Kalkine has a fully transformed New Avatar.
Company Overview: West African Resources Limited (ASX: WAF) is a gold mining company focussed on creating shareholder value through the acquisition, exploration and development of gold projects in West Africa. WAF has 100% interest in Sartenga copper-gold-molybdenum project, which has a large tonnage porphyry system. WAF also holds 90% interest in the Sanbrado Gold Project, which is located 90km east-southeast of Ouagadougou, and it covers an aggregate area of 116km².
WAF Details
Q4FY21 Operational Highlights:
Gold Production Trend (Source: Analysis by Kalkine Group)
Change of Director’s Interest: On 3rd February 2022, one of the company’s Directors, Rodney L Leonard, who holds an indirect interest in the company, acquired 22,277 ordinary shares of the company via exercise of performance rights. On 1 Feb 2022, Stewart Findlay, one of the company’s Directors, acquired 50,863 ordinary shares via exercise of performance rights.
Gold Operations Continue in Burkina Faso: Following recent political developments in Burkina Faso, WAF recently assured that its staff and contractors are safe and the company’s Sanbrado Gold Operations (Sanbrado) in Burkina Faso are continuing to operate as usual.
Key Metrics: For H1FY21, the company reported gross margin of 52.8%, up from 46% in H1FY20. Net margin for H1FY20 stood at 27.5%, up from 6.4% in H1FY20. ROE for H1FY21 stood at 32.8%, up from 3.7% in FY20. Debt to equity ratio for H1FY21 stood at 0.7x, up from 3.71% in FY20.
Debt to Equity Ratio Trend (Source: Analysis by Kalkine Group)
Top 10 Shareholders: The top 10 shareholders together form around 44.25% of the total shareholding, while the top four constitute the maximum holding. Van Eck Associates Corporation and L1 Capital Pty Ltd. are holding a maximum stake in the company at 12.53% and 5.49%, respectively, as also highlighted in the chart below:
Key Risks:
Outlook: The company is now focused on progressing the Kiaka feasibility study and ESIA updates and commencing mobilisation of site early works. With its acquisition of the advanced Kiaka gold project, the company aims to be a +400,000 ounce per year producer by 2025. The company is planning to release production and cost guidance for 2022, and updated resources and reserves for Sanbrado and Toega later in Q1FY22.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
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 corrected by ~14.91%. The stock is currently trading higher than the average 52-week price level band of $0.72 - $1.465. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price with an upside of low double-digit (in % terms). The company can trade at a slight premium to its peers considering the acquisition synergies, updated resources base, and higher production figures. For the valuation, peers such as Ramelius Resources Ltd (ASX: RMS), Silver Lake Resources Ltd. (ASX: SLR), Gold Road Resources Ltd (ASX: GOR) and others have been considered. Considering the company’s decent production performance, expected benefits from recent acquisitions, modest outlook, and indicative upside in valuation, we give a “Speculative Buy” rating on the stock at the closing market price of $1.17 as on 8 February 2022.
WAF 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 for 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 is 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 the 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.