Half year 2021/22 figures impacted by one-off effects
After the publication of H1/2021/22, we maintain our Buy rating for the shares of SunMirror but cut our fully diluted PT to EUR 122.40 from EUR 194.70 per share given (i) lower peer group multiples, (ii) expected delays in the commissioning of the Australian assets, (iii) higher net debt, and (iv) higher discount rates not at least due to ongoing uncertainties about the takeover of Lat66. In H1/2021/22, SunMirror reported operating losses of USD -6.7m (H1/2020/21: USD -1.3m) and after-tax losses of USD -10.4m (H1/2020/21: USD 1.3m). Profitability was impacted (i) by the full depreciation of an exclusivity premium of USD 2.8m, which SunMirror has agreed to pay as part of the acquisition price for Finnish Latitude 66 Cobalt Oy (Lat66), and (ii) by the expiry of a right to repay a loan granted to Lat66 in the amount of USD 1.5m. Driven mainly by issuing a USD 4.2m convertible bond, the company’s cash position improved to USD 2.8m by 12/31/2021 from USD 0.4m after 06/30/2021, while net debt deteriorated to USD 22.9m from USD 9.2m.
In April, SunMirror agreed with Latitude 66 a further 10-week extension to the outstanding takeover offer in respect of all of the outstanding ordinary shares of Lat66. For this extension, a loan of EUR 4m has been granted to Lat66 that becomes non-repayable if the takeover will not be completed. The Tender Offer will be extended to 21 June 2022. According to the company, more than 98% of all issued shares have been tendered by Latitude 66 shareholders.
We value the equity of the Dusseldorf Stock Exchange-listed company using a sum-of-the-parts valuation model based on a Net Present Value (NPV) entity model, in-situ values, and peer group multiples. We did not factor in any future acquisitions. Our price target is primarily driven by royalty schemes the company intends to generate from Cape Lambert North, for which we calculated an equity value of EUR 67.10 per share (base-case-scenario). We value Moolyella with EUR 30.30 per share, Lat66 with EUR 28.10 per share, and Kingston-Keith with EUR 6.20 per share. Together with net debt of EUR 9.40 per share, this approach calculates an equity value of EUR 122.40 per share. Higher grade potential at Kingston-Keith and Moolyella could represent substantial upside to our target price. Additional short- and medium-term upside potential could be identified, in our view, should the management decide for a trade sale of its most valuable mineral reserve, Cape Lambert, to a strategic investor or succeed in exploiting that asset in a capital-efficient manner. Upside to our price target could also arise, should the company use the proceeds from the capital increase for acquiring further strategic mineral assets significantly below market values.
Dynastar AG. Dynastar AG is a Germany-based company engaged in the business of acquisition, management, placement and disposal of investments in companies. The Company is also involved in providing financing services.
Founded in 2010, Sphene Capital is a German based pure-play research house offering state-of-the-art research and evaluation services to European small- and mid-caps by avoiding typical conflict of interests of traditional investment banks.
As a general rule, analysts of Sphene Capital strive to understand companies better than any other analyst or investor before publishing their initiation reports. Therefore, the comprehensive initiation research reports comprise of 50-80 pages, including an extensive analysis of the value chain of the IPO candidate, its unique selling proposition, an elaborate analysis of suppliers and clients, a thorough SWOT analysis, a commercial due diligence (i. e. market and competitive analysis), an integrated financial forecast model and a profound company valuation (both DCF methodology and peer group multiples). Before publication, each of Sphene Capital’s research report will be double-checked by a fellow research colleague (“Four-eyes-principle”), ensuring highest quality and avoiding careless mistakes.
After initiation of research coverage, Sphene Capital publishes regular updates of 12-30 pages following relevant news flow from the issuer or major peers, f. ex. after acquisitions or after publication of quarterly results.
Due to Sphene Capital’s extensive experience in equity and bond research, the team has established longstanding contacts to all relevant market players, i. e. institutional investors, family offices and high net-worth individuals as well as journalists. To each of these groups, Sphene Capital’s research analysts have regular contacts during analyst and management roadshows or via daily phone calls. Finally, analysts publish articles in selected stock markets magazines and websites in which the analysts help issuers to improve their popularity on the German capital markets.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.