Anglo Platinum trading update for the first half 2011

Then we had a trading update from Anglo Plats who are finalising their results for the 6 months ended 30 June 2011. Headline earnings expected to be between 1131c and 1336c per share compared to 1028c for the period ending 30 June 2010. That is an increase of 17%. They said that these increases attributable to an increase in both the platinum price and production.

Let's say they manage to maintain this growth for the next 6 months because the platinum price increases in a second half of the year which turns out better than everyone expected. That would make them 2675c for the year. Remember that for the full year last year they made 1935c. So a fantastic improvement. But that is expected. They have come off a very low base since the crisis where platinum miners got rocked. The share trades at R604. Even with a 17% growth rate they are trading on a forward PE of 22. Investors have high expectations.

Our thesis on this company is simple and the same applies to the other platinum producers. We believe the platinum price has the fundamentals to keep on rising. So do many other people and that is why expectations of Anglo Plat earnings are so high. However when I graph the platinum price with that of the Anglo Plats share price we see similarities up until January but then a divergence begins. This is because costs in SA are rising and these are cancelling out the benefits which arise from the higher price received. Unfortunate but true and we would therefore stay away from this company as an investment.