Oriental Peninsula Resources Group, Inc. (PSE: ORE)

Oriental Peninsula Resources Group, Inc. (the “Company”, “ORE”) derives 100% of its earnings from its 94% interest in Citinickel Mines and Development Corporation (Citinickel).

Citinickel was granted with a Mineral Production Sharing Agreement (MPSA) on January 3, 2007 for their Toronto and Pulot Nickel Mining Projects located in Narra and Sofronio Espanola, Palawan respectively.

On March 9, 2011, Citinickel was registered with the Board of Investments which entitles Citinickel to the following incentives:

  1. Income Tax Holiday for four years from March 9, 2011 to 2015
  2. Exemption from wharfage dues, export tax, duties, and imports and fees for 10 years.

The Company started commercial operations in the third quarter of 2011 ending the year with 20 shipments or 1 million WMT of nickel ore sold. As of the 3rd quarter of 2012, ORE performed 56 shipments with a total of approximately 2.8 million WMT.

Comments:

Nickel mining companies went out of favor mid-year of 2012 and with a very valid reason:

ORE3

Nickel prices went plunging from a high of $21,000+ a ton to as low as just over $15,000 in the 3Q of the year. A sudden drop in price should translate to a sudden drop of net income for any nickel producing company.

Below is Nickel Asia’s (PSE: NIKL) earnings chart, the largest nickel miner in the country:

ORE4

But ORE defied the trend:

ORE5

This is possible because the Company has a huge capacity for growth in terms of production. ORE compensated the decline in nickel prices through increase in shipment volume. According to the interview done by First Metro Securities [1] with ORE’s CEO, Ms. Caroline Tanchay, ORE is shipping a minimum of 3.5 million WMT for 2012 and 4 million WMT for 2013.

As of 3Q ORE has a total of 56 shipment or 2.8 million WMT sold ore. Assuming that ORE will be able to complete 10 more shipment for the quarter or an additional of 500,000 ore sold for $16,000/t we can expect ORE to report an EPS of 0.39/sh. That makes ORE trade with a single digit PE ratio of 8x at P3.10. Even at 3Q EPS of 0.36, ORE is already trading at 9x PE ratio.

ORE stands at numerous advantages that will enable them to generate growth:

  1. Income tax holiday until 2015
  2. Young MPSA rendering it unaffected with EO 79
  3. Exemption from wharfage dues, export tax, duties, and imports and fees for 10 years.
  4. The Company still has room for increasing its production.

A Company with a growth potential and competitive advantages but trading in a single digit PE ratio is definitely undervalued.

Other data:

ORE1 ORE2

Sources:

  1. The Bellwether, “Oriental Peninsula Resources Group, Inc.”, http://fami.com.ph/wp-content/uploads/2012/07/Bellwether-1-5.pdf
  2. SEC filings

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell.

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One thought on “Oriental Peninsula Resources Group, Inc. (PSE: ORE)

  1. Pingback: Opportunity, Stock Thoughts: VLL, ORE, COAL | Fundamental Enthusiast

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