Kalkine has a fully transformed New Avatar.
Company Overview: St Barbara Limited (ASX: SBM) is a gold production company with a diversified portfolio of gold operations, including Leonora Operations in Western Australia, the Simberi operations in Papua New Guinea, and the Atlantic Gold Operations in Nova Scotia, Canada. The company’s strategy is focused on developing or acquiring gold deposits in order to diversify the Group’s production base to create a portfolio of sustainable long-life operations. SBM was listed on ASX on 15 May 1969.
SBM Details
Acquisition of Bardoc Gold Limited: On 20 December 2021, St Barbara Limited (ASX: SBM) announced that it has entered into a binding scheme implementation deed with Bardoc Gold Limited (ASX: BDC), under which, SBM will acquire all of the shares in the capital of BDC by way of a scheme of arrangement. This transaction is expected to expand SBM’s footprint in the Leonora province and accelerate the Leonora Province Plan.
Q1FY22 Result Highlights: During the quarter ending 30 September 2021 (Q1FY22), the company advanced the Leonora Province Plan with drilling at Trevor Bore delivering near surface high-grade intercepts with 7 metres at 10.5 g/t Au from 17 metres. Some of the key highlights of the quarter are as follows:
Quarterly Gold Production Trend (Source: Analysis by Kalkine Group)
Completed the Tailing of DSTP Pipeline: On 4 January 2022, SBM notified that it has completed the laying of the deep-sea tailings placement (DSTP) pipeline at Simberi operations. Notably, over the last few months, the company has conducted substantial pre stripping at Simberi and is now preparing for the commencement of full processing at the process plant of Simberi operations.
Key Metrics: EBITDA margin for FY21 stood at 35%, down from 43.4% in FY20, but higher than the industry median of 29.3%. Asset turnover ratio for FY21 stood at 0.39x in FY21, down from 0.46x in FY20. Current ratio for FY21 stood at 1.26x, down from 4.41x in FY20. Debt to equity multiple 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 43.60% 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 8.96%, respectively, as also highlighted in the chart below:
(Source: Analysis by Kalkine Group)
Key Risks:
Outlook: The proposed acquisition of BDC will provide SBM access to the advanced Aphrodite and Zoroastrian underground deposits lying immediately adjacent to the rail line, which runs to the Leonora processing plant. Further, the acquisition will help SBM in expanding the Leonora processing plant from 1.4Mtpa to 2.1Mtpa. 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 – A$1,860. Growth capex in FY22 is expected to be between $70 – $95 million.
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: Over the last three months, the stock has been corrected by ~9.47% and is trading lower than the average 52-weeks’ price level band of $1.255 - $2.390. 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 uncertainties surrounding the COVID-19 pandemic, and gold price fluctuations. For the valuation purpose, peers such as Regis Resources Ltd (ASX: RRL), OceanaGold Corp (ASX: OGC), Red 5 Ltd (ASX: RED), etc. have been considered. Considering the expected benefits from the proposed acquisition of Bardoc Gold Limited, cost savings expected from the ongoing Building Brilliance program, current trading levels, improved production at Leonora operations in Q1FY22, modest production outlook and valuation, we give a ‘Buy’ rating on the stock at the current market price of $1.325 as on 11 January 2022, 10:30 AM, (GMT+10), Sydney, Eastern Australia.
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.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.