Institutional investors likely to chase FYI after MSCI inclusion
In a development that highlights FYI Resources Ltd (ASX:FYI; OTCQB:FYIRF; FSE:SDL) significant discount to fair value, the company has been added to the MSCI Australia Micro Cap Index which is designed to measure the performance of the microcap segment of companies traded on the Australian Securities Exchange.
Investors were quick to pick up on the group’s inclusion which was announced this morning with its shares rallying 6%.
MSCI is a leading provider of investment services such as research, data and technology to the global investment community, enabling clients to better understand and analyse key drivers of risk and return and build more effective investment portfolios.
Importantly, in terms of FYI receiving recognition for the advanced nature of its High Purity Alumina Project, as well as the group’s intellectual property, high-tech commodity exposure and multinational affiliations, inclusion in the MSCI will provide increased exposure to global institutions and investment markets and the potential for liquidity to increase, providing better access to capital sources and the ability to negotiate finance on competitive terms.
A $170 million company with a US$1.3 billion project
FYI is certainly punching above its weight with its market capitalisation of approximately $170 million far from reflecting the value of its High Purity Alumina Project as outlined in the recently released definitive feasibility study (DFS).
With a proposed production rate of 10,000 tonnes per annum of HPA and generating peak annual EBITDA of $250 million, the project has a net present value of more than $1.3 billion.
Such is the quality of this project that multi-billion dollar, multinational vertically integrated commodities miner, refiner and distributor Alcoa has been working hand-in-hand with FYI through the pilot planning stages and less than a fortnight ago FYI and Alcoa entered a 90 day exclusive period for joint venture discussions.
Should a joint venture agreement be formalised following these discussions, or developments such as offtake agreements emerge with Alcoa or other parties who have already demonstrated their interest in FYI’s product, one would expect a significant rerating.
It could be argued that the likely quantum of such a rerating has increased substantially through the group’s inclusion in the MSCI with much more attention likely to come from institutional investors.