SDV 1.43% 69.0¢ scidev ltd

what a difference an assumption can make

  1. 547 Posts.
    What assumption am I talking about??

    This one:

    Where we may be conservative:
    ! Our metals price outlook. If we assume flat future zinc
    prices of US$1.50/lb, our DCF valuation triples to
    ~$75m. Currently, zinc inventories are at record low
    levels, and there may be risk to the upside of our
    forecast in the near term. For further discussion on our
    zinc price outlook, see commodity section below.


    If we were to assume that the zinc price does indeed remain flat at $1.50 for the next x years, then maccas valuation on INL suddenly becomes 23cps (Do the sums yourself).

    What about if the price of zinc goes up?? to maybe $1.75?? well then it will be higher again!

    So I guess the question you need to ask is do you believe Maccas forecast that zinc will be 60c / lb within 3 years??? an assumption which seems to be based on the fact that historically prices return to mean levels, and doesn't necessarily take into consideration the effect that the industrialisation of china (and in the future other emerging nations) has.

    It's not all black and white! This aspect is critical to the 15c valuation, and when you also consider that a lot of the upside potential has been basically ignored (broadly and highly subjectively in maccas words) covered by the 20 Million NPV allocated to "the technology" There is a lot of room for "interpretation of the report when you read more than just the summary ;)

    As far as I'm concerned nothing has changed, and the original reasons for me buying and holding INL are still just as strong and valid as they were before, and it is the stuff in the guts of the maccas report, not the summary which is of interest to any holders or potential holders...

    Read it yourself and make up your own mind :)

    Tony.
 
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