THE BOTTOM LINE
It may look like a dump to you but it’s a prime source of gas
Montauk offers a way to invest via the JSE in a remarkable renewable energy story in the US
Montauk Holdings is an odd feature of the JSE. Never mind that the energy company is based in Philadelphia, over 320km from the charming seaside village of Montauk. It is also listed exclusively in SA even though it has always only operated in the US, where it extracts natural gas from landfills.In Johannesburg, Montauk has been listed since 2014 and has a not insignificant market valuation of R13.5bn. A decent number of its shares trade each day. The company was acquired by default by Hosken Consolidated Investments when it bought Johnnic to gain a sizable stake in Tsogo Sun.
The market had never attributed much value to Montauk – for Johnnic it had caused losses. But an unbundling of the company to list on the JSE has unlocked significant value for shareholders. Over the past four years the share price has shot up 95% from R5 to R96 this week.
Montauk offers a way to invest in a remarkable renewable energy story in the US. Under the Renewable Fuel Standard, refiners and importers of fuel used in transportation must, by law, have certain volumes of renewables mixed in. And it’s precisely there where Montauk’s natural gas is destined. US President Donald Trump is unlikely to mess with the arrangement because maize farmers are making fat profits from selling crops for ethanol.
The price-to-earnings ratio for Montauk is above 43, even though the dividends to shareholders are nothing spectacular. It’s expensive, but it looks like shareholders think Montauk is a sure thing.