#MTR ready to breakout from current share price range?

The Metal Tiger share price, despite recent positive RNS’s is stuck in the 3.12p – 4.2p trading range.

Two reasons why believe the share price is about to breakout of this trading range.

 

1) Comparison with MOD Resources trading pattern.

This is why the MOD and MTR share charts based solely on Botswana news should mirror one another.

Botswana JV is split in MOD favour 70/30 with MOD having 1312m shares in circulation and MTR 609m.

A £100m profit therefore expressed as a share value would equate per share for MTR shareholders to 5p and for MOD shareholders to 5.3p.

MTR also have 67.8m MOD shares. 67.8m MOD shares @ 5.3p is the equivalent of 0.6p per share for MTR shareholders.

The total benefit for MTR shareholders for every £100m is therefore 5.6p compared with MOD’s 5.3p. The impact on the share price of the two companies should therefore be similar.

You would therefore expect the two share charts to mirror each other. This currently isn’t the case with the MOD share price surging ahead.

image

The only reasons for the gap would be:

1. MOD shares over priced or Sam’s Creek value recently included in share price by investors.
2. MTR shares under priced.
3. Investors believe a significant risk with rest of MTR business.

I believe option 2 is the most likely reason when you consider:

i) The asset trading division has a portfolio of assets currently valued at £3.85m for investments in publicly listed investments (>3%).

Plus have investment in companies that are undisclosed (<3%) and numerous warrants.

The asset trading division therefore has a value of circa 1p per share. In other words 33% of current share price. 

ii) Chart indicates no difference in market cap between two businesses when Thailand contract announced. Therefore news has not yet been priced in.

 

2) Share Price Trading pattern similar to last rerate event.

The share price movement is similar to the last share price  rerate.

image

The dips in the share price are getting shallower and shallower. If the trading pattern repeats itself when the share price last rerated, this current dip is the last before the rerate.

 

Based on the above it looks like the share price is going to breakout of the current trading range.

 

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