Saracen Mineral Holdings Limited

Payment of Deferred Consideration for King of the Hills: Saracen Mineral Holdings Limited (ASX: SAR) has received the payment of $4.5 million deferred consideration related to the October 2017 acquisition agreement for the King of the Hills (KOTH) gold mine in Western Australia. On the other hand, SAR has delivered robust net profit growth of 166% to A$75.6m for FY 18. This is on back of rise in gold sales to 317,675oz compared to 266,556oz in FY17 and sharp decline in AISC to A$1,139/oz compared to A$1,348/oz in FY17. However, the average gold price realised for the year was $1,606/oz, which fell 2% from $1,642/oz in 2017. The company has reported 21% growth in the revenue to A$511 million. During the full year 2018, the underlying NPAT, that excludes the A$10.6 million abnormal profit booked on the sale of King of the Hills, a non-cash write down of $0.9 million related to the disposal of the Wallbrook project and the expensing of $1.4 million of exploration costs previously capitalised, has doubled to A$67.3 million. The company’s EBITDA rose by 75% to A$198.7 million, due to strong production volumes, lower costs and a strong Australian-dollar gold price. During FY 18, the company’s gold production had increased 16% to a record level of 316,453 ounces. SAR stock has fallen 6.10% in three months as on October 3rd, 2018. However, we give a “Buy” recommendation on the stock at the current price of $ 2.010 given the low level opportunity. The stock has immediate support at $1.75 and resistance at $2.30. Long-term rising trend is expected to be above the technical support level at $1.75 while the group's activity seems to turn profitable due to its net margins.
 

FY 18 Financial Performance (Source: Company Reports)
 

Iluka Resources Limited

Turnaround in 1H 2018 & Rise in Zircon prices: Iluka Resources Limited’s (ASX: ILU) stock has fallen 6.16% in three months as on October 3rd, 2018 as the company’s first half Z/R/SR production was 23% lower to 351kt than first half 2017 due to given cessation of HMC processing from Murray Basin. The sales of Z/R/SR in the first half declined by 3.3%. However, in the 1H 2018, ILU has reported 80% growth in the Underlying Group EBITDA to $279 million. In 1H 2018, Zircon (premium and standard) prices were up by 47% on H1 2017. Mineral sands revenue increased by 21% to $607 million on first half 2017. The company has reported the net profit after tax of $126 million compared to loss of $81.5 million in 1H 2017. Moreover, Jacinth-Ambrosia is operating successfully during the first half after the restart in December 2017 but the delays in commissioning in-pit mining unit and dredge downtime has reduced the production at Sierra Rutile. Additionally, ILU expects significant capital program in 2019 for Cataby development and Sierra Rutile expansions and significant tax payments in 2019. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 10.060 while it has immediate support at $9.06 and resistance at $10.72. Over the last twelve months, the sales forecast has been frequently revised upwards. According to recent estimates, the positive momentum is still prevailing; and in the past five days, the stock has given return of 2.24%.
 

Alumina Limited

Strong Performance in 1H 2018 with good dividend: Alumina Limited’s (ASX: AWC) stock surged 10.75% on October 4th, 2018 and was one of the best performing stocks among mid- cap companies (AWC has market capitalization of $8.75 billion), which has taken the stock to a new 10-year high. The stock was boosted by aluminum prices that were up by more than $US10 after the world's alumina largest refinery Alunorte has shut down production indefinitely, affecting 5 per cent of global alumina supply. On the other hand, for the first half 2018, AWC has reported whopping 110% rise in the net profit after tax to US$286.4 million. The total EBITDA rose by US$525.6 million to US$1,208.0 million and margin for alumina refineries has expanded by $87 per tonne, to US$200 per tonne in the first half of 2018. The company’s net cash inflows increased by $196.9 million to $660.5 million in 1H 2018. Additionally, alumina price is fluctuating due to tight Western world alumina market and structural and environmental reforms in China. This market condition is expected to continue in the second half of 2018 on the back of the Alunorte refinery in Brazil which is still running below capacity and China is expected to resume winter production cuts later in the second half. Meanwhile, AWC stock has risen 0.72% in three months as on October 3rd, 2018  and is trading at a P/E of 12.45x. The company also has a good dividend yield of 8.47% and has declared a fully-franked interim dividend of US8.6 cents a share, up from US4.2 cents a year ago. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 3.090 as it has immediate support at $2.57.
 

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