Cooper Energy Limited

COE Details

Strong Topline Growth in March Quarter: Cooper Energy Limited (ASX: COE) is an upstream Oil & Gas company whose primary purpose is to secure, find, develop, produce and sell hydrocarbons.The company generates revenue by selling gas to south-east Australia and low-cost Cooper Basin oil production. Gas accounts for a major part of the company’s revenue, production and reserves.

The quarterly report for the period of March 2019 exhibits production of 0.33 million boe, up by 14%on prior quarter’s 0.29 million boe. The quarterly revenue stood at $20.6 million, up by 43% from $14.4 million in the prior quarter. The YTD sales revenue was $56.8 million, up by 21% from $47.1 million.

Financial Performance in 1H FY19: The underlying profit after tax stood at $3.1 million in 1H FY19, compared with $2.2 million in 1HFY18, primarily driven by higher sales revenue of $4.9 million as a result of higher oil and gas prices.


Key Financial Results 1HFY19 (Source: Company Reports)

The current ratio increased by 53.8% in 1HFY19 as compared to the prior corresponding period, driven by decrease in payables and other current liabilities.

Outlook Going Ahead: With the completion of the Sole Gas Project and offshore drilling campaign to start in December quarter of 2019, the management expects FY19 to be primarily a year of consolidation for the company. Further, the production for the second half is likely to exceed that recorded in the six months to 31 December, primarily on the back of higher gas production from Casino Henry, including flush production benefits with the restoration of output from Netherby-1.

Stock Recommendation:At the current market price of $0.49, the market capitalization for the stock stands at $810.78 million. The stock has appreciated 38.89% in last 1-year. We expect that existing assets and projects are likely to generate growth in gas production, thus, boosting financial health of the company. Hence, considering the aforesaid facts and current trading level, we maintain our “Hold” recommendation on the stock at the current market price of $0.490 per share (down 2% on 15 May 2019).


COE Daily Chart (Source: Thomson Reuters)
 

Regis Resources Limited

RRL Details

Higher COGS Impacting Bottom Line: Regis Resources Limited (ASX: RRL) is engaged in the business of production and exploration of gold within Australia and Africa region.

Financial Performance in 1H FY19: The net profit after tax for Regis stood at $79.9 million in 1HFY19 as compared to ~$84.59 million in the prior corresponding period (pcp). Net profit margin of 25% reflects the ongoing profitability of the Duketon operations. The revenue of the company stood at $317.2 million in 1HFY19 compared to $298.99 million in the prior corresponding period, an increase of 6.0% over the pcp, with 186,276 ounces of gold sold at average price of $1,696 per ounce.


Revenue and Net Profit for 1H FY19 (Source: Company Reports)

EBITDA margin at 46.5% and net margin at 25.2% in 1H FY19 remains healthy and above industry median, however, have come off from the highs witnessed in June 2018. Higher cost of goods sold impacted the bottom-line in the period under consideration.

Production Guidance: Going Forward, Duketon operations is on track to achieve the mid to upper end of the annual production guidance of 340,000-370,000 ounces with all-in sustaining costs at the mid to lower end of annual cost guidance of $985-$1,055 per ounce.

Stock Recommendation: RRL enjoys strong financial position with substantial cash & bullion along with no debt on the balance sheet. The stock has gained a 13.73% in last 6-months. At current market price of $4.620, the stock is trading at price to earnings multiple of 14.27x. The stock is currently trading towards 52-week higher level of $5.815. It reported a higher EV/EBITDA and P/CF multiples (TTM basis) of 6.8xxand 9.8x respectively against the median of concerned industry.

Annual dividend yield for the stock comes in at 3.39% with market cap of $2.4 billion. We believe that at the current price, most of the positive developments are factored in; and we look forward for further catalyst to support the valuation. Hence, we recommend an “Expensive” rating on the stock at the current market price of $4.620 per share (down 2.119% on 15 May 2019).


RRL Daily Chart (Source: Thomson Reuters)
 

Evolution Mining Limited

EVN Details

Generating Strong Cash Flow: Evolution Mining Limited (ASX: EVN) is engaged in the gold mining business with its projects in Australia and New Zealand. The company recently announced that the planned airborne magnetic and radiometric survey on the eastern one third of the Murchison Project area has commenced. The 7,200-line km detailed low level magnetic/radiometric survey with specifications of 50 metre line spacing and 30 metre sensor height will complement previously flown surveys of similar specifications on the western and central portions of the project area.

As per the latest investor presentation, the financial position of the company seems robust with balance sheet liquidity of $606.0 million. Moreover, with most of the debts repaid, EVN will return excess cash to the shareholders. The company, in its March 2019 quarterly report, updated that the group operating mine cash flow stood at A$168.3 million, with the group net mine cash flow of A$107.8 million including record net mine cash flow from Ernest Henry of A$59.5 Million. The bank debt was reduced by A$25.0 million to A$330.0 million. The net bank debt stood at A$74.2 million for the period as compared to A$41.4Million on 31 December 2018.

The statutory profit after tax for H1 FY19 stood at A$91.1 millionas compared to the prior corresponding period where the same was $122.5 million. Decline in profit was primarily driven by non-cash impact items.


1HFY19 Key Metrics (Source: Company Reports)

Moreover, the company is maintaining a strong balance sheet with a cash balance of A$313.6 million for H1 FY19 as compared to $163.5 million in the prior corresponding period, a significant increase of ~91.8%, along with strong EBITDA of 48.0% in 1H FY19. The current ratio and quick ratio substantially rose from 1.7x and 0.86x to 2.31x and 1.42x, respectively in 1HFY19 over the prior corresponding period.

What to Expect From EVN: The company expects to produce more than 700,000 ounces of gold for at least in the next three years. All-in sustaining costs (AISC) are expected to remain relatively constant throughout the period of three years, which will enable the business to grow in weaker gold price environments as well. The company expects to incur higher capex in FY19 due to investment in significant projects at Cowal, however, it is expected to reduce from FY20 onwards. Further, the group maintained FY19 production guidance of 720,000 – 770,000 ounces at an AISC of A$850 – A$900 per ounce, with the June 2019 quarter production guidance at 190,000 – 195,000 ounces.
 
Consistent operational performance along with the strong financials reported for the quarter on the back of reduced debts and higher cash flows for the company augurs well for robust performance, going forward. EVN enjoys strong fundamentals including higher organic growth on the back of increasing gold mineral and ore resources. At the current market price of $3.580, the stock is trading at P/E multiple of 26.080x. Hence, considering the aforesaid parameters, we recommend a “Buy” rating on the stock at the current market price of $3.580 per share (up 0.28% on 15 May 2019).


EVN Daily Chart (Source: Thomson Reuters) 

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