AsiaPhos: High Growth / Low Risk Mix Deserves Attention, Fair Value: S$0.225

High Growth / Low Risk Mix Deserves Attention

Attractive mix of reduced risk and high growth. AsiaPhos Limited’s (AP) latest Qualified Person’s (QP) report indicates improved mine operations, thus explaining for the 117% growth in yearly mine output over 2014 and 2015. More importantly, AP is showing signs of self-sustainability with both upstream and downstream segments reporting positive gross margins for 2015. We assert that AP offers a compelling de-risked investment case with a positive outlook, based on estimated phosphate rock output of at least 40% in 2016 and 35% in 2017. The upside is even more attractive when we consider that AP’s shares are trading at 7% below book value, implying that the full value of AP’s mines has not been priced in yet.

First time reporting reserves shows lower risk. Total resources were largely unchanged year-on-year after mining depletion, except that 1.5m tonnes of resources were upgraded to reserves. Data from the past two years of development and production has given sufficient confidence for the QP to upgrade resources in the immediate vicinity of exploration and development work to reserves, includng planned output from 2016 to 2018.

To download the full announcement, please click on the link below.