Share Code: REN – Market Cap: R4.9bn – PE: -115x – DY: 0.0%

News: Helium & LNG more valuable, Ivanhoe Mines invests

• Helium market update: Supply challenges from BLM, Qatar & Amur all limit helium availability as SpaceX & the semiconductor industry ramps up demand, implying large helium spot upside.
• LNG market update: The oil price rally should drive domestic fuel prices (further) upwards. Reasons for the rally are both sticky and bode well for Renergen’s LNG revenues (tied to diesel &/or CPI).
• Ivanhoe Mines “strategic partnership”: In a momentous moment for Renergen, Ivanhoe Mines has invested into the Group (an initial 4.35%-stake) with a roadmap to potentially ramp this investment up to a maximum of either 55% or $250m of capital.

Our Thoughts: Renergen’s Potential Upside is Growing Quickly

• The tailwinds lifting Renergen’s underlying gas resource keep driving its fair value upwards. While the LNG revenue should track domestic fuel prices & CPI upwards, the helium revenue (even the revenue locked into the long-term supply contracts) holds immense upside potential too.
• The latter may see wild card renegotiation clauses being triggered and repricing in the increasingly tight global helium market.
• The investment by Ivanhoe Mines is a vote of confidence in the Group and, depending on how/if Ivanhoe Mines takes up their options to further invest, may underpin the (equity) funding for (a much larger!) Phase II that further derisks the Group.

Valuation and Implied Return: Plenty of Room…

• Despite keeping our helium basket price flat and a stronger Rand exchange rate, we upgrade our fair value to 5821cps (previously: 5747cps) & 12m TP to 6867cps (previously: 6766cps).
• Given the commodity pricing dynamics, there is considerable upside risk to this valuation from both LNG & repricing helium closer to spot, not to mention any Rand-weakness.