Evolution Mining Ltd
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EVN Details
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Falling gold prices hurt the stock sentiment: Evolution Mining Ltd (ASX: EVN) stock fell over 3.9% on June 28, 2016 impacted by the falling gold prices. Moreover, the group reported that they estimate over 213,000 gold ounces production for June quarter and a total of over 800,000 gold ounces for FY16. The AISC is expected to be about A$1,075 per ounce (US$783/oz) for June quarter and A$1,000 per ounce (US$728/oz) for FY 16. In addition, as on June 2016, EVN estimates its gearing to be reduced from 32% to 15% since July 2015. Meanwhile, EVN is doubling the dividend payout to 4% of revenue and planned to move to franked dividends from end of FY17. For FY17, the group expects production in the range of 800 - 860koz driven by the full year contribution from Cowal and Mungari, while AISC will be in the range of A$985-1045 per ounce and other physical metrics will be in line with FY16. Mt Rawdon & Edna May projects would finish by FY17, and White Foil is expected to finish in FY18. Cowal Stage H would commence in FY18 which will tail off by FY21.
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Recommendation: EVN has already generated 71.62% in the last six months (as of June 27, 2016) placing the stock at an unreasonable P/E. We give an “Expensive” recommendation at the current price of $2.44
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Production guidance from projects (Source: Company Reports)
Northern Star Resources Ltd
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NST Details
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Higher levels: Northern Star Resources Ltd (ASX: NST) stock also fell over 3.3% on June 28, 2016, especially from the second half of the day, as there has been a correction in the gold prices. NST expects the production to be 535koz-570koz in FY16 at AISC of A$1,050-A$1,100/oz. But, the group forecasts an even better production from FY18 which would rise to 700koz per annum. Accordingly, the stock delivered outstanding returns of over 77.97% in the last six months (as of June 27, 2016). Consequently, the stock is now trading at a higher P/E.
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Recommendation: We believe the stock is “Expensive” at the current price of $4.92, and would review the stock at a later date.
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Organic & Inorganic Growth (Source: Company Reports)
WorleyParsons Limited
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WOR Details
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Cutbank Ridge Partnership contract: WorleyParsons Limited (ASX: WOR) stock has fallen 2.8% on June 28, 2016 even though there is no specific update from the group, but is impacted by the commodity prices fluctuations. Meanwhile, National Australia Bank Limited and its associated entities became a substantial holder. Despite this short term pressure, WOR has been building its pipeline, and recently got the contract worth CAD130 million to provide module assembly and field construction services for the Cutbank Ridge Partnership Program’s 15-27 Saturn Phase 2 Sweet Gas Plant Project. WOR stock also has a high dividend yield and generated 48.41% in six months (as of June 27, 2016).
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Recommendation: We believe the stock has upside potential and accordingly give a “Buy” recommendation on the stock at the current price of $6.82
Incitec Pivot Ltd
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IPL Details
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Acceleration of efficiency program: Incitec Pivot Ltd (ASX: IPL) stock has fallen 4.9% on June 28, 2016 even though there was no specific event or announcement. The stock delivered a negative return of 22.9% in last six months (as of June 27, 2016) as the company had reported weak earnings due to the fall in commodity prices impacting the group’s product prices. On the other hand, the group launched an efficiency program to withstand the challenging market conditions and forecasts to deliver $100m of sustainable cash savings in 2017 while BEx is expected to continue to improve. In addition, there is a continued US Q&C growth underpinned by US$305Bn highway spending bill.
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Recommendation: The recent correction can be considered as an entry opportunity and we give a “Buy” recommendation on the stock at the current price of $2.88
Santos Ltd
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STO Details
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Exceeded pre-drill expectations: Santos Ltd (ASX: STO) stock has fallen 2.6% on June 28, 2016 due to falling commodity prices even though there were positive announcements by the company. STO has successfully conducted the Drill Stem Test on the G Sand reservoir at the AAL-4XST1 appraisal well, offshore Indonesia. The project achieved an average stabilized flow rate of 828 barrels/day (bopd) on a 64/64-inch choke which is exceeding the pre-drill expectations and are 58% higher than the previous G-sand tests at AAL-3X (525 bopd). The results indicate a major potential of the AAL oil project. In addition, Stairway Sandstone at Mereenie (operated by Central Petroleum in a joint venture with Santos) has confirmed the gas flow which were free flowed at an average of 1.5 million cubic feet per day (approximately 1.5 TJ/d). Meanwhile, STO has a decent dividend yield and has generated over 22.96% returns in the last six months (as of June 27, 2016).
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Recommendation: We maintain our “Buy” stance on the stock at the current price of $4.54, despite short term pressures.
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