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Company Overview: St Barbara Limited (ASX: SBM) is a gold exploration and production company with operations in Australia, Canada, and Papua New Guinea. The company’s assets include Leonora operations in Western Australia, Atlantic Gold Operations in Nova Scotia, Canada, and Simberi operations in Papua New Guinea. The company’s strategy is focused on developing or acquiring gold deposits in order to diversify its production base to create a portfolio of sustainable long-life operations.
SBM Details
2021 AGM Highlights: On 27 October 2021, SBM held its 2021 Annual General Meeting (AGM), wherein, the management highlighted that moving forward the company is focused on building momentum with its Leonora Province Plan, leveraging the excellent infrastructure and the decades of operational experience. Some of the key highlights of AGM are as follows:
Q1FY22 Result Highlights:
Leonora Production Trend (Source: Analysis by Kalkine Group)
Key Metrics: Gross margin for FY21 stood at 46.4%, down from 50.4% in FY20, but higher than the industry median of 38.6%. EBITDA margin for FY21 stood at 35%, down from 43.4% in FY20, but higher than the industry median of 29.1%. Current ratio for FY21 stood at 1.26x, down from 4.41x in FY20. Debt to equity ratio for FY21 stood at 0.1x in FY21, down from 0.25x in FY20.
Debt to Equity Ratio (Source: Analysis by Kalkine Group)
Top 10 Shareholders: The top 10 shareholders together form around 41.99% of the total shareholding while the top four constitutes the maximum holding. Van Eck Associates Corporation and L1 Capital Pty Ltd. are holding a maximum stake in the company at 9.89%, and 7.58%, respectively, as also highlighted in the chart below:
(Source: Analysis by Kalkine Group)
Key Risks:
FY22 Guidance: In FY22, the company is focused on developing and implementing business improvement initiatives under its Building Brilliance program. The consolidated gold production in FY22 is expected to be between 305 – 355k ounces with AISC of between A$1,710 – A1,860. Growth capex in FY22 is expected to be between $70 – $95 million.
Operation-wise Outlook and Guidance:
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of SBM gave a negative return of ~9.47% in the past three months and a negative return of ~22.26% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.255 - $2.660. The stock has been valued using an Enterprise Value to Sales-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The stock can trade at a slight discount than its peers, considering the risks associated with the fluctuations in gold price and COVID-19 uncertainty. For the valuation purpose, peers such as, Regis Resources Ltd (ASX: RRL), OceanaGold Corp (ASX: OGC), Resolute Mining Ltd (ASX: RSG), other have been considered. Considering the expected benefits of the ongoing Building Brilliance program, current trading levels, improved production at Leonora operations, lower AISC in Q1FY22, modest production outlook and valuation, we give a ‘Buy’ rating on the stock at the closing price of $1.450, down by ~3.334% as on 23 November 2021.
SBM Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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