Sylvania Platinum Limited (LON: SLP) 

Sylvania Platinum Limited (LON: SLP) is an FTSE AIM All-Share Index listed Company, which is a producer of platinum group metals (PGMs), including platinum, palladium, and rhodium. The core business of Sylvania Platinum is the retreatment of PGM bearing chrome tailings material. It holds mining rights for several PGM projects on the Northern Limb of the Bushveld Igneous Complex.

Recent trend of dividend payments: SLP had paid a final dividend of 4.00 pence per share on 03 December 2021, while the ex-dividend date was 28 October 2021.

Growth Prospects

• Efficient Cost Management: SLP produces low-cost PGMs with low-risk exposure. The Company identifies projects that have a minimum financial and operational risk with a potential LP high margin. SLP has a primary objective to maintain a regular stream of income to shareholders by generating generous shareholder returns.
• New Tailings Dam Facility: SLP remained on track to complete the construction of the new tailings dam facility at Lesedi by Q3 FY22. Moreover, the projects at Lesedi and Tweefontein would begin production as planned during the 2023 calendar year.

 

Key Risks

• Water Shortage: SLP’s Western operations have faced continuing headwinds because of the water shortages at the plant.
• Operational Halt: The temporary suspension of operations at Lesedi mine had adversely impacted the production levels during Q1 FY22.
• Surge in UK Inflation: The UK inflation reached a 30-years high as it surged by around 5.4% for the 12 months ended December 2021. It may cause a sooner-than-expected interest hike.
• Reduction in Cash Balance: The cash balance got declined from USD 132.7 million at the end of Q1 FY22 to USD 110.1 million as of 31 December 2021.
  

Key Fundamental Statistics & Shareholding Pattern of Sylvania Platinum Limited.

Africa Asia Capital, Ltd. is the most significant shareholder as it holds nearly 30.00 million shares as of 31 December 2021. 

Q2 FY22 Financial Highlights (for three months ended 31 December 2021, as of 31 January 2022)

(Source: Company Filings)

• Top-Line Business: The Company’s net revenue witnessed a healthy quarter-on-quarter growth of around 27% from USD 29.84 million during Q1 FY22 to USD 37.94 million for Q2 FY22.
• Net Profit: The net profit rose by around 80% to USD 15.52 million during Q2 FY22 when compared with Q1 FY22.
• Production Volumes: SLP had achieved 16,605 4E PGM ounces in Q2 FY22, while it was 15,771 ounces for Q1 FY22.

Financial Ratios (FY21)

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 02 February 2022, at 08:49 AM GMT, SLP’s shares were trading at GBX 91.61, down by around 0.96% from the previous day closing price. Stock 52-week High and Low were 150.00 and GBX 82.00, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Moreover, a 14-days RSI stood at ~43.56 levels.

Over the last two years, SLP’s stock price has delivered a positive return of ~152.00%, and it has outperformed the FTSE All-Share Industrial Metals & Mining index (benchmark sector) with a return of around 107.76% and FTSE AIM All-Share index (benchmark index) with a return of approximately 15.80%.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

SLP had shown a robust quarter-on-quarter growth in top-line revenue and bottom-line profitability during Q2 FY22. The execution of the MF2 project at Lesedi would remain on track to start contributing towards production from early next year. SLP aimed to demonstrate strong performance in FY22 with a promising PGM price environment. For FY22, SLP has kept the annual production target ranging from 66,000 to 68,000 ounces. The Company holds strong cash reserves to allow funding of capital expansion and process optimisation projects. Overall, the Company aims to upgrade exploration and evaluation assets and generate value for the stakeholders.

Considering the solid operational progress, robust financial performance during Q2 FY22, decent dividend yield, increased production prospects, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Sylvania Platinum Limited at the current market price of GBX 91.61 (as on 02 February 2022 at 08:49 AM GMT), with lower-double digit upside potential based on 4.84x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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