Is it really that simple that a falling pound means UK-based chemical companies make shed loads more money?
Er yes, well at least yes according to a couple of brokers today.
Analysts at Liberum have crunched the numbers on Croda (LON:CRDA), Victrex (LON:VCT) and platinum specialist Johnson Matthey (LON:JMAT) and worked out that pound’s fall to a 31 year low will potentially boost profits by 12%, 34% and 15% respectively.
Brexit may well have its costs in terms of higher trading tariffs, more paperwork and lower UK inward investment but all three chemcos are major beneficiaries of weaker pound, said the broker.
Croda gets a more in-depth review from UBS, which has upgraded to 'buy' due to the pound’s decline but more importantly the move into bioethanol in the US.
This is by far the largest organic investment for the company and will take the proportion of the natural raw materials it uses to 75%.
On a best case, UBS sees the move lifting the shares by 24% to 4350p/share, while Croda can return a special dividend of 3% a year and still have the cash capacity for more bolt-on acquisitions.
Weak sterling presents a competitive opportunity Croda exports around 10% of its sales from the UK, adds the broker.
Down a couple of divisions, resources specialist SP Angel has trotted off to Colombia and worked out a value of 0.72p per share for copper and gold explorer Metminco (LON:MNC), or around four times the current market price (0.16p).
The Colombian gold assets alone are worth over £18m - approximately three times the current market value of Metminco, while the residual interest in the LosCalatos copper deposit in Peru is worth a further £11.7mln.
“Construction of its Liqhobong diamond mine in Lesotho is now essentially complete. Mining has started with ore being stockpiled while the plant commissioning is completed.
“First diamonds from the commissioning phase are expected to be recovered later this month”
Because of that the risk discount has been dropped to 15% from 30% by finncap.