MON­TAUK

Financial Mail - Investors Monthly - - Opening Bell -

Share price: 1,030c JSE code: MNK

BUY MON­TAUK WAS NOT EX­PECTED TO rocket when HCI listed it sep­a­rately in 2014. It was de­scribed as a “strug­gling busi­ness” in the 2013 an­nual re­port.

It wasn’t an ac­tive HCI de­ci­sion to in­vest in it in the first place, since it was part of the port­fo­lio when HCI took over John­nic.

When a com­pany is spun off rather than sold, it can mean the hold­ing com­pany was un­able to find a buyer for it.

Un­ex­pect­edly, Mon­tauk’s shares have more than dou­bled in the 14 months since list­ing. That re­flects two is­sues: the at­trac­tive­ness of rand hedges, since Mon­tauk op­er­ates in the US, and in­vestors’ ap­petite for re­new­able-en­ergy op­por­tu­ni­ties.

Mon­tauk’s spe­cial­ity is ex­tract­ing methane from land­fill sites and sell­ing it as pipe­line gas or gen­er­at­ing elec­tric­ity with it. It sits in the nat­u­ral gas sec­tor but be­cause it is not us­ing fos­sil fuel, it ad­dresses a pol­lu­tion prob­lem and gen­er­ates re­new­able en­ergy cred­its.

Weak nat­u­ral gas prices present a chal­lenge, but Mon­tauk is off­set­ting that with the sale of re­new­able en­ergy cred­its.

The South­ern Cal­i­for­nia power sta­tion, which is un­der de­vel­op­ment, will sell elec­tric­ity at a fixed price.

There are tech­ni­cal chal­lenges in elec­tric­ity gen­er­a­tion from land­fills, and th­ese projects take time to come on stream. But with a 20-year track record, Mon­tauk knows how to avoid the pit­falls and is in a good po­si­tion to snap up its com­peti­tors in this sec­tor.

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