Stocks’ Details

Sandfire Resources Limited 

Morck Well and CashmanJV Highlights: Sandfire Resources Limited (ASX: SFR) is involved in the exploration of gold and base metal. On 28^th January 2020, the company stated the facts and updates on the Joint Venture with Morck Well and Cashman.During the December 2019 quarter, the company completed 322 Air Core (AC) drill holes for a total of 15,025m pertaining to the Morck Well JV. Further, Five Reverse Circulation (RC) drill holes were completed within the Morck Well JV for 2,092m. In addition, the company has planned for RC drilling for testing of geochemical and geophysical anomalies. In relation to the Cashman JV, the company completed two RC drill holes for the period for 694m.The company expects more than $8M expenditure for the upcoming exploration programmes within both the Cashman and Morck Well JVs. 
 

CashmanJV Updates (Source: Company Reports)
 

Morck Well JV Updates (Source: Company Reports)
 
Tshukudu Exploration Update: On 24^th January 2020, Sandfire Resources Limited (ASX: SFR) announced that the initial exploration program at the Tshukudu Exploration Project has delivered robust results, with important new zone of copper mineralisation intersected at the A4 Dome, 8km west of the T3 Copper-Silver Project. Primary focus of the company lies on the ~1,000 km² T3 Expansion Project. Drilling is currently aimed at the A4 Dome and has returned substantial wide intercepts of copper at shallow depth over the 250m strike length.
 
 Drill-Hole Parameters for A4 Dome Drill-Holes (Source: Company Reports)
 
Valuation Methodology: P/B Multiple Approach

P/BBased Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of SFR is trading close to its 52-weeks low level of $5.350, offering a decent opportunity for accumulation. As on 28^th January 2020, the market capitalisation of the company stood at ~$1.06 billion with a PE multiple of 9.11x (on TTM basis) and an annual dividend yield of 3.87%.We have valued the stock using a relative valuation method, i.e., P/B based approach and arrived at a target upside of lower double-digit (in % terms). For the said purpose, we have considered peers like OZ Minerals Ltd (ASX: OZL), IGO Ltd (ASX: IGO) and Western Areas Ltd (ASX: WSA), to name few. Hence, we recommend a “Buy” rating on the stock at the current market price of $5.600, down by 5.724% on 28 January 2020, on account of an update related to the Morck Well and Cashman JVs.

Perenti Global Limited

 
Revenue up ~14.2% in FY19: Perenti Global Limited (ASX: PRN) is engaged in delivering mining projects in tough environments and is one of the leading companies to offer both surface and underground mining solutions. Recently, the company highlighted that around 66,668 PRNAA Options issued at an exercise price of $0.1745, under the ESOP (2015) have lapsed.
 
FY19 Key Highlights:Proforma revenue for the period came in at $1.970 billion, up 14.2% year over year, and statutory revenue rose by 89.1% to $1.638 billion. Proforma underlying EBIT stood at $217.0 million, up 15.4% year over year. Underlying net profit after tax (before amortisation) for the period was $103.1 million, beating the guidance of $98.0 million. Statutory net profit after tax for the period was reported at $181.3 million. The Board of Directors declared a fully franked final dividend of 3.5 cents in FY19.
 

FY19 Key Metrics (Source: Company Reports)
 
Valuation Methodology: P/E Multiple Approach

P/EBased Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: PRN’s stock is currently trading below the average of its 52-week high and low level of $2.400 and $1.250, respectively. As on 28^th January 2020, the market capitalisation of the company stood at ~$1.05 billion with an annual dividend yield of 4.59%. Considering the performance in FY19 and current trading levels, we have valued the stock using a relative valuation method, i.e., Price to Earnings (PE) multiple and for the purpose, have taken the peer group - Imdex Ltd (ASX: IMD), Emeco Holdings Ltd (ASX: EHL), Macmahon Holdings Ltd (ASX: MAH), etc. Therefore, we have arrived at a target price of lower double-digit growth (in % terms). Hence, we recommend a “Buy” rating on the stock at the current market price of $1.535, up 0.656% on January 28, 2020.

Stanmore Coal Limited

 
December’19 Quarter Production Updates:Stanmore Coal Limited (ASX: SMR) is involved in the development, exploration, sale and production of metallurgical and thermal coal. On 14^th January 2020, the company provided its December quarter production report, wherein it reported quarterly coal sales of 497kt, down 31% sequentially. The decrease was on the back of co-shipper coal availability delays resulting in vessels for loading at DBCT slipping into January. For the same time span, net cash position declined from $90.7 million to $57.9 million. The company reported Run of Mine (ROM) coal production of 864kt during the quarter, up 23% sequentially.
 

December quarter Highlights (Source: Company Reports)
 
Outlook: The company has revised its EBITDA guidance for 1HFY2020 and now expects it to be in the range of $50 million to $52 million, previously $53m to $56m.It also gave the FOB costs (excluding royalty) guidance and expects it to be ~A$107/tonne product coal sold.
 
Stock Recommendation: As per ASX, the stock of SMR gave a return of 4.17% in the past one year and is trading close to its 52-weeks’ low level of $0.930. As on 28^th January 2020, the market capitalisation of the company stood at ~$256.13 million with a PE multiple of 2.76x (on TTM basis) and an annual dividend yield of 11%. On TTM basis, the stock is trading at a Price/Book multiple of 1.6x, lower than the industry average (Coal) of 1.9x. Considering the undervalued position and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $0.930, down by 7% on January 28, 2020 due to tepid December quarter production results.

Syrah Resources Limited

 
Key Highlights of December’19 Quarter: Syrah Resources Limited (ASX: SYR) is involved in the processing and mining of natural graphite.  Total Recordable Injury Frequency Rate (TRIFR) at the end of the December quarter stood at 0.6. Graphite production for the period was reported at 15kt as compared to 45kt in the previous quarter, mainly due to material reduction in prices detected in Q3FY19. The company sold 17kt of graphite at a weighted average graphite price of US$458 per tonne (CIF) for the quarter. 
 

December quarter Highlights (Source: Company Reports)
 
Cash Flow Details: Net cash outflow from operating activities was reported at US$16.601 million. Net cash outflow from investing activities for the period was reported at US$7.604 million. Net cash inflow from financing activities for the period was reported at US$38.913 million. Cash and cash equivalents at the end of the quarter stood at US$80.583 million. For the coming quarter, the company expects total cash outflow to be ~US$16 million.
 
Stock Recommendation: As per ASX, the stock of SYR gave a return of 19% on YTD basis and a return of 41.67% in the past one month. As on 28^th January 2020, the market capitalisation of the company stood at ~$246.13 million. It is also trading close to its 52-week low of $0.350 and offers a good opportunity for accumulation. On TTM basis, the stock is trading at a Price/Book multiple of 0.5x, lower than the industry median (Metals & Mining) of 1.6x. Considering the returns on stock and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.520, down by 12.605% on January 28, 2020, primarily due to the announcement related to December’19 quarterly results.
 
Note: Mining stocks are also trending down given the global share market scenario that is impacted by coronavirus spread.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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