Myles McNulty@MylesMcNulty
After the filing of the Form F-4 with the SEC, it is now pretty much a given that Mkango $MKA #MKA will list its subsidiary - Mkango Rare Earths $MKAR - on NASDAQ in the coming months, at a valuation of circa $500 million.
MKA's circa 79% stake will be worth ~$400m at the listing price of $10.
Using the current exchange rate of 1.34 and the existing total voting rights of 387.1 million, that equates to a value per MKA share at listing of 77.5p.
As of right now, MKA's share price is 46.5p / $241m mkt cap- a 40% discount to the value of its MKAR shares at the NASDAQ listing price.
Some might argue that UK stocks that have held shares in companies that have gone on to list on NASDAQ, have performed poorly.
MKA / MKAR is a very different situation. It will have complete control over the listed subsidiary (c.79% equity interest), and MKA's two key founding directors will also be the key executives at MKAR. Moreover, as most are now aware, the valuations of even early-stage development rare earth companies listed in the US and Australia are sky high.
So it's actually reasonably likely that we see MKAR push possibly significantly above its listing valuation, in those first few weeks post listing.
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MKA is trading at a 40% discount to the value of its shares in MKAR; which means we're looking at a 67% increase from 46.5p, just for MKA to be trading at the value of those MKAR shares.
But then what about MKA's downstream and - most would argue - more valuable businesses? Its various magnet recycling and manufacturing operations?
Mkango now possesses in its downstream portfolio:
Three fully constructed and commissioned NdFeB magnet recycling / remanufacturing plants (two short-loop, one medium-loop), with a combined capacity of 1,200 tonnes per annum of associated NdFeB products. The two short-loop HyProMag plants could be expanded (with additional capex) by a further combined 1,050 tpa, bringing European capacity across the three plants to 2,250 tpa.
In the US, the three plants under development (combined nameplate totaling just shy of 4,700 tpa) boast a combined NPV of circa $2.2 billion. Management is talking of ultimately building at least seven of these plants in the US.
Mkango / HyProMag is also looking to roll out its unique recycling / remanufacturing plants in Japan, South Korea, Canada and elsewhere.
Given the 40% discount that Mkango is presently trading at to its soon-to-be-listed MKAR shares, Mkango's entire magnet business is essentially being valued by the market at LESS THAN NOTHING.
I have been petty vocal over the past year about the UK investment community. It is poor, weak, unadventurous - in short, the LSE is a dying exchange. It is the much more optimistic (and wealthier!) US investors looking across the pond at tragically mispriced UK-listed entities that have been driving the high volume reratings witnessed in recent months (e.g. Invinity #IES today and in the coming sessions!).
With NdFeB magnets playing such a critical role in so many hyper-growth industry verticals in the coming years, I think it inevitable that Mkango starts receiving that US investor attention in the near future.
Hannam & Partners recently initiated with a 2026 year-end 240p target price. Given how much the REE industry (driven by geopolitics) has heated up over the past few days, I suspect that could be broken with ease.
londonstockexchange.com/news-article/M…
