Shares of Iofina are very attractive, unique and capable of more than doubling in the next year or so, argues Mark Watson-Mitchell.
Negotiations about the replacement of its $15m debt are underway for this £26m group and they should be concluded by the beginning of September.
They have been dragged out a bit by its junior lender being somewhat intransigent; however, the major lender, who holds the security cover, apparently has the ability to hand over the entire debt to another party, a US-based lender, with whom those negotiations are proceeding.
It is very possible that, when we get news that this has been concluded, the brakes could be released.
In my opinion the shares of Iofina (LON:IOF) are very attractive, unique and capable of more than doubling in the next year or so.
Estimates are that current-year profits could rise four-fold and then another 35% on top next year.
Iofina, is a specialist in the exploration and production of iodine and is a manufacturer of specialty chemical products.
Atomic number 53, iodine is a rare halogen element, produced in only a handful of countries across the world, and this group is the second-largest producer in North America.
It is sourced from water bodies such as oceans and water pools, as well as from seaweed.
Believe it or not, iodine is an essential element for life and industry that touches our lives every day.
Iodine deficiency in humans results in health-related issues such as goitre, mental retardation, heart diseases and eyesight problems – issues that affect more than 600m people worldwide.
Not only is it supplemented to table salt, ensuring adequate daily intake of this vital micro-nutrient, but it is an important ingredient of so much more.
Its compounds improve imaging contrast in the body for CT scans, X-rays and MRI diagnostics. It is also used to manufacture high-tech LCD displays allowing for superior image quality.
As biocides they are also added to paints and protective coatings to prevent growth of moulds and other pathogens, as well as for pesticides.
Its formulations protect cows and humans from infections transferred through milk.
In the cosmetics sector iodine compounds are added to products to prevent the growth and transfer of harmful bacteria.
Importantly, iodine derivatives are used to produce many essential pharmaceuticals which provide doctors with powerful new drugs to fight disease (exceedingly interesting in our Covid-19 crisis).
The group has 192m shares in issue, of which Hargreaves Lansdown Stockbrokers is a major holder (15.8%), while its Asset Management side is the fourth largest holder (6.80%).
Arron Banks has built up a significant stake in the group (12.7%), while his Southern Rock Insurance outfit is the third largest holder (9.64%) and it is also the junior lender referred to above.
The senior lender, Stena Investment, has a small holding (2.40%). Other big names include UBS Financial Services (2.38%) and HSBC Global Asset (1.32%).
Brokers finnCap are bullish about the company, looking for revenues to end-2020 of $33m and adjusted pre-tax profits of $4.4m, worth 2.3c per share.
For 2021 they go for $37m sales and $6.1m profits, giving 3.2c per share.
They have a current 32p price objective for the shares.
At the current 13.5p the shares have some strong upside, assuming the refinancing is completed.
At this level the group is valued at £26m and, upon conversion into sterling will make around £3.5m this year and almost £4.8m next year.
I now set an 18p target price.