Research Report
By Andrew McCrea
On an EV/Resource basis, Legacy is undervalued relative to its peers at A$0.025 per tonne compared to a peer average value of A$0.75 per tonne. Throw in the potentially transformative NMDC transaction and likely upgrade in resource by the end of 2011 and the undervaluation has short term and longer term catalysts for re-rating of Legacy’s share price.
Taking a line through neighbouring Jupiter Mines valuation of A$828 million (stripping out its non iron ore asset) for its Mt Ida and Mt Mason valuations, the mispricing in valuation of Legacy at A$32.6 million becomes more acute.
Based on the foregoing, and after applying an appropriate discount, investors could see a Legacy valuation and share price greater than A$0.30 within six months and A$0.40 - A$0.45 within 12 months, if not sooner on the back of an NMDC offer.
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