Company Overview: Tribune Resources Limited is an Australia-based company engaged in the development of exploration, development and production activities at its East Kundana Joint Venture (EKJV) tenements. The Company's EKJV is located approximately 20 kilometers west northwest of Kalgoorlie and approximately 50 kilometers northeast of Coolgardie. Its Japa Concession is located in the Western Region of Ghana, approximately 110 kilometers southwest of Kumasi and approximately 50 kilometers north of Tarkwa, and the concession covers approximately 27.52 square kilometers within the Akropong Belt within the Birimian Supergroup that hosts the Ashanti type lode-gold deposits of West Africa. The Company also operates West Kundana Joint Venture, Mt Celia Project and Seven Mile Hill in Western Australia. The Company's subsidiaries include Tribune Resources (Ghana) Limited, Mount Manning Resources Limited, Melville Parade Pty Ltd and Rand Mining Limited.


TBR Details

Significant Increase in Profit Witnessed in 1H FY 2019: Tribune Resources Limited (ASX: TBR) is an ASX listed company whose principal activities revolve around exploration, development and production activities at East Kundana Joint Venture tenements (or EKJV). As on July 9, 2019, the market capitalisation of Tribune Resources Limited stood at $339.12 million. The company had released their results for the half-year ended December 2018 (or 1H FY 2019) in which its profit, after providing for the income tax and non-controlling interest, stood at $43,674,258 as compared to $17,985,993 generated in the same period of the previous year. During the half-year, the company had sold the significant amount of gold inventory and the proceeds were utilised to cover the working capital and dividends that have been paid as well as declared to the shareholders. The company had witnessed a significant increase in the top line in half year ended December 2018 to $358,718,582 while, in the half year to December 2017, the figure stood at $94,233,759. The gold sales amounted to $358,313,050 in 1H FY 2019 while, in 1H FY 2018, the figure amounted to $94,141,500.  


Overview of Revenues and Expenses (Source: Company Reports)

From the analysis standpoint, the company’s stock seems to be attractive considering the performance as its total revenue had witnessed a CAGR growth of 16.18% in the span from FY 2014- FY 2018 which reflects that the company is possessing strong revenue-generation capabilities. Also, TBR’s bottom line had witnessed the CAGR growth of 51.94% from FY 2014- FY 2018.

Moving forward, sound liquidity levels, lower debt/equity ratio, lesser component of debt in total capital, decent operational capabilities and asset base are expected to act as key growth catalysts.

Top 10 Shareholders: The following table provides a broader overview of the top 10 shareholders in Tribune Resources Limited:

Top 10 Shareholders (Source: Thomson Reuters)

Higher Key Margins Than Industry Median Reflect Better Performance: Tribune Resources Limited’s net margin stood at 24.2% which is higher than the industry median of 13% that reflects that the company has been effectively converting its top line into the bottom line. The company’s EBITDA and gross margin stood at 41.8% and 52.1% in 1H FY 2019 which is higher than the industry median figures of 34.6% and 41.6%, respectively.


Key Metrics (Source: Thomson Reuters)

From the liquidity standpoint, the company is possessing sound liquidity levels which is evident from its current ratio of 3.49x that is higher than the industry median of 1.89x that implies that the company can satisfy the short-term obligations in the more effective way as compared to the broader industry. The better than industry liquidity levels also provides the company with sufficient headroom to make deployments towards key strategic initiatives which could act as the long-term growth catalysts.

Lower Debt/Equity Ratio Can Be Considered a Positive: The company is having Debt/Equity ratio of 0.05x which is lower than the industry median of 0.08x and, thus, it looks like that the company’s balance sheet is less leveraged as compared to the broader industry which could be a factor to support the company’s operations moving forward.

Also, the company’s long-term debt as a percentage to total capital stood at 1.6% which is lower than the industry median of 4% and, therefore, it can be assumed that the component of debt in the total capital is lesser as compared to the broader industry median.  

EKJV Exploration Report for December 2018 Quarter: As per the report and, with respect to exploration activity, the surface exploration programs were wrapped up at Beverly Hills, Humpeg Regional as well as Ambition (multi-element results). The Near-mine Resource Development exploration is targeting the prospects like Drake, Sir Walter and Raleigh South. With respect to Beverly Hills, it was mentioned that One Reverse Circulation (RC)(319m) was drilled at Beverly Hills prospect to test for mineralisation between the Barker’s structure and an area of historical mineralisation in stockwork veining.

Coming to the Humpeg Regional, it was stated that a regional aircore drilling program was wrapped up in November. Seven holes (181m) on EKJV tenure were designed to extend aircore lines drilled at the Papa Bear prospect in 2017. In the quarterly report for December 2018, the company stated that 254,311 tonnes of EKJV ore were processed at Kanowna Plant and 56,206 tonnes of EKJV ore were processed at Greenfields Mill. Also, 27,361 oz of gold as well as 4,597 oz of silver were credited to Rand and Tribune Bullion Accounts. At quarter end, the EKJV has following stockpiles:


EKJV Stockpiles (Source: Company Reports)

During the December quarter, the Takeovers Panel made a declaration of unacceptable circumstances on September 14, 2018 as well as final orders on October 26, 2018.During the quarter ended December 2018, Board had rejected unsolicited $112.5 million offer from Northern Star Resources Limited for TBR's 36.75% interest in East Kundana Joint Venture.

Respectable CAGR Growth Witnessed in Cash from Operating Activities: The company’s cash from operating activities have witnessed the CAGR growth of 17.52% in the time span of FY 2014- FY 2018 which can be considered at respectable levels and it reflects that the company is possessing decent operational capabilities. In the quarterly report for March 2019, the company stated that 253,065 tonnes of EKJV ore were processed at Kanowna Plant, 37,869 tonnes of EKJV ore and 65,996 tonnes of R&T ore were processed at Greenfields Mill. Also, 34,473 ounces of gold and 5,549 ounces of silver were credited to Rand and Tribune Bullion Accounts. Tribune was entitled to a share of following stockpiles at March 2019 quarter end:


Stockpiles (Source: Company Reports)

During the quarter ended March 2019, Evolution Mining Limited had acquired 11.05 million which represents a 19.9% shareholding in Tribune Resources. During the same quarter, the company’s net cash used in operating activities stood at $26.54 million while the receipts from customers amounted to $0.096 million. In the time frame of FY 2014- FY 2018, the company’s cash receipts have encountered the CAGR growth of 16.29% which reflects that the company is having sound cash-generating capabilities which might help it moving forward. We expect that decent operational capabilities coupled with the sound cash-generation capabilities might support the company’s long-term growth. 

Other Updates: As per the earlier announcements by the group, TBR was involved in a Takeovers Panel process in relation to an application submitted by a shareholder on the affairs of the Group. Interim orders prohibiting the identified shareholders from disposing, transferring, charging or otherwise dealing with their shares in Tribune were made and subsequently, the Panel made a declaration of unacceptable circumstances on inadequate disclosures of substantial holdings in Tribune with respect to three shareholders - Sierra Gold Limited, Trans Global Capital Limited and Rand Mining Limited, and the associations among those. The group has also been under a discussion with respect to cross-holding arrangement with Rand Mining. In fact, a specified number of Rand shares in Tribune were then vested in ASIC to sell and be held on trust for Rand pending such sale. As per the media release dated March 29, 2019, TBR had made an announcement that the application for the judicial review of the review Panel’s decision in Tribune Resources Limited case on its affairs has now been discontinued.

Decent Asset Base Might Support Future Prospects: Looking at the balance sheet of Tribune Resources Limited, it can be said that the company is possessing decent asset base which might help it in carrying out the core operations smoothly moving forward. The company’s cash and short term investments have witnessed a rise from $11 million in FY 2014 to $13.2 million in FY 2018 which can be considered as a positive sign. Also, TBR’s total receivables (net) have declined from $6.3 million in FY 2014 to $2.3 million in FY 2018.

The company’s total current assets base witnessed a significant increase from $115.9 million in FY 2014 to 218.6 million in FY 2018 and, therefore, it looks like that the company is well-placed when it comes to working capital requirements.

What To Expect From TBR Moving Forward: In EKJV Exploration Report for March 2019 quarter and with respect to in-mine exploration, TBR had stated that drilling would continue to test the extents of K2 mineralisation to RL5400 from P5796 drill drive. The drilling also continues at Falcon to test the extent of mineralisation from drill platforms in Pegasus P5796 and P5920. A further platform in Raleigh, RA6149 would be utilised to test northern extents of Falcon mineralisation.

With respect to Regional Exploration, the company stated that regional target generation away from existing mining centres would be continuing into June 2019 quarter.The company had stated that there are intentions that it would continue the exploration, development as well as production activities on the existing projects and also would continue to acquire the further suitable projects for the exploration as opportunities come in the way. Moving forward, we expect that its higher than industry median key financial ratios (as mentioned above) and the strong revenue generation capabilities might help in gaining the attention of market players.


Historical PE Band (Source: Company Reports)

Stock Recommendation: The stock of Tribune Resources Limited has delivered significant returns as, in the span of previous six months, it posted the return of 52.75% and, in the time frame of previous three months, the return was 49.02%. The factor which might help the company in gaining traction among the market players is higher RoE than the industry median. The company’s RoE stood at 22.6% in 1H FY 2019 which is comfortably higher than the industry median of 6.5%, implying that the company has been delivering respectable returns to the shareholders in comparison to the broader industry.

The company had witnessed a rise in the total other revenue from $92,259 in 1H FY 2018 to $405,532 in 1H FY 2019. There are expectations that decent improvement in the total current asset base, strong revenue-generation capabilities coupled with sound cash-generation capabilities might act as tailwinds for the long-term growth of Tribune Resources Limited. Based on the foregoing, we have valued the stock using PE multiple and have arrived at an upside of high single to low double-digit growth ascribing a valuation of two-year average PE multiple of 6.12x to FY19E EPS. On the backdrop of above-mentioned factors, we give a “Buy” rating on the stock at the current market price of A$6.650 per share (up 8.838% on 9 July 2019).

 
TBR Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.