Canaccord Genuity initiates coverage on Iofina at 'buy'
By Iain Gilbert
Date: Monday 21 Nov 2022
(Sharecast News) - Analysts at Canaccord Genuity initiated coverage on specialty chemicals group Iofina at 'buy' on Monday as it pointed to a "strong return profile ahead".
Canaccord said Iofina's vertical integration gave it a "significant cost advantage" over competing iodine suppliers, which were primarily in Chile. It also said Iodine has "attractive long-term growth characteristics" and was currently experiencing "significant supply tightness".
"We expect this to continue well into 2023, and potentially beyond, allowing Iofina to benefit from premium returns," said Canaccord.
The Canadian bank believes Iofina's "successful transition" to being not only free cash positive, but also its "exceptionally robust balance sheet", was underrated in the market.
Canaccord Genuity started the stock off with a 35.0p target, based primarily on multiples, meaning the stock would trade at 13x/15x 2023E/24E price-to-earnings ratio at its target price.
"We believe earnings for FY22E are likely to be in the range of EBITDA $8.5-9.5m; we expect FY23E to be somewhat stronger due to the mix of lagged contract pricing, improved cost recovery, and some volume increase from the 1H23 start-up of IO#9. The group is not wasting current profits and is investing in chemical as well as further IOsorb plants. It has been free cash generative throughout the past five years and we expect will be able to continue this record over the next three years," said the analysts.
Reporting by Iain Gilbert at Sharecast.com
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