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The OMG newsletter recommends at least 15 companies each month, using the writers’ experience of small caps to give you a winning edge. Last week they wrote about Pensana and Pittards. Read about these Opportunities 4 Material Gains!
Mid-week Tip
Rare Earth into Powerful Markets
Pensana (LSE:PRE) 74p Mkt Cap £176m. The risk profile category is a challenge as it has a licence to mine in Angola as well as a working-in-progress plan to build the first rare-earth magnet separation facility to be established in over a decade at Saltend in the Humber. Pansana by teaming up with alloy makers and magnet manufactures is looking to establish a 3,000 tonne per year metal facility to supply the European EV and wind-turbine original equipment manufacturers. This downstream potentially highly profitable facility will make PRE one of only three major producers outside China of these ultra-strong magnets. The business plan published in April 2021 is based on a range of independent studies supporting the assumptions that estimated its (Net Present Value) NPV is $2.3billion (£1.7bn) as its average annual revenue (based on the first five years is $550m with a 65% margin this gives a US$ 359m EBITDA. The other two listed producers are Lynas (ASX:LYC) and MG Materials (NYSE:MP) both are valued at $billions each and only produce slightly more than PRE plans to. So as the plan is moved into reality there is plenty of growth and upside. It is perhaps this financial market confusion of where the total $450m funding will come from that but we are optimistic that this funding will be available from grants, project finance, long term Loans and the pick of willing strategic partners. Agreements for funding are expected in months and at this stage is hard to see the company’s value not being a multiple of the current price. The risk here is missing the upside. Buy
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Reviving a dead horse
Pittards (LSE: PTD) 62.5p (62-63p) Pittard dates back to 1826 and has high competency in the old tech material of leather. The 21st century focus is on more technically advanced leather hides with bright colours and its core markets is luxury goods for retailers, manufacturers and distributors. PDT are reporting finals to December 2021 this Wednesday. interim dividend of 0.5p a share was paid and a similar final dividend is forecast. A 2021 pre-tax profit of £0.5m is forecast, rising to £0.8mn 2022. That would put the shares on 10x prospective 2022 earnings with a forecast yield of 2.4% although cost headwinds add a note of caution. An entrepreneurial shareholder, John Rendell has built-up a 25% holdings so adding corporate development interest. Net debt will be around £10m after investing in capital equipment to increase capacity. John Rendell has built-up a 25% holdings so adding corporate development interest. A speculative buy on weakness hoping for some corporate action.
Reviews
FNX – 158p- Not Static
PRE – 74.5p- Just needs $494m
EAAS – 10.6p – Increasing efficiency
PMP – 620p – Korean recovery
TRCS – 935p – US acquisition
DUKE – 40.5p – Increased dividend
TOWN – 60.5p – 47% discount
OPTI – 39.25p – ProBiotix spin-off
EYE – 444p – Recurring revenues grow
AVCT – 53p – Non-core disposal
Finally: There are plenty of US figures although we will wait for the FED’s summary report of Wednesday which will set out priorities. Any further war escalation should not be a surprise but could well be.
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