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The Most Undervalued Stock In Our Portfolio


Published 14-DEC-2020 13:00 P.M.


3 minute read

Last time we announced the stock we thought was the most undervalued in our portfolio, it didn’t stay that way for long - rising from 19c to a high of 36c over a few weeks.

We are continuously analysing the stocks we own... and a couple of months on we have re-evaluated each position.

We currently think Minbos Resources (ASX:MNB) is the most undervalued stock in our portfolio, given their progress since we first invested.

However, it still has a market cap of just $13M, with $2M in the bank after a recent cap raise.

MNB is developing a phosphate (fertiliser) project in Angola, West Africa.

This project should not only deliver significant returns for shareholders but also have a positive impact on food security in the region while helping local farmers and the economy.

MNB recently released a Scoping Study, which estimated an after tax Net Present Value (NPV) of between US$159 and US$260M.

This calculation was based on a very modest pre-production capital estimate ranging between US$22M and US$28M.

The company is now working towards the release of its Definitive Feasibility Study, which should lead to a range of share price catalysts early in 2021.

Why do we think MNB is undervalued?

A lot has happened in the last week...

IFDC MoU signed

On Friday, MNB announced a MoU with the International Fertiliser Development Centre (IFDC) to develop and grow the smallholder farmer market in Angola.

The IFDC is dedicated to global food production and empowering farmers to increase crop yields... by using fertiliser.

Why is this IFDC MoU important to MNB’s fertiliser project?

A similar country-scale project run by IFDC in Burundi trained nearly 900,000 farms and increased local fertiliser demand by 5x.... that’s 500%.

Strengthened Board of Directors

Not one, not two... but three new high calibre board members joined the MNB board in the last week.

Why is this important?

Looking at their skill sets, it clearly signals that MNB is serious and ready to move to the next phase in developing their project.

Meet the new board members:

  1. Valentine Chitalu specialises in Private Equity and General Investments and is the co-founder of Phatisa Group, a Private Equity Fund Manager in Sub-Saharan Africa with approximately US$400 million in funds under management in the food and housing sectors.
  2. Paul McKenzie has more than 25 years experience in agribusiness, management, finance, corporate governance, and primary production, and holds degrees in Science (Agriculture) and Commerce.
  3. Graeme Robertson is the Chairman and CEO of the Intrasia Group of companies focusing on the development of growth industries on the African continent and brings valuable expertise in the agriculture and resources industries.

The market hasn’t seemed to have noticed the announcements released over the last week, but with MNB currently capped at a tiny $13M and with plenty of catalysts to come in the new year, we think MNB will soon be on their radar.

Strong ESG credentials

We believe that companies with a strong and reportable focus on ESG (Environmental, Social and Governance) will significantly outperform over the next few years.

“ESG first” companies create positive social and environmental impact, as well as financial returns - hence they attract more customers, the best talent and more investment dollars.

There are large amounts of capital seeking to invest in the best ESG opportunities.

MNB is a standout investment from an ESG perspective

MNB’s ESG goals are multi-faceted in sub-Saharan Africa:

  • potential to improve food security and nutrition
  • decrease levels of poverty
  • mitigate the impacts of climate change on farmers.

This is another reason we think MNB is currently the most undervalued stock in our portfolio.

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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