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ALK 18.5¢

Longterm SP (and dividend) potential

  1. mtm100

    1,239 Posts.

    I know there is already a thread up titled "potential 10 bagger", but I'd like to have a calm look at that question under a somewhat less provocative title ...

    I'm looking at that question from a long term POV, that is
    - 5 years from now, - with a working DZP and - capex debt paid back
    I also assume that we sell 10% of the DZP to a stragetic partner for financing purposes, but consider that off set by income from Tomingley and other gold operations that I'll leave out of the equation otherwise.

    The big factors for evaluating Alk then will be
    (1) yearly FCF / op profit from Alk
    (2) number of Alk shares (dilution above current 400 mio)
    (3) the multiple Mr Market is willing to pay for a 20/36/70 year operation

    For each I plug in what I consider (c) best case, (b) conservative and (a) worst case szenario.
    - For the FCF (in millions), I stick close to the current 220 mio number as a worst case, since this number does not yet include the recent improvements in REE recoveries. The last such improvement added 50 mio in revenue and I feel really confident that we won't fall below 200 mio (else, it would make more sense to delay the project until China shows signs of recovery)
    - I can't see any case in which we would see more than a doubling of the current share count - again, it then would make lots more sense to delay the project and concentrate on gold
    - the increased sharecount (in millions) for the conservative szenario is based on the idea that we need to finance full contingency costs and do so by cap raising at around 1 dollar
    - I'd expect the multiple to go up over time
    - Just going with my gut for the dividend

    Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7
    0   FCF Shares EPS Dividend Multiple SP
    1 a 200 800 0,25 0,10 5 1,25
    2 b 250 600 0,42 0,20 10 4,16
    3 c 300 400 0,75 0,40 20 15,-

    I think this gives a nice feeling for the range the SP should be headed to.
    Feel free to play and insert your own numbers ...

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