- Production guidance raised from 72,000 to 74,000 ounces (oz) for year to 30 June 2023
- Net cash up 16 per cent to $144.2mn (43p), or half market capitalisation of £226mn
- Third quarter cash profit halves to $9.8mn on 28 per cent lower net revenue of $26.5mn
Sylvania Platinum (SLP:85p), a South African producer and developer of platinum, palladium and rhodium, has upgraded full-year production guidance. But softer metal prices mean annual profits are set to decline year on year.
Third-quarter results fell below analyst forecasts due to a 21 per cent quarter-on-quarter fall in the average basket price to $1,932 per ounce. This impacted both revenue for the three-month period and the sales adjustment for the previous quarter. Moreover, unit costs have come under pressure due to cost inflation, lower grades and throughput – ore from host mines and current arisings from Samancor were replaced with dump material which led to lower feed grades. That said, the dump operations’ cash cost of $688 per oz is materially below the basket price.
Post results, Edison Investment Research reduced their average basket price by 14 per cent to $2,120 per oz for the 12 months to 30 June 2023. This largely explains the $16.6mn cut in both their full-year revenue and cash profit estimates to $141.7mn and $71.3mn, respectively. On this basis, expect full-year earnings per share (EPS) of 19¢ (15.2p), down from 20.6¢ in the 2022 financial year.
The flat share price performance since the trading update reflects the low rating on offer – the shares are priced on a 50 per cent discount to Edison’s 174p per share sum-of-the-parts valuation and on a cash-adjusted price/earnings (PE) ratio of three. There is an attractive dividend on offer, too. Edison pencilled in a full-year payout per share of 6p, but house broker Liberum Capital is forecasting 9p, implying a prospective dividend yield of 7 to 10.3 per cent.
Moreover, analyst Ben Davis of Liberum notes that spot PGM prices have bounced recently. The group is a potential takeover target, too. So, although the holding is flat in my 2022 Bargain Shares Portfolio, I would maintain your interests. Hold.
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