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What is MM’s view on Nickel Industries Ltd (NIC)

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

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What is MM’s view on Nickel Industries Ltd (NIC)

Hi James, Shawn and the MM team, Thanks for good feedback that you have given to my questions. This is much appreciated. NIC’s share price has fallen from over $1.00 in Feb 23 to a close of $0.685 on 6/2/24. NIC has a PE of 10.2 and Div Yd of 7.8%. Bell Potter has a target price of $1.53; and all 3 stockbrokers covered by FnArena have a “BUY” rating. Although the price of Nickel has fallen 40% in a year, and a number of local Nickel miners have suspended operation; NIC has recently announced increased dividend and a US$100m share buyback to be conducted over a 12-month period. Moreover, I have noticed that Insiders have purchased over $26 million shares since April 23, including $2.9 million from Justin Werner, MD of NIC. I would like to hear what is your opinion on NIC short to medium terms. Thanks again for the good work that you have put in. Best regards, Peter Wong

Answer

Hi Peter,

The timing of NIC’s final dividend and buyback of up to $US100mn, or ~$A150mn, worth of stock is an interesting one considering the crisis unfolding across the industry. Our concern is the depressed nickel price, primarily due to huge exports of “dirty nickel” from Indonesia, is a structural as opposed to cyclical issue. We do like the insiders buying NIC with MD & Director recently acquiring $502k worth of stock ~67c but they also may have been caught by the sharp decline in nickel prices.

  • We like NIC as a contrarian Nickel play but we would leave $$ flexibility to accumulate down to 50c, i.e. its halved from its 2023 high, and further weakness cannot be ruled out.

If nickel prices do bounce from current levels NIC does indeed look capable of bouncing back sharply towards its 2023 high, but the too many variables at play for us.

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Nickel Industries Ltd (NIC)
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