With a target price of 40p the stockbroker suggests some 167% upside to the current Sirius market price of around 15p.
In recent weeks the company launched a near £4bn sequence of project financing – since then it has completed the first US$825mln raise, via the issue of equity and convertible debt.
Liberum’s Knights, in a note, highlighted that Sirius is now “on the cusp of finalising” the funding package.
“The company plans to issue a $500m high yield bond in the coming months which will unlock the remaining $2.5bn credit facility from JP Morgan, needed to complete the project. With financing risk behind it we think the stock looks sharply undervalued,” the analyst said.
“In our view financing risk is a hefty component of Sirius's 78% discount to NPV (68p). With a line drawn under dilution, only construction risk and market risk remain.”
Share sale was oversubscribed
On Monday, Sirius announced that the open offer portion of its new funding package has now closed and said that that the shareholder equity sale was oversubscribed.
The FTSE 250-listed firm said, therefore, it would be issuing the full 218mln allocation of new shares which are priced at 15p each, in line with the placing shares launched in early May.
"We are encouraged by the oversubscribed open offer, which underlines the strong equity market support for our comprehensive markets-led solution for stage 2 funding,” said Chris Fraser, Sirius Minerals' managing director.
“Today's result takes us another step closer to bringing POLY4 to the global agriculture industry and I would like to thank shareholders and partners for their continued support. We now turn our focus to delivering the next phase of the funding package, with planning for the high yield bond well underway," Fraser added.