St Barbara Limited

Subdued Performance in 1HFY19: St Barbara Limited (ASX: SBM) has lately through a presentation stated that Gwalia Mine has achieved a record production which is evident from the production of 268 koz for FY 18 vis-à-vis 265 koz achieved for FY17. Also, the AISC (All-In sustainable costs) incurred for the FY 18 was A$802/oz vis-s-vis A$785/oz for the FY17. As regards the FY19 guidance, the management stated that they expect to achieve the production of 235 to 240 koz and All-In sustainable cost for FY 2019 is expected to be A$980 to A$1,000/oz.

Coming to the company’s financial performance, the company reported a Profit before tax of $111,938,000 for the half year to 31 December 2018 as compared to the $$121,640,000 for the comparative reporting period. This fall in profits was due to the lower operating margin at Gwalia, partially offset by the stronger results at Simberi, together with increased exploration expenditure.

As regards the Q2 Dec FY19 production, the Gwalia mine achieved a production of 53,257 oz vis-s-vis 62,685oz for Q1 FY19 at an All-In sustainable cost of A$1,081/oz vis-à-vis A$833/oz incurred for Q1 FY19. The company stated that lower production, higher CAPEX and higher capital development impacted unit costs.

On the financial metrics front, the company’s net margin stood at 24.5% at the end of 31 December 2018 reflecting the YoY fall of 7.4% exhibiting contracting bottom line performance. Also, the ROE has plunged as the same stood at 11.8% at the end of December 2018 reflecting a YoY fall of 9.1%.


1HFY19 Financial Highlights (Source: Company Reports)

 Meanwhile, the stock has generated a negative YTD return of 24.46% and is trading at close to a 52-week low level of $3.150. In the last three months, the stock has fallen by about 25.11% and the volatile trend is continuing. Moreover, the company recently disclosed that Vinva Investment Management ceased to be a substantial holder of SBM since 25 March 19. Given the mix of scenario, we believe it is best to avoid the stock at the current market price of $3.370 (down 4.261% on 27 March 2019).
 

Cooper Energy Limited

Gas sales to drive growth: Cooper Energy Limited (ASX: COE) recently updated that installation and testing of 67 km control umbilical connecting the Sole gas field with the Orbost Gas Plant has been wrapped up. This result in the completion of the offshore construction phase of Sole Gas Project, free of lost time injuries and within budget.Now, the only work pending on the offshore project is the repair of damaged pipe section which is slated to start in April 2019.

In the first half FY19, the company posted an underlying profit of $3.1 million up 41% from the $2.2 million reported for the pcp. Also, the Underlying EBITDA was up 6% to come in at $13.8 million from $13.0 million in the pcp. The increased revenue generation from the gas supply happens to be the crucial factor in the higher underlying profit.


Key Financial Metrics (Source: Company Reports)

What to Expect From COE: The production for the 2nd half is forecasted to supersede the mark which was recorded in the 1H FY 19. Moving forward, the company is expected to drill Annie and Elanora exploration wells in offshore Otway Basin and it also plans to wrap up Sole Gas Project & commence sales. Moreover, it also plans to commence a 90-day production test at Sole to qualify for the finance facility transition from the construction regime to operations regime.
In the meantime, the stock price has risen by 17.44% on the YTD basis and is trading close to a 52-week higher level of $0.525. Hence, considering the double-digit growth in sales revenue and underlying PAT in 1HFY19 and by looking at current trading level, we maintain our “Hold” recommendation on the stock at the current market price of $0.510 per share (up 0.99% on 27 March 2019).  

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