Stocks’ Details

Evolution Mining Limited

Improving Margins Coupled with a New Resistance Level: Evolution Mining Limited (ASX: EVN) is an Australian based gold mining company having five gold reserves over the continent of which three are located in Queensland (Ernest Henry, Mt. Carlton, and Mt. Rawdon) one in Western Australia (Mungari) and one in New South Wales (Cowal). Today, it is one of the top three ASX listed gold miners. EVN’s gold production for FY18 summed up to 801,187 ounces at the cost of $797 per ounce. Its FY19 guidance states that the company will produce 720,000 – 770,000 ounces of gold at the cost of $850 – $900 per ounce.


Global Leader in Low Cost Production (Source: Company Reports)

Over the past five years, the margins of the company have improved. During FY18, the company reported an EBITDA, Operating, and Net margin of 49.4%, 22.0%, and 17.1% respectively which were above the industry median of 29.6%, 19.0%, and 12.5% respectively. The company also reported ROE of 11.9% again above the industry median of 11.7%. But the asset turnover ratio reported at 0.51x was below the industry median of 0.67x, stating that the industry is unable to fully utilize its assets to generate the revenue because of high cost related to the procurement of assets. The company has ~1.7 billion shares outstanding with the market cap of ~$6.48 billion and a beta of 0.68x (5-Year, monthly basis).

During the past one year, the stock has generated a positive yield of 51.16% and is trading at a P/E and EV/EBITDA multiple of 25.05x and 8.78x, respectively as compared to the industry median indicating growth of the company. Today, the stock was up by 2.094% as compared to the previous close, currently trading at the price of level $3.90. Although it is trading at a 52-week high, the stock has breached its resistance level of $3.57, and further upside momentum is also expected on the stock. We, therefore, maintain our “Buy” recommendation on the stock at the current market price of $3.900, considering decent fundamentals and recent developments related to upgradation of Cowal plant expansion from 7.5 Mtpa to 8.7 Mtpa and excellent result from deep step-out drilling at Cowal.
 

Resolute Mining Limited

Strengthening gold hedge book: Resolute Mining Limited (ASX: RSG) is a 28-year-old gold mining company based out in Perth, Australia. The company has worked over nine gold mines based out in Australia and Africa producing 8 million ounces of gold and is currently focussing on the Syama Gold Mine located in Africa and the Ravenswood Gold Mine situated in Australia. As per its FY18 results, the company produced 284,000 ounces of gold at the cost of $1,355 per ounce.
On 21 December 2018, the company announced that it had strengthened its gold hedge book by selling a forward for an additional 30,000 ounce of gold at a price of AU$1,783 per ounce with deliveries between July 2019 to December 2019 of 5,000 ounces of gold each month.


RSG’s Investment Portfolio (Source: Company Reports)

During FY18, the company reported an EBITDA and Operating margin of 11.2% and 18.4% respectively which were below the industry median of 29.6% and 19.0% respectively. The net margin of the company was reported at 17.5% which was above the industry median of 12.5%. The ROE of 9.5% was below the industry median of 11.7%. Similarly, the asset turnover ratio reported at 0.50x was below the industry median of 0.67x, stating that the industry is unable to fully utilize its assets to generate the revenue because of high cost related to the procurement of assets. The company has ~757.51 million shares outstanding with the market cap of~ $901.44 million (as on January 04, 2019) and a beta of 0.11x (5-Year, Monthly basis).

During the past one year, the stock has generated a positive yield of 3.90% and is trading at a reasonable PE level of 13.56x. Today, the stock was up by 0.84% as compared to the previous close, currently trading at the price of level $1.200. As of now, the company continues to manage its sales via hedging strategy to take advantage of gold price volatility, maximize revenues, and protect the Company’s balance sheet, thus, we maintain our “Buy” recommendation on the stock at the current market price of $1.200.

Newcrest Mining Limited

Overvalued at Current Juncture:Newcrest Mining Limited (ASX: NCM) is an Australian based gold mining company having its mines located in Australia, Papua New Guinea (PNG) and Indonesia. Today, it is one of the largest ASX listed gold miners. The company is currently focussing on four projects out of which Cadia Valley Operations, Telfer, and Lihir are based out in Australia and Gosowong is situated in Halmahera Island, Indonesia.The company is trading with the following symbols across different exchanges: ASX: NCM; POMSoX: NCM; and NYSE ADRs: NCMGY. As per its FY18 results, the company produced 2,346,000 ounces of gold at the cost of $835 per ounce.Its FY19 guidance states that the company will produce 2,350,000 – 2,600,000 ounces of gold at the cost of $1,870 – $1,970 per ounce.


Five-Year Financial Metrics (Source: Company Reports)

During FY18, the company reported an EBITDA margin of 40.4% which was above the industry median of 29.6% whereas the Operating, Net margin and ROE of 12.4%, 5.9%, and - 2.7% respectively, were below the industrymedian of 19.0%, 12.5%, and 11.7% respectively. Even the asset turnover ratio reported at 0.31x was below the industry median of 0.67x, stating that the industry is unable to fully utilize its assets to generate the revenue because of high cost related to the procurement of assets. The company has ~768.25 million shares outstanding with the market cap of ~$17.4 billion (as of January 04, 2019) and a beta of 0.23x (5-Year, monthly basis).

During the past one year, the stock has generated a positive return of 2.13% and is trading at a higher P/E and EV/EBITDA multiple of 66.13x and 9.68x, respectively which are higher than the peer group indicating an overvalued position at the current juncture. For all instances, where today has been mentioned.

The stock was up by 3.885% as compared to the previous close, currently trading at the price of level $23.530. Although it is trading at a 52-week high and the stock has breached its 6-months resistance level of $22.350. Based on foregoing, we presume that the stock has priced in all the positive developments and is trading at a premium level, therefore, we have wait and watch view on the stock at the current market price of $23.530.


Stock Price Comparative 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 advice or recommendations.