WorleyParsons Ltd

WOR Details

Cost efficiencies to drive operating margins:With gains in energy and resources sectors, WorleyParsons Ltd (ASX: WOR) soared 3.9% on September 18, 2017. For FY17, WOR reported a 19.5% year on year (yoy) decline in underlying net profit at $123.2 million while posting 42.6% increase in statutory net profit after tax (NPAT) at $33.5 million. Further, underlying revenue declined 23.6% to $4,377.0 million in line with the company’s customers’ spending contraction. While the contraction has impacted revenues, WOR has been able to improve both gross margin and EBIT margin by delivering significantly reduced overhead costs, improved customer delivery and an optimized portfolio of operations. WOR has exceeded the target for overhead reduction by the end of June 2017 as the program has delivered $500 million in annualized savings against an initial target of $300 million. These savings contributed to an underlying EBIT margin improvement to 5.9% from 5.3% in the prior corresponding period and made significant progress on initiative of strengthening the balance sheet during the second half of the year with total net debt position improving by $153.5 million in the period to $766.7 million.
 

FY17 Financial summary; (Source: Company reports)

WOR’s operating cash flow for the year was a net inflow of $78.9 million and day sales outstanding (DSO) improved across the business while measures to improve cash collection are continuing to improve working capital position. The company’s backlog has increased to $5.1 billion at 30 June 2017, up from $4.2 billion at 30 June 2016.We maintain a “Hold” recommendation on the stock at the current price of $ 13.65


WOR Daily Chart (Source: Thomson Reuters) 

St Barbara Ltd

SBM Details

Impact from gold prices: St Barbara Ltd.’s (ASX: SBM) stock slipped by 3.3% on September 18, 2017 at the back of gold price movement. The group had otherwise reported a 26% yoy growth in FY17 underlying net profit after tax at $160 million while posting 7% decline in statutory net profit after tax at $158 million. Underlying EBITDA grew 13% yoy to $321 million and cash flow from operating activities increased 25% yoy to $303 million (2016: $243 million). Total production for the group in the 2017 financial year was 381,101 ounces of gold (2016: 386,564 ounces), and gold sales amounted to 380,173 ounces (2016: 381,761 ounces) at an average gold price of $1,685 per ounce (2016: $1,595 per ounce). The prior year gold production and sales included 9,112 ounces from King of the Hills which was disposed of in October 2015. Notably, consolidated All-In Sustaining Cost (AISC) for the Group stood at $907 per ounce in 2017 (2016: $933 per ounce), led by the benefits of strong results achieved at Gwalia and Simberi.

On the other hand, repayment of the U.S. debt that commenced in June 2015 resulted in a significant reduction in interest paid for the year, as the total finance costs of $19.9 million reflected the benefit of the lower interest expense. Further, full repayment of the U.S. senior secured notes and other facilities totalling $228.5 million strengthened the Group’s balance sheet. The stock rose over 21.4% in the last six months (as of September 17, 2017) while it is up 46% on year to date basis. We maintain an “Expensive” recommendation at the current price of $ 2.91


SBM Daily Chart (Source: Thomson Reuters)

Fortescue Metals Group Ltd

FMG Details

Nev Power to leave the company in February 2018: Fortescue Metals Group Ltd.’s (ASX: FMG) stock has been under pressure since last week partly at the back of weakening sentiments on the stock and iron ore price forecast. The stock continued with the downswing and fell about 2.7% on September 18, 2017. FMG had announced that after seven years from the role commencement, Mr Nev Power will complete his term as CEO on 16 February 2018 and hand over the reins. FMG had delivered a strong revenue growth of 19% yoy to US$ 8,447 million for FY17, while net profit after income tax surged 112% yoy to US$ 2,093 million. The group controlled their C1 operating costs to average US$12.82/wmt which was a 17% fall against the same period last year. Total delivered cost to customers, including C1, shipping, royalty and administration costs, fell 4% yoy to US$22/wmt, against US$23/wmt in FY16. Overall, the result was driven by higher average iron ore prices. The group now expects price realisations of 75-80% on Platts 62 CFR Index to either continue or be lower than low end guidance for first half of FY18. At the end of FY17, the company holds cash of US$1.8 billion with net gearing reduced to 21% following an additional US$2.7 billion in debt repayment during the year and a further US$1.5 billion refinanced, extending maturities to 2022 on improved terms and conditions. The stock surged over 17.8% in the last three months (as of September 17, 2017) and we maintain an “Expensive” recommendation at the current price of $ 5.40


FMG Daily Chart (Source: Thomson Reuters)

Independence Group NL

IGO Details

Lake Mackay JV - Grapple prospect drilling update: Independence Group NL (ASX: IGO) and JV Partner, ABM Resources NL (ASX: ABU) have announced the update on the Lake Mackay Joint Venture Project, which includes assay results from the first diamond hole drilled at the Grapple Prospect. Assay results received from Grapple’s first diamond drill hole 17GRDD001 include 11.4m @ 7.9g/t gold, 20.7g/t silver, 0.8% copper, 1.1% zinc, 0.5% lead and 0.1% cobalt from 284.9m including 3.5m @ 18.3g/t gold, 13.8g/t silver, 1.1% copper, 0.3% zinc and 0.2% lead from 288.8m; and 14.4m @ 1.8g/t gold, 6.0g/t silver, 1.1% copper, 0.3% zinc and 0.1% lead from 348m, including 2m @ 7.2g/t gold, 1.0g/t silver, 0.2% copper and 0.1% zinc from 348m. Multiple narrow zones of sulphide mineralisation were also intersected in three additional diamond drill holes (17GRDD002, 3 and 4). These intercepts are considered to be near misses, as the main conductive zones identified in subsequent downhole electromagnetic (DHEM) surveys are interpreted to occur at locations either above, below or beyond the end of the hole. Assay results for these holes are pending.


Lake Mackay Project with active prospects on EL24915; (Source: Company reports)

Notably, the agreement recently signed with the Central Land Council (CLC), the representative body of the Traditional Owners of the region, has now provided the framework to access the entire Lake Mackay Project in the Northern Territory as part of the planned work program to systematically explore this highly prospective tenement package. Given the ongoing progress and ramp up of Nova mining activities, we maintain a “Buy” recommendation on the stock at the current market price of $ 3.55


IGO Daily Chart (Source: Thomson Reuters)

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