Stocks’ Details

Perenti Global Limited

Decent Outlook for FY20:Perenti Global Limited (ASX: PRN) is a mining company engaged in surface mining, underground mining and support services. The company recently responded to a media speculation stating that it is considering the acquisition of Downer EDI’s mining services division and will go ahead with an offer if the acquisition will align with its strategy and serve value for the shareholders. The company will execute a transaction only if the buyout has the potential to be EPS accretive.

PRN Secures a Contract worth $200 million: The company recently updated that Barminco, a subsidiary of Perenti Global Ltd, has been chosen as a contractor by Panoramic Resources at the Savannah Project in the Kimberley, for a period of three years. The scope of the contract involves mine development, production, and haulage, with work expected to commence in March 2020.

FY19 Results: During the year, the company reported statutory revenue amounting to $1.638 billion, up 89.1% on pcp. Underlying NPAT stood higher than the guidance amount, at $103.1 million. The company declared a fully franked dividend of 3.5 cents per share.


FY19 Financial Results (Source: Company Reports)

Guidance: For FY20, the company is targeting an underlying EBITDA amounting to $140 million, provided that global market conditions remain positive.

Valuation Methodology:P/E Based Valuation

P/E Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation:The stock of the company is currently trading below the average of its 52-week trading range of $1.250 - $2.400. The recent contract for the Savannah Project represents a key achievement for the business and depicts its ability to tap organic growth opportunities, as and when arise. The company remains confident about future growth on the back of a strong balance sheet and an enhanced order book. We have valued the stock using Price to Earnings based relative valuation method and for the purpose, have taken the peer group - Macmahon Holdings Ltd (ASX: MAH), Sandfire Resources Ltd (ASX: SFR), NRW Holdings Ltd (NWH), etc. As a result, we have arrived at a target price offering an upside of higher single-digit (in % terms). Hence, we give a “Buy” recommendation on the stock at the current market price of $1.510, up 2.027% on 6^th February 2020.
 

Coronado Global Resources Inc.

CRN Eyeing New Sales Opportunities:Coronado Global Resources Inc. (ASX: CRN) is a leading producer of high-quality metallurgical coal for production of steel.

December Quarter and FY19 Production Highlights: During the quarter ended 31^st December 2019, the company reported ROM production of 6.6 Mt, representing a fall of 12.8% on the previous quarter. FY19 ROM production came in at 30.8 Mt. Saleable production for the quarter came in at 4.6 Mt, down 12.4% QoQ. FY19 total saleable production stood at 20.2 Mt. Both ROM production and total saleable production for FY19 were in-line with the previous year. Higher inventories at the US operations and maintenance shutdown at Curragh were the key reasons for the decline in production.


Production & Sales Summary (Source: Company Reports)

FY19 revenue came in at US$2,216 million, as compared to US$2,296 million in FY18. As at 31^st December 2019, net debt of the company amounted to US$303 million. Overall, the company experienced a challenging second half that followed a strong first half in FY19.

What to Expect: The company is looking forward to new sales opportunities for its US coal brands beyond 2020 and is exploring new marketing channels by leveraging its existing global relationships. It is on track for expansion at the Curragh Mine and expects to deliver decent returns to shareholders in 2020.

Valuation Methodology:Price to Cash Flow Multiple Approach

Price to Cash Flow Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of the company gave negative returns of 9.05% in the past one month. Currently, the stock is trading close to its 52-week low of $1.900. Despite a challenging second half, the company managed to deliver results in-line with the previous year. We have valued the stock using Price to Cash Flow Based relative valuation method and arrived at a target price offering an upside of single-digit (in % terms). In the light of a decent outlook, plans in pipeline, favourable valuation, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $1.995, down 0.746% on 6^th February 2020.
 

Saracen Mineral Holdings Limited

Record Production in December Quarter:Saracen Mineral Holdings Limited (ASX: SAR) is engaged in exploration and mining of gold and other minerals. The company recently announced that it is no longer a substantial shareholder of Red 5 Limited. As per another recent announcement, the company notified that its general meeting will be held on 5^th March 2020.

Quarterly Performance: During the quarter ended 31^st December 2019, the company produced 120,127 ounces of gold at an All-in Sustaining Cost of $1,098 per ounce. The company sold 117,575 ounces of gold at an average sale price of $2,034 per ounce. The above sales gave revenue amounting to $239 million. Net mine operating cashflow for the period came in at $91 million, higher than $82 million reported in the September quarter. Cash and cash equivalents at the end of the period stood at $283.8 million.


Production & AISC (Source: Company Reports)

Production Guidance: FY20 and FY21 group production has been estimated at ~500,000 ounces and ~600,000 ounces, respectively. During the September quarter 2020, the company might provide an update regarding Resources and Reserves and group production guidance for FY21.

Stock Recommendation: Over a period of 1 year, the stock generated returns of 20.94% and is currently trading above the average of its 52 weeks trading range of $2.423 - $4.659.The company reported record production in the December quarter and witnessed successful drilling results from Carosue Dam. The company is committed to exploration activities and invested an amount of $15.3 million for the same during the December quarter. Considering the performance in December’19 quarter, decent production guidance, business developments, and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $3.940, down 0.253% on 6^th February 2020.


Comparative Price Chart (Source: Thomson Reuters)

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