZAR97.18ps, implying a total return of 97.2%. The total return is 84.9% greater than our estimated market return of 12.3%. Accordingly, we retain an OUTPERFORM rating.
Montauk Holdings Limited is a South Africa-based investment holding company. The Company is engaged in the development and operation of large-scale renewable energy projects utilizing landfill gas (LFG) in the United States. Its operations include the permitting, design, construction and operation of energy facilities utilizing LFG. The Company specializes in pipeline quality gas production; electric power generation; carbon reduction and offset credits; renewable energy credits, and LFG collection system operations. It has an operational platform of renewable energy projects in the United States, where the Company operates approximately 14 LFG sites. It offers services in the development, operation and management of LFG fuelled renewable energy projects through the provision of a service spanning operations, regulatory compliance, engineering, construction and back-office functions. The Company's subsidiaries include Montauk Holdings USA LLC and Montauk Energy Holdings, LLC.
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