🕐17.04.13 - 09:54 Uhr

INVESTEC: AQUARIUS PLATINUM - CLIMBING EVEREST - HOLD



Aquarius Platinum (Price: 40.0p | Target: 45.0p | Rec: Hold) We initiate coverage of AQP with a Hold recommendation and a 45p target price.

We see short-term pain but long-term gain for the platinum sector.

However, AQP has some company-specific issues to resolve before it can benefit from any upturn in PGM prices.

In brief, these are refinancing its convertible loan, resolving Zimbabwean ownership issues and concluding (either way) its Booysendal South transaction. * Overview.

Whilst not alone, AQP has had a challenging few years, culminating in recent significant losses (H1 FY13 US$184m and FY12 US$163m) and the closure of Marikana, Everest and the CTRP operations.

In the medium to long term, we believe that there will be a turnaround in the platinum sector following sufficient supply side response and demand recovery. * Climbing Everest.

In order to be a survivor for the potential future PGM recovery, AQP has to position itself carefully over the next couple of years.

Most importantly, it must refinance its convertible debt.

It must also establish the new Mimosa ownership structure and demonstrate a working relationship with its partners.

Its limited future production profile must also be addressed. * Valuation.

We value AQP at US$340m or 45p/share.

Our valuation includes a blend of discounted cash flow analysis taking the group’s net debt position into account, as well as earnings and free cash flow multiples.

We set our valuation as our target price for AQP. * Recommendation.

We initiate coverage with a Hold recommendation.

While our valuation, particularly on an NPV basis points to some upside, we discount this given the uncertainties which threaten the group.

That said, we believe the market is pricing in much of the downside, except, perhaps, total expropriation of Mimosa.
To access the full note please click here Analyst: Louise Collinge
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