Neometals 

Demerger Update: Neometals Ltd (ASX: NMT) has recently announced that the company has successfully converted lithium leach residue into Zeolite, the advanced material used as commercial adsorbents. This result comes from laboratory test?work conducted by CSIRO Mineral Resources, using a Neometals?designed process aimed at developing a saleable product and minimizing waste generation and disposal costs. As per the release, the group has been actively developing processing technologies to potentially deliver favorable cost and environmental benefits in support of the company’s integrated lithium production strategy. The zeolite project has been designed to support exploitation of a significant annual quantity of material that would otherwise incur handling and disposal costs. The addressable market of Zeolite is vast, and the company stands to have a competitive advantage associated with the zero-cost feed material. Besides this, the company has approved plans to demerge its Titanium?Vanadium Project and associated technology assets to form a new company which would be listed on ASX. The objective of this demerger is to focus on the development of their respective integrated lithium and titanium/vanadium strategies. We expect that the two separate ASX?listed companies will provide the most effective platforms to unlock the full value of all assets for the benefit of its shareholder.


Post Demerger Entities (Source: Company Reports)

On the financial front, the company has maintained ROE of 5.7% in 1HFY18 which is broadly in line with the Industry average of 6.3%, indicating that NMT has efficiently deployed the fund of the shareholders and generated returns on that. The current ratio stood at 25.40x in 1HFY18, indicating that the company has enough liquidity to meet the working capital requirements. Meanwhile, the stock has remained under pressure for most of the sessions this year, generating negative YTD return of 38.20%. However, the downside seems limited as the price has not gone below the crucial level of $0.261. The reversal of 14-day relative strength indicator highlights that the prices have bottomed out and would catch up from the current levels. New potential revenue and strong fundamentals of the company would be positive for the company going ahead. Further, the company is focused towards achieving better margins via downstream integration and technology solutions. We, therefore, recommend ‘Speculative Buy’ in the stock at the current market price of $0.275.
 
 

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