Renergen – H1:22 Results – Approaching Phase One Production

Share Code: REN – Market Cap: R3.4bn – PE: -76.3x – DY: 0.0%

H1:22 Results: Sufficiently Capitalised for Phase One

  • Group revenue rose during the period, but rising overheads as the Group ramps up towards Phase One first production in late H2 saw its loss slightly larger than we expected.
  • OPIC debt, a small share placement, offtake agreements for c.28% of Phase One’s LNG & c.65% of Phase Two’s helium production, & a digital tokenisation mechanism for “prepaid helium” all ensure that the Group is sufficiently capitalized to see Phase One over the line.
  • CryoVacc has moved into field trials that could see it becoming commercially viable as a standalone business soon.
  • Finally, the favourable exploration outcomes from Evander have triggered an updated reserve report that management anticipates publishing in Q4:22.

Progress Updates: Numerous Qualitative Updates

Forecast, Valuation & Implied Return: Undemanding SOTPs

  • Taking our Phase One & Phase Two DCF’s, Group overheads, factoring in debt, the recent share issue & (potential) future dilution, we arrive at a SOTPs for Renergen that indicates that the stock is worth 5,383cps (previously 5,093cps).
  • Assuming Cryo-Vacc & Evander collectively add +10% value, this boosts our fair value to 5,922cps (previously 5,603cps).
  • Finally, rolling this forward at our (nominal) Cost of Equity implies a 12m TP of 6,976cps (previously 6,567cps).
  • We highlight the likelihood of Phase Two being larger than we anticipate as a risk to our valuation, but we will only update our view after several variables have been resolved.