Evolution Mining Limited

Strong cash balance: Evolution Mining Limited (ASX: EVN), on 13 February 2019, has announced to pay a fully paid ordinary dividend of AUD 0.035 which is having the payment date of March 29, 2019 and record date of 22 February 2019. The statutory profit after tax for H1 FY19 stood at A$91.1 million as compared to $122.5 million compared to the prior corresponding period. The profit decline was primarily driven by non-cash impact items.

The company is maintaining a strong balance sheet with a cash balance of A$313.6 million for H1 FY19 as compared to $163.5 million in the prior corresponding period, a significant increase of ~91.8%. Current ratio and quick ratio substantially rise from 1.7x and 0.86x to 2.31x and 1.42x respectively, in 1HFY19 over the prior corresponding period.


Key Metrics (Source: Company Reports)

What to Expect From EVN: Going Forward, the company will focus on prioritising margins over production growth. It expects to produce in excess of 700,000 ounces of gold for at least the next three years. All-in sustaining costs are expected to remain relatively constant throughout this period enabling the business to prosper even in weaker gold price environments.

It will have higher capex in FY19 due to investment in significant projects at Cowal, however it is expected to decline from FY20 onwards.
 
On the price-performance front, the stock has produced significant returns over the past three months and six months period, with 20.63% and 35.23% respectively. Given the backdrop of aforesaid facts and robust fundamental with a healthy balance sheet, we uphold our “Buy” recommendation on the stock at the current market price of $3.650 per share (down 3.947% on 21 February 2019).
 

OceanaGold Corporation

A Look at Key Updates: OceanaGold Corporation (ASX: OGC), has recently announced the appointment of Ian Reid as the new Non-Executive Chairman of OceanaGold, effective June 2019, and Mr. Craig Nelsen as a new Non-Executive Director, with Jim Askew, retiring at the June 2019 Annual General Meeting.

Ian Reid is a professional company director with a deep background in mining services, executive management of global companies and performance improvement. However, Craig Nelsen has more than 40 years in exploration, resource development and mine development experience.
 
 

EBITDA Margins & ROIC Trend (Source: Company Reports)
 
On the financial front, the revenue for the year ended 31 December 2018 increased by 6.6% to US$772.5 million in FY18 compared to $724.4 million in FY17, mainly due to higher gold ounces sold, higher average prices received for gold and copper and the inclusion of first full year revenue of the Haile Gold Mine.

Net profit after tax for the year ended 31 December 2018 was $121.7 million compared to $171.8 million for the year ended 31 December 2017, a decrease of 29.2%. This result was attributable to higher operating costs, higher general and administration – indirect taxes and higher income tax expense mainly related to New Zealand and the United States.

What’s OGC’s Strategy Going Forward: The company is going to implement productivity improvements and cost reductions through Implementation of innovative technologies in the operational front. On the financial front, however, the group has plans for disciplined capital allocation and maintain low leverage and continue delivering strong ROIC.

On the price-performance front, the stock has generated decent returns over the past three months and six months period, with 17.08% and 19.75% respectively.The stock is trading slightly above the average of 52 weeks high and low level of ~$4.22 with reasonable PE multiple of 11.30x, showing an undervalued scenario. However, the issues relating to cost management that impacted group's performance is something to be watch out for. Based on foregoing, we maintain our “Hold’ rating on the stock at the current market price of $4.730.

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