Company Overview: Jupiter Mines Limited (ASX: JMS) is a Perth-based mining company mainly involved in the exploration and production of manganese. The company has a 49.9% beneficial interest in Tshipi é Ntle Manganese Mining Proprietary Limited (Tshipi), which operates the Tshipi Borwa Manganese Mine in the southern portion of the Kalahari manganese field. The company was listed on ASX on 18 April 2018.

JMS Details

H1FY21 Result Highlights:  During the half-year ended 31 August 2021 (H1FY22), Tshipi é Ntle Manganese Mining Pty Limited (Tshipi) sold 1.65 million tonnes of manganese ore. Tshipi made a net profit after tax of ZAR345 million in H1FY22, down from ZAR841 million in H1FY21, impacted by sustained depressed manganese prices and significant increases in logistics and shipping costs not borne by the end customer. Some of the other key highlights of H1FY21 are as follows:

• Divestment of Central Yilgarn Iron Project Assets: During H1FY21, JMS completed the divestment of its Central Yilgarn Iron Project assets into wholly owned subsidiary, Juno Minerals Limited (Juno), and completed a demerger of Juno via an in-specie distribution of its shareholding in Juno to JMS Shareholders.
• Rise in Revenue: For H1FY22, JMS reported total revenue of A$3.8 million, up from A$3.3 million in H1FY20.
• Decline in NPAT: JMS reported a net profit of A$27.56 million, down from A$29.79 million in H1FY21.
• Dividend Update: For H1FY22, JMS paid an interim unfranked dividend of A$0.005 per share, bringing the cumulative payout made by JMS since its ASX listing to A$309 million.
• Cash Balance Update: At the end of August 2021, JMS had attributable cash (including its share of Tshipi cash) of A$68.7 million.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Metrics: Gross margin for H1FY22 stood at 59.5%, down from 67.8% in H1FY21, but up from the industry median of 45%. EBITDA margin for H1FY22 stood at 38.7%, down from 40.5% in H1FY21, but up from 39.2% of the industry median. Current ratio for H1FY22 stood at 1.55x, down from 1.96x in H1FY21.

Profitability Metrics (Source: Analysis by Kalkine Group)

Top 10 Shareholders: The top 10 shareholders together form around 52.99% of the total shareholding, while the top four constitute the maximum holding. Ntsimbintle Holdings (Pty) Ltd. and AMCI Group, LLC are holding a maximum stake in the company at 19.90%, and 7.44%, respectively, as also highlighted in the chart below:                                

(Source: Analysis by Kalkine Group)

Board Changes:

• New Nominees for Tshipi’s Board: On 1 December 2021, JMS announced the appointment of Scott Winter and Brian Beem as its nominees to the Board of Tshipi é Ntle Manganese Mining Pty Ltd (Tshipi), with Peter North and Patrick Murphy as their alternates, respectively.
• Searching for New CEO and Chair: On 1 November 2021, JMS announced that Priyank Thapliyal has ceased to be Jupiter’s Chief Executive Officer (CEO), and the company has started searching for the candidates for the positions of Chair and CEO. Peter North and Scott Winter have been appointed as acting Chair and acting CEO of Jupiter, respectively.

Key Risks:

• Volatility in the Prices of Manganese: As the company’s primary business is the production and export of manganese, JMS is exposed to the risks related to fluctuations in the price of manganese ore, fluctuations in third party contractor costs, and any reduction in the global demand for steel.
• Production Issues: The company’s production can be impacted by several factors, including excavator breakdowns, inclement weather and operator issues.

Outlook: The demerger of Central Yilgarn Iron Project assets by JMS was a major step forward towards becoming an ASX pure play manganese company. Looking ahead, the company intends to maintain its focus on maximising value and cash returns from its participation in the world class Tshipi operation, while evaluating attractive opportunities to grow and diversify. Further, the company is also focused on addressing outstanding items for expansion of Tshipi mine to 4.5mtpa and on the consolidation of Tshipi manganese mine and other opportunities in the Kalahari manganese field.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the stock has corrected by 30.64% and is trading lower than the average 52-week price level band of $0.180 - $0.375. The stock has been valued using P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers, considering the volatility is the price of manganese and increase in logistics and shipping costs. For the purpose of valuation, peers such as EQ Resources Ltd (ASX: EQR), Champion Iron Ltd (ASX: CIA), and Alumina Ltd (ASX: AWC) have been considered. Considering the Tshipi’s scale of operations, the company’s ongoing focus on the expansion of the Tshipi mine and consolidation within the Kalahari manganese region, modest outlook, current trading level, indicative upside in valuation, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the current market price of $0.210, as on 15 December 2021,12:30 PM (GMT+10), Sydney, Eastern Australia.

JMS Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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