Renergen Limited, an investment holding company, engages in the alternative and renewable energy businesses in South Africa and sub-Saharan Africa. The company explores for, develops, and sells compressed natural gas, as well as liquefied helium and natural gas. Renergen Limited was incorporated in 2014 and is based in Johannesburg, South Africa.

S. Africa

Renergen Limited

Energy

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. 

RLT.AX reported revenue of ZAR 31mn in the last 12 months, down 4% from FY23. The dynamics of cash flow, as measure by free cash flow (FCF), were rather similar. EPS grew 70% from FY23 to ZAR -0.92. Market expects EPS to reach ZAR -0.55 in FY24.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 29ppts over six months and grown 0ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported very poor EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to -402.0% in the last 12 months, a decline from -357.6% in FY23. 

Historically, RLT.AX has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -435.8%, down from -379.2% in FY23. 

Renergen Limited reported a return on equity (RoE) of -13.3% in the last 12 months, up from -15.1% in FY23. The market consensus projects an RoE of -22.1% in FY24, again behind its peers. 

Another important profitability metric, return on assets (RoA), amounted to -5.8% in the last 12 months, an increase from -5.8% in FY23. The market analysts predict that RoA will be -8.4% in FY24, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to -7.3%, below the peers. The consensus estimate for FY24 for RoCE is -12.4%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -1.2 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 close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

RLT.AX 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 relatively stable and becomes extremely unfavourable on the days with the lowest activity. However, under highly turbulent market conditions, the trading volume tends to improve significantly. 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 moderate. We note resilient historical revenue growth and low margin volatility, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, bleak profitability, negligible return on capital, poor working capital management, and inadequate interest coverage.

In highly turbulent market conditions, RLT.AX 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, RLT.AX 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 critical to immense. 

Based on key historical and expected multiples, the stock is fairly valued relative to its peers. 

Renergen Limited

A$ 0.52

3

Renergen Limited

A$ 0.52

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

A$ 0.52

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