Stocks’ Details

OceanaGold Corporation

Margins Higher than Industry Median: OceanaGold Corporation (ASX: OGC) highlighted in the Macquarie Australia Conference that as on December 31, 2019, its Gold and Copper production stood at 500,000-550,000 oz and 14,000-15,000 tonnes, respectively. All-In-Sustaining Costs was reported at US$850-US$900 per oz. For the company, production growth per share, EBITDA growth per share, and Earnings growth per share over the period 2012-2018 were reported at 10%, 20%, and 192%, respectively. The Gold price was down by 24% over the period of 2012-2018.

Q1FY19 Financial Performance: Revenue for the company decreased from $183 Mn in Q4FY18 to $180 Mn in Q1FY19. Adjusted net profit decreased from $17 Mn in Q4FY18 to $16 Mn in Q1FY19.
 

 Q1FY19 Key Metrics (Source: Company Reports)

What to Expect: The company expects to generate strong operating cash flows from its portfolio of assets in 2019 and reinvest most of these cash flows to advance its value accretive organic growth opportunities and targeted exploration programs. It expects production in the second half of 2019 to be stronger than in the first half while costs are expected to be lower. As per the 2019 production and cost guidance, Gold and Copper production for the Group are estimated to be 500-550 Koz and 14-15 Kt, respectively. The Cash cost and All-In Sustaining cost for 2019 are estimated to be in the range USD580-630 per oz and USD850-900 per oz, respectively.


2019 Production & Cost Guidance (Source: Company Reports)

Stock Recommendation: OceanaGold’s share gained 20.80% in last 1-year. 1QFY19 Gross margin, EBITDA margin, and net margin at 43.7%, 35.7%, and 6.9% respectively, which are better than the industry median of 9.7%, 3.2% and 3% respectively, implying decent fundamental of the company than its peer group. Moreover, EV/Sales and PB multiple on TTM basis stand at 0.4x and 0.1x respectively which are lower than the industry median of 174.3x and 1.4x respectively, indicating an undervalued position at the current juncture. Hence, considering the aforesaid facts and current trading level, we recommend a “Buy” rating on the stock at the current market price of $4.090 (up, 3.544% as on June 3, 2019).
 

Newcrest Mining Limited

Gold and Copper Production forMarch Quarter Declined: Newcrest Mining Limited (ASX: NCM) in its quarterly presentation, ended for March’19, reported that Gold and Copper production are decreased by 5% to 623 koz and 6% to 25 kt respectively as compared to December’18 quarter. Group’s All-In Sustaining Cost (AISC) increased by $18/oz to $738/oz as compared to December’18 quarter. AISC margin was reported higher by $48/oz at $563/oz as compared to December’18 quarter. Group’s Year-to-date (YTD) Gold and Copper productions were increased by 7% and 33% respectively as compared to the prior period. YTD AISC decreased by 12% to $744/oz as compared to the prior year. During the period, the company has entered into an agreement to acquire 70% of the Red Chris mine in British Columbia, Canada.


March’19 Quarter Key Metrics (Source: Company Reports)

What to Expect: Production guidance for FY19 remains unchanged for the company and is expected to be around mid-point of the guidance range. Production from Cadia is expected to be around the top end of the guidance range of 800 – 880 koz for Gold and ~90 kt for Copper,whilst Gosowong and Lihir are expected to be around the bottom end of their guidance range of 950 - 1,050 koz Gold and 200 – 240 koz, respectively. AISC expenditure ($m) and total capital expenditure are both expected to be around the bottom end of their guidance range of $1,870 - 1,970 Mn and $590 – 690 Mn, respectively.

Stock Recommendation: Newcrest Mining’s share generated a positive YTD return of 25.33%. Presently, the stock is trading close to its 52-week high level of $28.270, which indicates a probability for correction in the near term. EBITDA margin and net margin for H1FY19 stood at 41.4% and 13.7% respectively which are better than the industry median of 34.6% and 13.0% respectively, implying decent fundamental than its peer group.Hence, considering the aforesaid facts and current trading level, we recommend an “Expensive” rating on the stock at the current market price of $28.210 (up, 3.675% on June 3, 2019).
 

Northern Star Resources Ltd

Overview of Challenges Witnessed during March’19 Quarter: Northern Star Resources Ltd (ASX: NST) in its March’19 quarterly activities report highlighted that around 185,296 oz of Gold was sold at an AISC of A$1,369/oz. Its Pogo’s result reflects the challenges that it faced during the period, which included the late delivery of the new mobile underground mining fleet and the introduction of a new mining method, which limited production temporarily and drove up AISC per ounce.

March’19 Quarter Financial Performance: Operating cash flow was reported at A$63 Mn. Company’s cash and cash-equivalents at the end of the period was reported at A$288 Mn after investing A$44 Mn in exploration and expansionary capex in the quarter. It reported no bank debt at the end of the period.

 
March’19 Quarter Key Metrics (Source: Company Reports)

What To Expect: In light of the strong progress at Pogo, Northern Star is set for record production in the June quarter of 235,000-260,000 oz at an AISC of A$1,075-A$1,175/oz.Group’s FY2019 production guidance is maintained at 850,000-900,000 oz. Its AISC guidance has increased slightly from A$1,125- A$1,225/oz to A$1,225-A$1,275/oz. Its production across the Australian operations is set to be at the top end of FY2019 guidance of 600,000- 640,000 oz.

Stock Recommendation: Northern Star Resources is trading closer to its 52-week higher levels of $10.140, which indicates a probability for correction in the near future. Its EBITDA margin for H1FY19 stands at 35.8% which is better than the industry median of 34.6%. Hence, considering the aforesaid facts and current trading level, we presume that the stock is “Expensive” at the current market price of $9.960 per share (up 2.575% on June 3, 2019).
 

Saracen Mineral Holdings Limited

Cash & Equivalents Increased to $153.3 Mn: Saracen Mineral Holdings Limited (ASX: SAR) in its quarterly report (ended on March’19) highlighted that its gold production for the period stood at 89,208oz at an AISC of A$1,035/oz. Its Year-to-date (YTD) gold production was reported at 266,981oz at an AISC of A$1,032/oz, which is in-line with the upwardly revised FY19 guidance.

SAR’s cash and equivalents increased from A$142.6 Mn to A$153.3 Mn at the end of March’19. Around 89,002 oz of gold was sold at an average sale price of A$1,766/oz, generating revenue of A$157.2 Mn. Its unaudited NPAT for the quarter period ranged between A$26 Mn and A$29 Mn.


March’19 Recovered Gold and AISC data (Source: Company Reports)

What To Expect: After a second upward revision in the December quarter 2018, the group production outlook for FY19 is unchanged at 345- 365,000oz at an AISC of A$1,050 - 1,100/oz.The Company is well on track to deliver into the seven-year production outlook with an upside case to 400kozpa.


 7 Year Production Outlook (Source: Company Reports)

Stock Recommendation: Its EBITDA margin and net margin for H1FY19 stand at 37.1% and 15.2% which are better than the industry median of 34.6% and 13% respectively, which implies a decent fundamental of the company than its peer group. Its ROE for H1FY19 stands at 10.6% which is better than the industry median of 6.5%. It indicates that the company generates a better return to its equity-holders than its peer group. Its current ratio for H1FY19 stands at 2.64x, which is better than the industry median of 1.87x, implying a better liquidity position to address its short-term obligations than its peer group.

Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $3.420 per share (up 6.875% on June 3, 2019).
 

Comparative Price Chart (Source: Thomson Reuters)

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