Sylvania Platinum SLP. If I hold, there will trouble if I sell it will probably double.

20th Feb '21 by Bluesky Ventura

49 comments 4001 reads

Sylvania Platinum £SLP. If I hold, there will trouble if I sell it will probably double.

Sylvania Platinum (LON:SLP) has had a sharp increase in share price and becomes a large part of my portfolio (2^nd largest holding). I have been contemplating if I should continue to hold or take some profit by selling at this point with Sylvania Platinum (LON:SLP), announcing its interim financial results for the six months ended 31 December 2020 tomorrow (22nd Feb 2021).

Buying Sylvania Platinum (LON:SLP) seems straightforward on valuation grounds at 37p in back July-2020 but selling seems more problematic as the valuation still looks attractive. I’ve done a bit more work to determine if I should sell and at what price to sell some of my stake in the company. Here some questions and thoughts on the matter.

1. Why has the share price and valuation risen?

The Sylvania Platinum (LON:SLP) Share price and valuation have risen hand in hand with PGM (Platinum Group Metal) and more specifically the explosion in Rhodium commodity pricing. Back in 2017, the Rhodium price was $900 TOz greater than $22000 per TOz today. Sylvania Platinum (LON:SLP) revenues attributable to Rhodium have increased from 12% in 2017 to an estimated 68% for FY2021. EPS in 2017 was 3.59p and my estimate suggests 27p for FY2021.

2. Is the raise in Rhodium price just a bubble or sustainable?

Well, what’s driving demand?

Rhodium price climb to above $22,000 an ounce is being driven by new regulation from the auto industry due to increasingly stringent emissions regulations globally. Car companies are using more rhodium to meet tougher clean-air legislation. There is a link and world map below related to the new regulation in different counties.

https://www.continental-automotive.com/getattachment/8f2dedad-b510-4672-a005-3156f77d1f85/EMISSIONBOOKLET_2019.pdf

Rhodium has an important role to play in NOx reduction and an increasingly important requirement within upcoming world regulations for automotive manufacture. There is both a plus and a minus for platinum which is related to whether the vehicle is running lean burn, with a higher oxygen/fuel ratio in the outgas (diesel engines), versus stoichiometric burn, which we have in a typical gasoline engine. While in a diesel engine, platinum supports NOx reduction and is a key component, a gasoline engine running under…

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Bluesky Ventura

5th Mar '21

£SLP

From what I've read the Rh content is about 0.3g and increases to 0.45g for the new regulation for automotive, that a 50% as new regulation becomes the legal requirement. As 80-90% of Rh use is expected for this automotive industry and mining can't increase production for 5 years there a real supply-demand imbalance that is only going to grow. There are no speculative markets or ETF's for investors to speculate on Rh so I see no bubble here or reserves that could be released into the market.

So my own thoughts are Rh price is being rerated higher and the new price is here to stay for some considerable time.

I could be wrong so as always DYOR and decide for yourself before investing.

All the best

BSV

Rusty2

I did come across this db Physical Rhodium etc ETF.

Good spot

john2

I worked 10 years ago in the IT section of the Honda factory in Swindon. I was told that the catalytic converter was by some distance the most expensive part that Honda bought in.

Troymcclure1970

Yeah I couldn't find the edit on my post to correct this, I did post underneath it.

It's still a significant amount of money for the more modest vehicles.

Great reply. Sounds like a promising hold.

Momoko Miyamoto

Baird Gold sells physical rhodium bars for speculative purposes.

Patrickmylnetrade

SLP currently qualifies for no less than 11 Long screens on the stocko report... so it must be doing something right. (I hold)

Stephen Lock

There is a very good relevant article in today's investor's chronicle (March 5). Simon Thompson rates SLP as a strong buy

6th Mar '21

Excellent, Simon seems to have an article on it in every other edition.

Will S

Hi BSV,

I might be getting my excel cells backwards so can I check my basket price calc?

PRILL from their presentation is 63.3% Pt 23.7% Pd, 12.7% Rh and 0.2% Au

Using current prices of $1,129.75 /oz for Pt, $2,338.96 / oz for Pd, $29,200 / oz for Rh, and $1,700.91 / oz for Au then I get a current basket price of $4,981.27 / oz.

H1 value was $3,184 so H2 is going to be somewhere north of the $3,800 they expected. Not for the full 6 months but certainly for a good 50% of it assuming the price holds till June.

Thoughts?

(I hold btw)

Found my notes from the investor call:

2021 estimate for EBITDA is ~$120M based on a basket price of $3,807 with $1,169 /oz for Pt, $2,321 / oz for Pd, $20,000 / oz for Rh, and $1,828 / oz for Au.

According to their slides if the basket price rises by 10% then its more like ~$130M. If the Rh price keeps anywhere near current levels then something like $150M+ EBITDA if the Rh price holds (or grows) till June.

slopsjon

8th Mar '21

Liberum's estimate for EBITDA is $147m for 2021.

Hi Will,

Your calculation is correct for the spot price.

My calculation is based on an average basket price of $2880 for FY2021 for Sylvania Platinum (LON:SLP) for scenario 2. Scenario 2 looks very conservative now and we are clearly in the realms of scenario 3 now.

What I thought too BSV... at this rate Rhodium might reach the heady prices of HP printer ink....

Seriously though, IC pushed the stock again on Friday with a raised target price of 180p. I am guessing that the trading update in July will mention stellar results so it'll keep on this upward trajectory until then with some pauses along the way. Then a final dividend to account for the surge in prices plus an expanded amount of CAPEX for their own mining operation.

Who knows how long the Rh price surge continues but lets hope it settles around $20K / oz for a while.

Thanks Slopsjon... nice my maths checked out.

bullhead

9th Mar '21

Thanks again for your initial post BSV and everyone else’s input like most on here I have done very well out of this and it is my second biggest holding and I don’t have any plans to sell down yet with the squeeze In rhodium supply and a continuing deficit due to laws being imposed across the world on car emissions I honestly can’t see how the price of rhodium does not stay at these elevated levels there does not seem to be a lot of speculative price action it seems to be purely driven by demand does anyone see it differently?

Talking Money

10th Mar '21

Excellent analysis - thank you. Like you the decision was easy at my entry point of 42p and the uplift now makes Sylvania Platinum (LON:SLP) my biggest holding in my portfolio. On all the standard metrics that I use such as ROCE, free cashflow, net debt, cash on the balance sheet etc, they all seem to be going in the right direction at the current metal prices. New mines take a long time to come on stream and as you say, demand is set to stay strong or grow in the near to medium term. A useful dividend completes my reason for holding for now.

Metatron

SLP is very liquid upto £14K .Feel anybody who holds a sizeable stake above £14K in SLP should consider diversifing part of their holding into the very similiar Tharisa PLC

Upyrgunga

30th Mar '21

I invested £7,000 at £0.37.

I sold enough at £1.20 to repay my original investment. I will leave the rest to run for the time being.

Sylvania Platinum SLP. If I hold, there will trouble if I sell it will probably double.

Sylvania Platinum £SLP. If I hold, there will trouble if I sell it will probably double.

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Bluesky Ventura

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