Petra Diamonds Limited engages in the mining, processing, sorting, and sale of rough diamonds in South Africa. It holds interest in three underground producing mines, including Cullinan, Finsch, and Koffiefontein mines located in South Africa. The company also provides treasury, beneficiation, and other services. Petra Diamonds Limited was incorporated in 1997 and is based in London, the United Kingdom.

Petra Diamonds Limited

Basic Materials

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

PDLMF reported revenue of USD 367mn in the last 12 months, up 21% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 8% from FY23 to USD -0.44. Market expects EPS to reach USD -0.11 in FY24.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 27ppts and its growth accelerated by 13ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 39.5% in the last 12 months, up from 0.8% in FY24. 

Historically, PDLMF has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -4.8%, a growth from -23.4% in FY24. 

Petra Diamonds Limited reported a return on equity (RoE) of -3.7% in the last 12 months, up from -30.6% in FY24. The market consensus projects an RoE of -15.2% in FY25, again behind its peers. 

Another important profitability metric, return on assets (RoA), amounted to -1.2% in the last 12 months, an increase from -10.3% in FY24. The market analysts predict that RoA will be -4.8% in FY25, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to -1.4%, below the peers. The consensus estimate for FY25 for RoCE is -6.2%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -0.9 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

PDLMF has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is very unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to slow historical revenue growth, negligible return on capital, excessive margin volatility, weak debt servicing capacity, and inadequate interest coverage. We note robust profitability, among the positive credit factors. 

In highly turbulent market conditions, PDLMF is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, PDLMF is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from moderate to immense. 

Based on key historical and expected multiples, the stock is greatly undervalued relative to its peers. Specifically, the stock is neutral on EV/EBITDA, underpriced on P/FC. 

Petra Diamonds Limited

$ 0.37

3

Petra Diamonds Limited

$ 0.37

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 0.37

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