Sylvania Platinum H1 results

Sylvania Platinum: (SLP.L, AIM All-Share, Market Cap £138, 49p, 3.8 of JIC Portfolio and 0.0 of JIC Top 10)

Half-year results to 31st December 2020.

Given that, on 31st January it published its Q2 results we already know much of the information in today’s report. For instance, production of $40,003 PGM oz. and net cash of $33.8m on 31st December was already known.

The financial performance was superb, benefiting from lower-cost production and higher Platinum and Rhodium prices. Net profit was up 244% to $23.9m. (H1 FY 2019 = $7.0m).

In the commentary, it again lays out the challenges to the business from power outages, water shortages and the potential retrenchment of some of its supplier mines due to lower chrome demand. It also sets out opportunities such as maximising the contribution to the business from the higher PGM prices. It announces a share buyback of up to 12 million shares.

Conclusion: Simon Thompson wrote the stock up in this week’s Investors Chronicle, which caused a flurry of buying on Friday. He points out that Q3 ending 31st March will benefit from the current high price of PGM metals and that forecasts for the year ending 30th June, will have to move up, significantly. Even without the surge in PGM prices, it is generating net cash of around $10m per quarter. Thompson points out that cash currently represents around 20% of the current market capitalisation. Stripping out likely year-end net cash of $50m leaves a stock on around two times net profits. Profit forecasts will have to be increased. I reduced the position on Friday, selling the shares I bought opportunistically when the stock dropped to 35p following the Q2 results. I have it as Medium/High Risk and High Reward. Some might argue that it should be Medium Risk or perhaps even Low Risk, but I think the challenges it itself sets out suggest not. I am very happy with a 3.8% holding and think the stock will go much, much higher over the next six months or so. Very Happy Holder.

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