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Sylvania Platinum - Low risk option on PGMs, stellar dividend payer

Its FY22 results were much in line with our revised forecasts. A 23% drop in the PGM basket price, because of global recessionary concerns and production challenges in the first three quarters of FY22, was the main reason for the 43% decrease in EPS to 20.6c. The 8p/share dividend declared, a 9.2% dividend yield, was higher than our forecast 3.5p/share. At 22.1c/share our FY23e EPS is slightly higher than in FY22 because our PGM price forecasts take into account supply disruptions in South Africa and North America that could spill over into next year. The stock is cheap relative to our valuation, especially because of its low risk in terms of safety, low labour component and generally low-cost nature. Its US dollar costs could fall in FY23 as the South African rand weakens against the US dollar, as virtually all the major world currencies have. Furthermore, currency outflows from South Africa for the purchase of fuel outweigh the inflows from the sale of commodities, weakening the rand versus the US dollar.