Our valuation of AMS is exposed to macroeconomic developments affecting PGM prices and exchange rates, operational risks that might affect volumes and input costs, political and regulatory risks that might affect costs and the company's reputation and risks associated with the power outages. We highlight the following risks to our TP:
Macroeconomic risks: Our valuation of AMS is highly dependent on input assumptions for platinum, palladium, and rhodium prices, as well as the rand/dollar exchange rate. Upside risks to our view include higher-than-expected PGM prices and a weaker-than-expected rand.
Operational risks: We base our production and cost outlook for AMS's individual mines on management guidance and the application of our discretion to management's guidance and targets. We caution downside risk to our generally favorable cost assumptions, given the inflationary environment in which AMS operates. The main upside risk to our view is better-than-expected cost performance by the company.
Political and regulatory risks: The company is exposed to government and regulatory-related risks in the countries in which it operates. Specific risks include higher-than-expected royalties, production delays from government intervention and labour unrest.
If the impact from any of these factors proves to be more negative than we anticipate, the stock will likely have difficulty achieving our financial and price targets. However, if any of these factors proves to have less of an effect than we anticipate, the stock could materially outperform our targets.
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