Stocks’ Details

Rio Tinto Limited

A Quick Update on Shareholdings of KMP/PDMR: Rio Tinto Limited (ASX: RIO) is engaged in the production of various minerals and metals like copper, gold, iron ore, coal, aluminium, borates, and titanium dioxide. As on June 5, 2019, the market capitalisation of the company stood at ~A$36.59 Bn. Recently, the company, by release, dated 4^th June 2019, notified the London Stock Exchange about interests of persons discharging managerial responsibility/ key management personnel (PDMR/KMP) in Rio Tinto plc’s securities in relation to fulfilling the compliance with the EU Market Abuse Regulation.RIO shed more light on performance share plan 2013 (or PSP) and it gives the participant a conditional right to receive a share of Rio Tinto plc or Rio Tinto Limited shares, subject to fulfillment of performance conditions. The 2014 performance share award which vested in 2019 is subject to two performance conditions as follows:
 

• Two third of the award is subject to Total Shareholder Return (TSR) performance
•  
• The remaining one third to an earnings-based measure of Relative EBIT Margin

PDMR’s award (Source: Company Reports)

What to Expect from RIO:  As per the CEO address on AGM, the company would focus on safety, qualities of products, relationship with its customers and suppliers, productivity of its operations and maintain a strong balance sheet. It would be continuing its focus on value over volume, high value growth and mine-to-market productivity. Additionally, partnership and sustainability would be important priorities for the company.

Stock Recommendation: RIO would continue to make efforts to keep people safe, healthy and fully ready for the challenges, which might come in the upcoming years. When it comes to the financial metrics, it had shown satisfying numbers. The net margin of the company stood at 34.4% in FY18 as compared to the industry median of 14.0%, which implies that RIO has a better capability to convert its top line into the bottom line. While the current ratio of the company stood at 1.91x in FY18 in comparison to the industry median of 1.67x, which represents that the company is in a decent position to address its short-term obligations.

On the stock performance front, it had witnessed a rise of 4.36% and 34.20% in the time span of three months and six months, respectively. Currently, the stock is trading slightly towards its 52-week higher price of $107.990. Hence, considering the aforesaid facts and current trading level, we give an “Expensive” recommendation on the stock at the current market price of A$99.510 per share (up 0.964% on 5^th June 2019).
 

Cooper Energy Limited

Addition to S&P Dow Jones Indices: Cooper Energy Limited (ASX: COE) is upstream oil and gas exploration and production company. Its primary focus is to secure, find, develop, produce and sell hydrocarbons. COE has a market capitalisation of A$818.88 Mn as on June 5, 2019. Recently, S&P Dow Jones had removed Healthscope Limited from S&P/ASX 200 which became effective at the open of trading on May 27, 2019. Adding to that, it was mentioned that Healthscope Limited has been replaced by Cooper Energy Limited in the S&P/ASX 200, effective at the open on May 27, 2019.
 
Signing of Sales Agreement: On 5^th June 2019, the company had announced that it had inked a new gas supply agreement with AGL Energy from COE’s Sole (Gippsland Basin) and Casino Henry (Otway Basin) gas operations.

Under the agreements, AGL Energy had contracted to take a share of the 2019 CY production from Sole, inclusive of commissioning gas. It will take up to 4 PJ from Sole for the period 1 January 2020 to 30 April 2020. This tranche represents an extension to the gas volume AGL previously contracted from 1 May 2020.  Additionally, it will also take 100% of Cooper Energy’s share of gas production from Casino Henry for the 2020 calendar year. These would be done at the current market prices.  

Robust Growth in Revenue Witnessed: The company published its Q3FY19 report on 29^th April 2019. The company’s gas production witnessed a rise of 16% to 1.63 PJ for Q3FY19 in comparison to the previous quarter. The rise has been resulted by the increased production from Casino Henry gas field. Adding to that, crude oil and condensate production stood at 62.78 kbbl, which reflects a rise of 5% in comparison to previous quarter production of 59.98 kbbl.
 
The sales revenue for Q3FY19 was $20.6 Mn, which represents an increase of 43% as compared to the prior quarter of $14.4 million. The sales numbers are supported by increased gas prices and production and higher oil sales volume. The company ended Q3FY19 with the cash position of $157.1Mn as compared to $193.9 million at the beginning of the quarter.
 

 
 Quarterly Gas Production (Source: Company Reports)
 
Future Aspects: The company stated that planning for Henry development well continues. COE is expecting a decision on the timing of the well in the September quarter 2019 after assessing the exploration drilling outcomes at Annie and Elanora. However, this might affect the order of future developments to maximize production and value. It had targeted offshore drilling campaign for late 2020/early 2021. However, it is subject to rig availability.
 
Stock Recommendation: The company is anticipating the full year production of around 1.3 million barrels of oil equivalent as compared to the previous guidance of approximately 1.4 million boe. The current ratio of the company stood at 6.34x in 1HFY19 when compared to the industry median of 1.25x, which reflects that the company is in a decent position to address its short-term obligation in comparison to the broader industry. Coming to the stock’s past performance, it had witnessed a rise of 17.44% and 34.67% in the time span of six months and one-year, respectively. Based on the foregoing and looking at current trading level, we give a “Hold” rating on the stock at the current market price of A$0.530 per share (up 4.95% on June 5, 2019).
 

Dacian Gold Limited

DCN Provided Mt Morgans Operation & Corporate Update: Dacian Gold Limited (ASX: DCN) had provided revised production as well as cost guidance and it also commences strategic review to consider corporate approaches. The company had stated that the production guidance for the quarter ended June had been revised to 36,000-38,000oz at MMGO All-in Sustaining Cost (or AISC) of A$1,500-$1,600/oz while the previous guidance was 50,000-55,000oz at MMGO AISC of A$1,050-$1,150/oz. The revision of guidance follows the underground contractor performance issues resurfacing. Also, lower-than-expected grade performance on subordinate lodes at Westralia and hangingwall lodes at Jupiter had impacted the production which was planned.

However, the company stated that the mining of the thicker, higher grade Cornwall Shear Zone at Jupiter is progressing well. In the quarter ended March 2019, the company’s net cash used in the operating activities stood at $5.41 million and, during the same period, it had made production payments amounting to $43.578 million.
 
 
Operating Cashflow Statement (Source: Company Reports)

What To Look Out in DCN Moving Forward: DCN had stated that an updated 5-year Mine Plan is expected to be out by June end. The company’s preliminary review had anticipated annual average production level between 160,000-180,000oz over the span of five years. DCN is optimistic and stated that the ongoing exploration success would continue the indicative production levels of the 5-Year Mine Plan well beyond five years.  

The company’s preliminary FY 2020 production and cost guidance indicates that the production would be between 150,000-170,000oz at MMGO AISC of A$1,350-$1,450/oz.

Stock Recommendation: In a recent update, DCN stated that it started a strategic review process in order to consider the potential corporate as well as funding initiatives which may culminate in a change of control transaction. Over the span of five years, the company’s stock has delivered significant returns of 532.69% which might attract the attention of market players. Also, the company added that the final FY 2020 guidance would be out by June end after the completion of further optimisation analysis. As per ASX, the company is trading at a 52-week low price of A$0.515.

Even the stock had witnessed significant fall today (i.e. June 5, 2019), we advise the market player to keep a check on final FY 2020 guidance, which is expected to be released soon.Hence, we give a “Hold” recommendation on the stock at the current price of A$0.515 per share (down 67.508% on 5 June 2019).


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.