Montreal asset manager Letko Brosseau has just increased its investment in 5N Plus by buying more than $7 million in shares of the Montreal producer of technological materials.
Letko Brosseau bought an additional 2 million shares of 5N Plus during the July 6 trading session alone, says a document filed this month with regulators.
The document specifies that Letko Brosseau thus began the month of August with an 11.2% stake in 5N Plus. Letko Brosseau is the company’s second largest shareholder, behind the Caisse de depot et placement du Québec.
The stake in 5N Plus thus returns above the 10% mark, since the sale of 5N Plus shares by Letko Brosseau in April had caused the investment to slip below the 10% mark.
In a telephone interview, portfolio manager Peter Letko explains that the firm he leads has been a shareholder of 5N Plus for “a long time” and that interest in the Montreal company stems from an initial investment in the American panel manufacturer. First Solar, a major customer of 5N Plus.
He clarified that the desire to increase the position in 5N Plus follows China’s decision earlier this summer to restrict the export of certain raw materials deemed strategic, in particular gallium, a metal notably used in the manufacture of semi -drivers.
“Not that the Chinese decision will completely change the market, but it influences our thinking,” says Peter Letko.
China cited national security reasons for its move.
5N Plus is designing several critical products, including a gallium chemical.
5N Plus management touts the company as the only viable supplier of ultrapure specialty semiconductor materials outside of China.
The Chief Financial Officer, Richard Perron, also pointed out at the beginning of August, during a conference call organized with analysts on the sidelines of the presentation of the company’s most recent financial performance, that 5N Plus is better positioned than ever before to benefit from strong demand in high-growth sectors such as solar and renewable energy.
He added that China’s decision affected gallium and germanium and did not affect the company, as 5N Plus’s germanium supply comes 95% from outside China.
5N Plus products are used in the manufacture of mobile devices and satellites launched into orbit. Customers also use 5N Plus products in pharmaceuticals and light emitting diodes (LEDs).
5N Plus is also trying to break into the medical imaging sector through strategic partnerships and the active pharmaceutical ingredient manufacturing sector.
Letko Brosseau believes that 5N Plus’ partnership with Samsung to develop new medical imaging techniques will be a growth story beginning in 2025 when certifications are complete.
Although 5N Plus is investing in its business today to meet growing demand, the asset manager expects net debt to decrease by the end of next year and what management considers from 2025 the payment of a dividend to shareholders as free cash flow increases.
5N Plus stock closed the first session of the week at $3.57 on the Toronto Stock Exchange. The stock has been hovering between $1 and $4 for a year.
