By now, regular readers will probably be tired of hearing about the value in Kaz. I won’t opine further, just simply relay the calculations below to those people how are talking it down to sub 200p.
At the current ENRC offer price (which has been rejected of course), they will receive just under £600m in cash and the number of shares in issue will reduce by 77m shares (they receive back this number of shares as part of the consortia’s bid terms).
There will be thus 446m KAZ shares in issue should the bid proceed. 446m x 273p = new market cap £1.2bn. Take off the cash receipt of £600m from ENRC and add back their current debt of circa $700m (@ £450m at current FX rates) and the enterprise value is @ £1.05bn. Ekibastuz has been deemed to be worth upto £1.5bn (and low end £700m), and the copper assets anywhere between £600m and £1.5bn (depending on the EV:EBITDA estimate). That’s £1.3bn – £3bn SOTP. That’s a helluva value opportunity that’s presented even on a fire sale asset valuation basis.
We go from the ridiculous (from previously the sublime) to utter perplexment….
IF Kaz fell to 200p absent a bid for ENRC (as some doomsayers are posturing), the market cap would then be just over £1bn (523m x 200p), and yet it’s stake in ENRC would be worth around £600m (assuming a 10% drop in the price of ENRC on a bid collapse). Adding the net debt back, gives an EV of @ £1.5bn. Assuming an ENRC market price of 200p, a new sum of the parts value would be between £1.9bn and £3.6bn. IF the market offers us anywhere near such an opportunity on a bid collapse then I’m mortgaging my granny to buy!