Daily Brief Energy/Materials: Ramelius Resources, Indo Tambangraya Megah, Continuum Green Energy, Electrovaya, TMC the metals co and more

• 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.

• 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 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%.

• 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 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.