The stockbroker today repeated a ‘buy’ recommendation on the British mine developer following last week’s confirmation that it would be moving onto London’s main market from AIM at the end of this month.
“Assuming its market cap remains at around the current level, Sirius should be well positioned to be considered for inclusion in the FTSE 250 index during the June 2017 rebalancing process,” Shore Capital analyst Yuen Low said in a note.
“That said, we note that even inclusion in the All Share index would result in the relevant tracker funds being obligated to invest in the company.
“We believe that Sirius is already benefiting: we think that the recent sharp rise in the share price is occurring in anticipation.”
Low highlights that even though the company’s fertiliser mine, in North Yorkshire, remains in the development phase investments in Sirius Minerals shares will be “progressively derisked” as the project advances, thus investors will “enjoy significant value uplift” along the way.
He also noted recent communications from the company that suggest there may be some new positive developments for the project.
“In any major construction project, keeping to schedule can be tricky – unsurprisingly, this is a common concern voiced by investors that we speak to,” the analyst said.
“We were therefore intrigued to learn from Sirius’s Q1 2017 project update that the company is considering opportunities to ‘accelerate components of the shaft and tunnel spend’.
“In response to a query we made, Sirius explained that it had included in its 2017 budget ‘some activities’ (which we understand to be associated with engineering design) that were originally scheduled for 2018, so that it could exploit any opportunities to get more of these said activities done earlier than previously planned.
“From our point of view, any (significant) work that can be brought forward should have a positive de-risking impact, in that it would hopefully add to the ‘time buffers’ available to cater for potential over-runs.”
Shore Capital models a risked net present value between 65p and 82.5p per share for Sirius, depending upon the nature and make-up of the project’s Phase 2 financing – suggesting very significant upside from the current price of around 21p.