Monday 18 December 2017

Stock pick of the week: Kenmare Resources

Exploration firm Kenmare has been a strong performer this year with the shares up 79pc.

But we believe there is more to come.

Commodity pricing, expansion and earnings as well as cash flow momentum are some of the factors we expect will drive further performance.

The good share price performance was largely on the back of higher titanium dioxide feedstock prices, used by paint manufacturers for example.

We believe that these prices will continue to rise as the widening deficit (estimated at 25pc of market by 2016) drives prices higher.

Demand drivers (China) are holding up and no new supply is expected to come on stream in the near future.

Kenmare is expanding its own mine in Mozambique and once completed, Kenmare will become the most efficient producer in mineral sands.

For us, Kenmare is the best placed among the titanium dioxide feedstock producers to take advantage of the expected shortfall in supply as it has the largest reserves and resources and will be the lowest cost producer.

The share price softened this earlier month due to concerns over higher taxes in Mozambique, but has since recovered.

We see that there is still an opportunity for investors to acquire the stock. stock picks are not explicit or implicit recommendations to buy or sell the shares mentioned, under the Market Abuse Regulations 2005. Merrion Stockbrokers may be corporate adviser to some of the shares chosen.

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