Stocks’ Details 

Coronado Global Resources Inc.

Improved Q1FY21 Performance: Coronado Global Resources Inc. (ASX: CRN) produces and exports a range of metallurgical coals. The Company owns a portfolio of metallurgical coal mines in Queensland, Australia and in the states of Pennsylvania, Virginia, and West Virginia in the United States. It operates four segments: Curragh, Buchanan, Logan, and Greenbrier. The company has reported an increase in its ROM production to 6.8MT, up modestly by 0.9% QoQ. Similarly, saleable production increased by 2.5%QoQ to 4.6MT in Q1FY21. The company has seen an improvement in price realisation for Metallurgical coal sold per MT in Q1FY21 as compared to Q4FY20.

FY20 Financial Highlights: The company has registered a decline in its revenue to US$1,462.3mn in FY20 as compared with US$2,215.8mn in FY19 due to a decline in production on the back of weaker demand seen during COVID-19 situation. The company has posted a decline in its EBITDA to US$53.8mn in FY20 as compared with US$634.2mn in FY19 due to a decline in the average realised metallurgical coal price and lower sales volumes. The company has seen an increase in its cash and restricted cash situation to US$45.73mn as on 31 December 2020 as compared with US$26.55mn as on 31 December 2019.

FY20 Results (Source: Company Reports)

Key Risks: CRN holds interest-bearing loans and borrowings, so any severe change in interest rates may lead to financial loss for the company. The company deals in multiple currencies. Any severe movement in foreign exchange prices may lead to financial losses for the company.

Outlook: CRN is expecting an increase in supply of its seaborne metallurgical coal by ~13% from 175MT in 2021 to 190 MT in 2030 due to increase in demand for the same by ~14% from 298MT in 2021 to 340MT in 2030 

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of CRN has corrected by 38.49% in the last one month and has provided a return of ~55.54% in the last three months. The current market capitalisation of CRN stands at ~$719.61mn as of 10 May 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.497-~$1.278. On the technical analysis front, the stock has a support level of ~$0.511 and a resistance of ~$0.687. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer median, considering a decline in EBITDA and a decline in revenue. For this purpose, we have taken peers Bhp Group Ltd (ASX: BHP), New Hope Corporation Ltd (ASX: NHC), Whitehaven Coal Ltd (ASX: WHC) to name a few. Considering an increase in ROM production and an increase in saleable volume in Q1FY21, increase in cash position, expectation on increased production, valuation, and associated key risks, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.530, up by ~1.923% as on 10 May 2021. 

Dacian Gold Limited

An Update on Quarterly Activities: Dacian Gold Limited (ASX: DCN) is engaged in gold exploration and development. The company's principal activities include mineral exploration and development activities at its Mt Morgans Gold Project (MMGP) in Western Australia. The company has reported its March 2021 quarterly activities report on 29 April 2021. As per the reports, the Mt Morgans Gold operation (MMGO) has produced 21,400oz at an All-In Sustaining Costs (AISC) of $1,874/oz. During the quarter, DCN has witnessed a tightening of labour market due to which production in March quarter was lower than expectations. The company has reported more than 30,000m of exploration and drilling during the quarter. 

1HFY21 Financial Highlights: The company has registered a decline in its revenue to $133.97mn in 1HFY21 as compared with $142.10mn in 1HFY20. Despite a decline in revenue, DCN has posted a turnaround in its profits to $13.62mn in 1HFY21 as compared with losses in 1HFY20 to $78.52mn in 1HFY20. DCN has posted a decline in its cash and cash equivalent position to $28.19mn as on 31 December 2020 as compared with $51.97mn as on 30 June 2020.

Revenue and Profit (Source: Company Reports)

Key Risks: The company estimates the reserves and the production quantity. Any major gap in estimates may lead to financial losses for the company. The company is dependent on key personnel to carry out its business efficiently. Tightening of labour market will lead to shortage of key personnel required for business operations and may lead to business loss.

Outlook: DCN has provided a full year 2021 production guidance of 110,000-120,000oz at an AISC of $1,400-$1,550/oz. 

Valuation Methodology: EV/EBITDA based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of DCN gave a return of ~-6.75% in the last one month and a return of ~-24.99% in the last three months. The current market capitalisation of DCN stands at ~$275.86mn as of 10 May 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.290-~$0.565. On the technical analysis front, the stock has a support level of ~$0.234 and a resistance of ~$0.412. We have valued the stock using an EV/EBITDA multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer median, considering a decline in revenue and cash position and tightening of labour market. For this purpose, we have taken peers Aeris Resources Ltd (ASX: AIS), Gascoyne Resources Ltd (ASX: GCY), Regis Resources Ltd (ASX: RRL). Considering the company has seen a turnaround in its profits in 1HFY21, increase in net assets, valuation, and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.345, up by ~1.47% as on 10 May 2021. 

Tribune Resources Limited 

Q3FY21 Performance Highlights: Tribune Resources Limited (ASX: TBR) is engaged in the development of exploration, development, and production activities at its East Kundana Joint Venture (EKJV) tenements. The company also operates West Kundana Joint Venture, Mt Celia Project, and Seven Mile Hill in Western Australia. The company has announced its March 2021 quarterly activity report on 29 April 2021. During the quarter ending on 31 March 2021, Tribune Toll and Rand collectively processed 131,406 tonnes of ore at 4.13 g/t from the EKJV operations in which TBR’s share stands at 98,554 tonnes. TBR’s share for gold from the processing stands at 12,355 oz out of total production of 16,474 oz of gold for Rand and Tribune Bullion. During the quarter, drilling activities continued at the Japa project in Ghana with 22,967 metres completed in 144 holes.

1HFY21 Financial Highlights: The company has seen an increase in revenue to $103.72mn in 1HFY21 as compared with $95.29mn in 1HFY20. TBR has registered an increase in its profit to $25.48mn in 1HFY21 as compared with $24.74mn in 1HFY20. The company has seen a decline in its cash and cash equivalent position to $6.59mn as on 31 December 2020 as compared with $14.02mn as on 30 June 2020.

Revenue and Profit (Source: Company Reports)

Key Risks: The company operates in multiple countries. Any severe movement in foreign exchange prices may lead to financial losses for the company. The company may see an impact on its profit with fluctuations in the gold prices.

Outlook: TBR June quarter 2021 exploration program is likely to include drilling pode and Hera southern extensions. Testing of the Startrek trend and Rubicon hanging wall zones are likely to continue progressing in June 2021 quarter. 

Stock Recommendation: The stock of TBR gave a return of ~-2.69% in the last one month and a return of ~-12.75% in the last three months. The current market capitalisation of TBR stands at ~$270.21mn as of 10 May 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$4.80-~$8.87. On the technical analysis front, the stock has a support level of ~$4.60 and a resistance of ~$5.79. On a TTM basis, the stock of TBR is trading at an Price/Book Value multiple of 1.2x, lower than the industry median (Metals and Mining) of 2.8x. Considering the company has seen an increase in profit and an increase in revenue, continuation of exploration activities, associated risks with the business, and valuation on a TTM basis, we recommend a “Speculative Buy” rating on the stock at the current market price of $5.06, down by ~1.748% as on 10 May 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters) 

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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