Jupiter Mines Limited

JMS Details

Demerger of CYIP Assets Delayed: Jupiter Mines Limited (ASX: JMS) is a Perth-based mining company mainly involved in the exploration and production of manganese. In October 2020, the company had announced its intention of demerging its Central Yilgarn Iron Ore assets (CYIP) and subsequent initial public offering to create an ASX listed company, Juno Minerals Limited (‘Juno’). In January 2021, Juno lodged its prospectus, as per which it was planning to issue 120 million shares to JMS in exchange for the CYIP assets and $5 million in seed capital provided by JMS. In addition, Juno was also raising up to $20 million to develop the Mount Mason DSO Hematite Project. On 8 March 2021, JMS announced that the demerger and IPO of Juno have been halted, as one of its shareholders, Stichting Pensioenfonds ABP, has refused to meet the regulatory requirements of the Foreign Investment Review Board (FIRB), which is a condition of the in-specie distribution and capital reduction. Later on, 15 March 2021, the company assured that it would pursue the demerger and IPO of Juno, but on a delayed timetable. The company plans to conduct a General Meeting in April 2021 to re-approve the capital reduction and demerger, and the proposed ASX listing of Juno is expected to be completed in May 2021.

Q3FY21 Result Highlights: For the quarter ended 30 November 2020, the company reported total sales of 598,238 dry metric tonne (DMT). The company’s marketing fee income stood at $2.7 million for the quarter, higher than $2.1 million in the previous quarter. Further, the company’s NPAT for the quarter stood at $1.7 million, up from $1.4 million in the previous quarter. Over the quarter, the company’s mining performance was impacted by inclement weather, breakdowns and the DMR stoppage requirements, with an average of 77% of Tshipi’s target achieved.

Q3FY21 Results (Source: Company Reports)

Key Risk: As JMS is mainly involved in the production and export of manganese, it is exposed to the risks related to fluctuations in the price of manganese ore, fluctuations in third party contractor costs, and any reduction in the global demand for steel. Moreover, the economic, political, or social instability in South Africa may also impact the company’s operations.

Outlook: It is expected that the demerger of its iron ore assets will help JMS in becoming a pure-play manganese company and will allow it to focus on maintaining its decent balance sheet and high payout ratio. Further, the IPO of CYIP assets will crystallise value from the assets by developing the Mount Mason DSO Hematite Project on a fast-track basis and by growing the existing DSO resource base via a consolidation platform. As part of the final dividend for H2FY21 from Tshipi é Ntle Manganese Mining Proprietary Limited, JMS is expected to receive approximately A$46.1 million. Further, JMS is expected to receive approximately A$2.7 million in marketing profits for H2FY21.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last three months, the stock of JMS has provided a return of 15.78%. The stock has a 52-week low and high price of $0.190 and $0.375, respectively. On the technical analysis front, the stock has a support level of ~$0.2598 and a resistance of ~$0.3606. We have valued the stock using the Price to Earnings multiple based illustrative relative valuation method and arrived at a target price with an upside of high single-digit (in % terms). We believe that the company can trade at a slight discount compared to its peer median, considering the decline in net margin and ROE, while also taking into account that the company has been trading at a discount in the past 3-years over its peer median. We have taken peers like Champion Iron Ltd (ASX: CIA), South32 Ltd (ASX: S32), Alumina Ltd (ASX: AWC). Considering the company’s decent performance in Q3FY21, expected dividend and marketing profits from Tshipi for H2FY21, nil debt to equity multiple, high current ratio, and expected progress in the demerger of CYIP assets, we give a “Hold” rating on the stock at the current market price of $0.300, down by 9.091% as on 15 March 2021.

JMS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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