Share Code: REN – Market Cap: R4.6bn – PE: -129x – DY: 0.0%

FY 22 Results: Pilot CNG revenue higher, losses smaller

• Given the elevated oil price, the diesel-linked pilot CNG plant at Renergen produced a higher revenue and smaller loss than expected and, in a way, is a precursor to the sensitivity of the Group’s coming Phase 1 (& Phase 2) LNG and helium projects.
• Given that the Group is still in development stage, the FY 22 results are less relevant than focussing on key project and corporate activity during the period. For detailed analysis of these, see our previous reports listed here (LINK), but in summary:
  • The Group massively upgraded their proven gas reserves.
  • Lockdowns, supply chain challenges & a NUMSA strike negatively impacted Phase 1’s timing. This is a sunk cost and, importantly, Phase 1 is now in hot commissioning.
  • A partnership with Ivanhoe Mines &, subject to conditions, the investment by the Central Energy Fund (CEF) both solidified Virginia’s potential & helped derisk the funding of Phase 2.
  • Finally, the Group’s helium token has listed successfully and early trade indicates a healthy (future) spot market (while providing an effective prepaid offtake financing for Phase 2) while Cryo-Vacc^TM keeps progressing.

Valuation and Implied Return: Upgrading Fair Value & 12m TP

• We have adjusted our model to reflect c.9 months of Phase 1 production (adjusting Phase 2 equivalently) while updating spot prices. We expected 35% of the Phase 2 helium revenues to earn Argonon Helium token “spot price” (currently c.$296.93/mcf). Finally, we have assumed Ivanhoe takes up their full equity stake & the CEF’s R1bn investment proceeds successfully.
• We see Renergen’s fair value as 6344cps (previously: 5821cps) and upgrade its 12m TP to 7501cps (previously: 6867cps).