Australia a good fit for Renergen
SA alternative energy group Renergen plans to dual list on the Australian Stock Exchange, where it will unlock opportunities that are not available to it on the JSE.
SA alternative energy group Renergen plans to dual list on the Australian Stock Exchange (ASX), where it will unlock opportunities that are not available to it on the JSE.
The decision to list on the ASX was motivated by several advantages it would offer, said CEO Stefano Marani. South Africa will become the eighth country in the world to produce helium when Renergen commences production.
The company will be better covered by equities researchers who specialise in oil and gas stocks. As the only holder of onshore natural petroleum gas exploration rights in SA, the value proposition is not fully understood domestically.
“In SA, there are no comparables. It’s difficult for any analysts to take a position,” Marani said. But on the ASX, where there are hundreds of oil and gas stocks, “we would blend right in”, he said.
With the JSE, 90% of its market cap is comprised of companies valued at more than R5bn, whereas 84% of the ASX’s market cap comprises of companies under R5bn.
In fact, 64% of the market cap of the Australian exchange sits in the companies under R1bn, said Marani.
This would place Renergen, with a R734m market valuation, firmly into mid-cap range on the ASX. Mid-caps on the ASX are also incredibly liquid, which is in stark contrast to the situation on the JSE.
In SA, investors have been scared to burn their fingers on Renergen, but in Australia the mentality is about getting in on the ground early, Marani said.
The listing on the ASX will be pursued upon the completion of the R125m rights issue, which is fully underwritten. The rights issue will raise the prerequisite funding Renergen needs in order to access a R218m loan facility from the Industrial Development Corporation and to develop its Tetra4 project, a helium-rich gas field in the Free State, with about 29-million kilograms of reserves.
Helium is critically important to the medical industry and is also needed for the manufacture of cellphones, televisions, fibreoptic cables, and is used in the cooling of nuclear power and to propel rockets into space.
Helium is fetching a premium price too as US supply continues to run out.
Renergen’s project also holds about 150-billion cubic feet of liquified natural gas (LNG) reserves, which is best suited for powering vehicles.
Earlier in 2018, Renergen signed an offtake deal with Anheuser-Busch InBev for the supply of LNG to power its SA Breweries fleet of delivery trucks in Gauteng.
IN SA, THERE ARE NO COMPARABLES. IT’S DIFFICULT FOR ANY ANALYSTS TO TAKE A POSITION