FY 21 Results: Smaller than Expected Preproduction Loss

  • Renergen’s operating loss was smaller than expected despite a small revenue miss as lost production (due to the lockdown) was offset costs.
  • The Group spent R125.7m on assets under construction, capitalized R21.5m intangible assets and made a second draw down on its US International Development Finance Corporation (DCF) loan to the tune of $12.5m. The Group’s short-term unencumbered cash reserves sit at R130m.

 

Progress Updates: Almost Entire Positive

  • The Group has concluded a partnership with Total SA as LNG distribution is set up down the key N1 route.
  • Drilling of P007 & MDR1 both reflect strong resource, flow & helium concentration data, highlighting potentially better-quality resources and/or lower capex intensity of Phase Two.
  • The Group has concluded its first helium sales agreement with a global tier-one automotive supplier for Phase Two.
  • Finally, The Group’s innovative cold chain storage solution (Cryo-Vacc™) made its first sale, moving post-revenue.

 

Forecast, Valuation and Implied Return: Appears Undervalued

  • Since our Initiation, our major assumptions remain the same, albeit we have updated our model for the latest spot prices that, in general, have moved in Renergen’s favour.
  • Our DCF-driven sum-of-the-parts (SOTP) valuation for Renergen implies Phase One & Two—offset by central costs, debt and (potential) dilution—are worth 4149cps (previously 3539cps). After options for Evander and Cryo-Vacc are added, we see Renergen’s share as potentially worth 4978cps (previously 4247cps).
  • Rolled-forward by CoE, our 12m TP is 5850cps (previously 4977cps) or over double what the current share price is.