Hi Mr. A!
The problem comes down to a lack of reliable data. For example, it is a fact that IPT has been reporting earnings for 2 quarters, however they have not yet had a full financail year with earnings. A PE multiple is based on a year of results, and without that in hand, it is a guessing game anyway. IPT was running low production volumes in the first quarter after they acquired the mine. They were also running lower grade material. So it is reasonable to assume that the costs per tonne will decrease as they ramp up production, and net earnings will also increase. But how much? Your guess is as good as mine.
As for the multiple, again, there is a very limited data set to compare. And thats what it is, a comparison. You can only state that stock XYZ carries a premium valuation if you compare it to other similar companies that have lower multiples. And how many juniors are currently reporting recurring earnings? Not to mention that these companies are not stable to begin with. Most are rapidly growing, and the current operations are small and subject to production interuptions that create a wide variance in results from quarter to quarter.
Earnings are just one reason why IPT deserves a premium share price, and there are several others that I discussed. If one considers the asset value for the suite of properties under management, the infrastructure in place and the development of two operating mines, the 2 recovery plants and the rolling stock and service equipment, these are things that give IPT a competitive advantage and support future growth.
Ultimately, I think IPT will also be one of the top companies for net earnings in the sub-sector as well, but that is a year or two down the road, when they have the Zacualpan mill running at full capacity, and they have taken full ownership of the Zacatecas mill and are operating that at full capacity. For now, IPT is a growth story. I think a multiple of 10 times forward earnings is a bare minimum, and in fact there are examples of juniors that have traded at 25 and 50 times earnings.
cheers!
COACH247 |
