Will the Om Holdings Limited share price keep charging higher?

Credit: DubSnipe

The Om Holdings Limited (ASX: OMH) share price has been charging higher and has provided shareholders with returns exceeding 450 per cent over the past year.

And it’s showing little sign of slowing down, gaining almost 7 per cent on Tuesday and is now trading at around 69 cents.

The investment holding company and manganese-focused producer, with a market value of about $476 million, holds a 15 per cent stake in Dotz Nano Ltd (ASX: DTZ), formerly known as Northern Iron Limited (ASX: NFE), and a 12.5 per cent shareholding in Shaw River Manganese Ltd (ASX: SRR).

But those companies have struggled to provide shareholders with returns close to Om Holdings.

Om Holdings’ other assets include its wholly owned OM (Manganese) Ltd, with its core operating business of exploration and mining of manganese at Bootu Creek.

Om, a vertically integrated operation with its headquarters in Singapore, also has a marketing business and a manufacturing business in China.

The company announced that it’s on track to achieve better performance this year than the year before and had produced 124,099 tonnes of ferrosilicon and 110,414 tonnes of manganese alloy with high sales figures to match.

Om stated that it had increased its EBITDA to $41.5 million for the six months ended 30 June 2017, up by $3.7 million from the corresponding period the year before.

Om also announced its gross profit margin rose from 16% in the first half of 2016 to 19% for the same period this year. It was pushed along by stronger ore and alloy prices, and due to an increase in operational efficiency at the company’s smelting complex in Sarawak, Malaysia.

The company also managed to reduce its debt to $583.3 million as at 30 June 2017 from $617.6 million recorded 6 months earlier.

Om’s shares are changing hands at around 10x trailing earnings which appears moderate when stacked against companies such as Western Areas Ltd (ASX: WSA) which is going for 44x trailing earnings or Oz Minerals Limited’s (ASX: OZL) at 15x trailing earnings.

It appears some investors see value in Om and it looks as though the company’s share price could keep charging, especially if alloy and ore prices continue to climb and production increases are maintained.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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