In today’s briefing:
- S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed
- ITMG Q2 2023 Weak But Stock At 20% Dividend Yield with ~50% of Mkt Cap In Cash
- Continuum Green Energy – New Issue Snapshot – Lucror Analytics
- Electrovaya, Inc. – 3Q23 Results: Revenue of $10.5 Million
- The Metals Company – Two steps forward, one step back
- TMC the Metals Company, Inc. -The Resource Is the Resource
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S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed
- We forecast 26 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
- The review period ends tomorrow, so most changes are high probability. Though there are some changes that will be up to the discretion of the index committee.
- There will be a lot of stock to trade on the changes to the ASX200 and indices higher up the hierarchy. But there will be a lot of pre-positioning too.
ITMG Q2 2023 Weak But Stock At 20% Dividend Yield with ~50% of Mkt Cap In Cash
- Indo Tambangraya Megah (ITMG IJ) provides investors with fat dividends. We estimate from 2021-2023e, the company will have paid over 20,000 Rph (70% of the current share price) in dividends.
- Despite these dividend payouts, cash on the balance sheet by the end of FY23e will easily exceed one bn USD or about 50% of the market capitalization.
- Weak results/degrowth are expected due to unsustainably high coal prices in 2022. Nevertheless, there is a good case for future value as hefty dividends will continue to be paid.
Continuum Green Energy – New Issue Snapshot – Lucror Analytics
Continuum Green Energy has launched a roadshow to market USD 144A/RegS 3.5NC1.5 green bonds. The expected size is USD 450 mn. The proceeds are earmarked for: [1] refinancing the issuer’s outstanding USD 400 mn 2026 notes; [2] paying the first coupon of the proposed notes and transaction costs: and [3] capex for eligible green projects. The expected ratings on the notes and issuer are B+ (positive) by S&P and Fitch.
We view Continuum as “Medium Risk” on our LARA Scale. We like the company’s: [1] high exposure in healthier commercial & industrial customers with almost no receivables; [2] diversified customer portfolio; and [3] long-term PPA being benchmarked to various industrial tariffs. On the flip side, the credit is constrained by higher leverage compared to peers and has smaller scale. Our Credit Bias is “Positive”, considering the 1 GW of new capacity scheduled to be commissioned later this calendar year.
We believe the COGREN 27 should be priced to yield c. 8.5-8.75%.
Electrovaya, Inc. – 3Q23 Results: Revenue of $10.5 Million
In 3Q23, Electrovaya achieved revenue of $10.5 million, a 160% Y/Y increase from $4.1 million in 3Q22.
The increase in revenue was due to increased order volume and a ramp-up in production to meet demand.
Guidance of $42 million for the year has been reiterated.
The Metals Company – Two steps forward, one step back
The proposed equity issue and additional resources will largely complete the funding requirement for The Metals Company’s (TMC’s) further environmental study and completion of its mining application, which it intends to file in July 2024. While the regulatory delays in the International Seabed Authority’s (ISA’s) implementation of the mining exploitation code were disappointing, momentum behind the legislative process remains positive and the stepping stones towards TMC’s production of battery metals from the deep sea are steadily falling into place.
TMC the Metals Company, Inc. -The Resource Is the Resource
Keeping a tight rein on expenses. TMC reported 2Q23 results that included a significant reduction in SG&A expenses from $8.1 million in year-ago period to $5.1 million, demonstrating the company’s ability to operate and move the NORI project forward at a significantly lower cash burn rate, suggesting that liquidity may be a diminishing investor concern.
Time to production extended; certainty increased.
While some observers may have been disappointed with the ISA’s failure to complete the undersea mining code creation process in July 2023, as originally envisioned, the July session featured the ISA’s renewed commitment to complete the code over the next three sessions (and inter-session discussions) that allowed TMC to announce a definitive timeline for NORI-D exploitation applications submission (3Q24) and beginning of commercial nodule collection envisioned under Project Zero (4Q25), establishing a timetable for getting to revenue and profitability.