Analyst see the potential for a $5.00 to $10.00 sh
IC Potash Assembles Industry Leading Feasibility Team - Stock Continues to Offer Great Value Considering its Niche Product (SOP), Excellent Economics and Strong Strategic Partner (Yara)
This morning, IC Potash announced that it has assembled an independent team for its bankable feasibility study scheduled for completion in July 2013. The team appears highly reputable (including SNC Lavalin) and therefore should generate a high degree of confidence among investors, project finance banks and JV partners. We view this as a modest positive with a neutral impact on the shares and our investment view.
ICP offers excellent value in our opinion trading at less than 4% of the project’s value as per the prefeasibility study and one-fifth the value of its closest peer (LSE:SXX). IC Potash has an enterprise value of only $54 million versus the prefeasibility NPV of $1.3 billion for the base case ($2.0 for the expansion case). Sirius Minerals current enterprise value is $295 million. Valuing IC Potash in line with Sirius Minerals would equate to a $2.02 ICP share price whereas one could argue that ICP is worth even more on a relative basis given its relative strengths.
We reiterate our STRONG BUY rating and C$2.00 target price. We base our target on a 0.5x multiple applied to our NAV calculation using a 12% discount rate. We expect upside to our target as the project is de-risked through the completion of feasibility. We see the potential for a $5.00 to $10.00 share price in the long term.