Kenmare Resources (KMR) chief executive Michael Carvill has a problem. It doesn’t concern operations at his company’s mineral sands mine in Mozambique, where record production volumes and a 3 per cent decline in cash costs fed into a swing to profit in 2017. Nor is it with the ilmenite and zircon markets, both of which saw strong price rises last year, and – notwithstanding sporadic disruption caused by Chinese environmental inspections – are expected to tighten further in 2018.
Instead, Mr Carvill’s issue lies in the disconnect with Kenmare’s market valuation. Since a 2016 capital restructuring and refinancing, a once active tier of private investor have essentially been replaced with lenders ill-suited to long-term equity investment, and institutions in it for the long haul. The result has been illiquidity and damp sentiment for a stock firmly in recovery mode.
Dividends could be key to burnishing the investment case; management is “acutely conscious of the need to provide tangible returns on investment to shareholders”. Less than two years since its restructuring, this will require lender approval, the safe passage of annual meeting resolutions and a trip to the High Court in Ireland to expunge accumulated losses.
On average, analysts are guiding for a pre-tax profit of $67m and adjusted EPS of 57.5¢ in 2018, up from last year’s estimates of $20.8m and 17.5¢.
| KENMARE RESOURCES (KMR) | ||||
| ORD PRICE: | 250p | MARKET VALUE: | £274m | |
| TOUCH: | 249-250p | 12-MONTH HIGH: | 352p | LOW: 237p |
| DIVIDEND YIELD: | nil | PE RATIO: | 19 | |
| NET ASSET VALUE: | 726¢ | NET DEBT: | 4% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2013 | 138 | -42.1 | -171 | nil |
| 2014 | 174 | -101 | -362 | nil |
| 2015 | 143 | -61.9 | -218 | nil |
| 2016 | 141 | -17.1 | -28.0 | nil |
| 2017 | 208 | 18.4 | 18.0 | nil |
| % change | +47 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| £1=$1.40 | ||||
