Sunday share tips: Rainbow Rare Earths, Palace Capital
By Alexander Bueso
Date: Sunday 28 Nov 2021
(Sharecast News) - The Financial Mail on Sunday's Midas column called attention to Rainbow Rare Earths's shares, pointing out that it was shaping up to become one of the largest producers outside of China of two key rare earth metals, praseodymium and neodymium.
Those two rare earths formed the basis for NdPr oxide, the price of which had nearly tripled over the preceding two years to reach $115,000 (£86,000) per tonne.
And some forecasters expected that surge to continue given NdPr oxide´s critical role in wind turbines and electric cars.
Furthermore, the miner's project in South Africa would not require actual mining. Instead, the company was set to treat stacks of gypsum located on the surface containing the two metals, meaning that the process would be less costly - as well as greener.
In parallel, the company's shares had gained over 30% in the last 12 months and analysts believed that their price should triple over the following two years.
"A mining company that is making no money, wrestling with political issues and unlikely to deliver meaningful profits for several years may seem a foolhardy investment," the tipster said.
"But Rainbow Rare Earths is in the right place at the right time. Demand for rare earths is growing, Rainbow can help reduce the world's reliance on China and [its boss, George Bennett] knows his game. At 13p, the shares are worth a punt."
The Sunday Times's Sabah Meddings recommended readers buy shares of Palace Capital, touting its growth potential and predicting a possible tie-up with a rival.
The real estate investment trust owned £262m-worth of properties in towns and cities outside of London and reported revenues of £27.8m at the half.
While the company as still small, investors had begun to take notice, she argued, pushing the shares nearly 30% higher since the beginning of 2021 to value it at £120m.
Key to the investment case was the trend towards government and corporates increasingly relocating outside of the capital.
The Treasury was headed to Darlington, HSBC to Birmingham, Burberry to Leeds and TalkTalk to Salford. It was also hoped that more university graduates would opt to stay at university towns rather than head to London.
Worth taking note of as well was the firm's high level of rent collection despite the pandemic with collections expected to hit 95% in the December quarter.
But the problem was Palace Capital's size, which meant that "some of the big institutional shareholders will overlook it and it will not be meaty enough for private equity to come knocking," Meddings said.
But she offered up a possible solution.
"An answer could be to consolidate, which would allow it to strip out back-office costs and free up cash. Expect Palace Capital to be focused on finding a partner in the months ahead. Buy."
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