Stocks’ Details
 

St Barbara Limited

A Look at 1H FY20 Results: St Barbara Limited (ASX: SBM) is engaged in the production and exploration of gold. The market capitalisation of the company stood at $1.76 Bn as on 28^th February 2020. For the six months ended 31^st December 2019, the company reported production of 182 k ounces of gold with AISC amounting to A$1,391/oz. Lower production at Gwalia and Simberi impacted the company’s financials, and as a result of which, statutory profit after tax and underlying profit after tax stood at $39 million and $35 million, respectively.

SBM declared fully franked interim dividend amounting to $0.04 for the period, which is to be paid on 25^th March 2020. Key dates in relation to the dividend can be seen in the below picture:


 Key Dates for Interim Dividend (Source: Company Reports)

Production and AISC Guidance: For 2020, the company is expecting gold production in the range of 370-400 koz at an AISC (All in Sustained Cost) between A$1,330/oz to A$1,420/oz. The company will be completing the Gwalia Extension Project in the upcoming months.

Valuation Methodology: P/E Based Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation:As at 31^st December 2019, the cash and debt position of the company stood at $79 million and $138 million, respectively. During 1H FY20, Gross margin and EBITDA margin was 47.4% and 39.5%, which is higher than the industry median of 46.8% and 37.8%, respectively. We have valued the stock using P/E-based relative valuation method, and for the purpose, we have taken peers such as Regis Resources Ltd (ASX: RRL), OceanaGold Corp (ASX: OGC), Evolution Mining Ltd (ASX: EVN), etc., and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Hence, considering the decent margins against industry and production guidance for FY20, we give a “Buy” recommendation on the stock at the current market price of $2.350 per share, down by 6.746% on 28^th February 2020.

Regis Resources Limited

Strong Financial Performance: Regis Resources Limited (ASX: RRL) is a gold and mineral exploration company with a market capitalisation of $2.25 Bn as on 28^th February 2020. For 1H FY20, RRL delivered record net profit after tax amounting to $93.4 million and net profit margin of 25% demonstrating the continuing strong profitability of the Duketon operations. Revenue for the period stood at $371.4 million, with saleable gold of 182,807 ounces at an average price of $2,063 per ounce.

On the back of strong financial performance, the company declared fully franked interim dividend 8 cents per share, which is to be paid on 18^th March 2020 with the record date of 3^rd March 2020.


Financial Summary (Source: Company Reports)

Aspects for FY20: The company is anticipating gold production in the range of 340,000oz - 370,000oz at an AISC in the vicinity of A$1,125-$1,195/oz for FY20. RRL anticipates growth capital of around A$62 million for FY20.

Valuation Methodology: P/E Based Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company finished the half-year with the cash and bullion of A$169 million with nil debt. We have valued the stock using P/E based relative valuation method and for the purpose, we have taken peers such as IGO Ltd (ASX: IGO), Western Areas Ltd (ASX: WSA) and St Barbara Ltd (ASX: SBM), and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Hence, in the light of strong financial performance, debt-free position and significant internal growth projects, we give a “Buy” recommendation on the stock at the current market price of $4.030 per share, down by 9.029% on 28^th February 2020.
 

OceanaGold Corporation

Forward Gold Sale Arrangement: OceanaGold Corporation (ASX: OGC) is a multi-tier gold company with operating assets in the Philippines, New Zealand and the United States. Recently, OGC entered into a forward gold sale arrangement with the support of members of the current banking group of the company. Under this, OGC will receive a pre-payment of $78.5 million on 28^th February 2020, in exchange for delivering 48,000 ounces of gold between September 2020 and December 2020.

For the full year 2019, the company reported revenue amounting to USD 651.2 million; this includes Q4 2019 revenue of USD 152.1 million. Consolidated capital expenditure increased by 10% in 2019 stood at USD 240.7 million. This has been resulted by increased capitalised pre-strip at Haile and Macraes, and increased exploration and growth capital spend at Waihi with respect to the Martha Underground development.


Results Overview (Source: Company Reports)

Cost Guidance for Upcoming Year: For 2020, total capital investment is expected to be in the range of USD 220 million – USD 255 million. Cash costs are anticipated between USD 675/oz – USD 725/oz sold.

Valuation Methodology: P/CF Based Valuation

P/CF Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The company’s focus for FY20 mainly revolves around Waihi district study and a restart of Didipio. We have valued the stock using P/CF-based relative valuation approach and for the purpose, we have taken peers such as St Barbara Ltd (ASX: SBM), Coronado Global Resources Inc (ASX: CRN) and Lynas Corporation Ltd (ASX: LYC) and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Therefore, considering the recent gold sale arrangement and expected upside in valuation, we give a “Buy” recommendation on the stock at the current market price of $2.500 per share, down by 9.091% on 28^th February 2020.

Resolute Mining Limited

Increase in Sales Revenue: Resolute Mining Limited (ASX: RSG) is mainly engaged in gold mining and development of the Syama Underground Mine. The sales revenue for FY19 stood at A$770 million against A$466 million of FY18, which comprises of A$656 million revenue from continuing operations at Syama and Mako, and A$114 million from Ravenswood (discontinued operation for the purpose of financial reporting). The financial performance of RSG has been impacted by the ramp-up of the Syama Underground Mine as well as the structural repairs required to the Syama roaster. Resultantly, the company reported a net loss after tax of A$59 million.


Profit and Loss Analysis (Source: Company Reports)

What to Expect: For FY20, the company is expecting a production of 500,000oz at an AISC of US$980/oz. RSG anticipates production of 260,000 ounces gold at Syama with an AISC of US$960/oz.

Valuation Methodology: P/BV Multiple Based Valuation

P/BV Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Going forward, the company is focused on generating positive free cashflow from operations at Syama and Mako. The company’s plan for 2020 also includes optimising the asset portfolio, strengthen its balance sheet, and deliver value for shareholders. We have valued the stock using a P/BV based relative valuation approach and arrived at a target price, which is offering an upside of high single-digit (in percentage terms). As per ASX, the stock of RSG is trading towards 52-week low of $0.965. Thus, considering the rise in revenue and focus on generating positive free cashflow and aforesaid facts, we give a “Buy” recommendation on the stock at the current market price of $1.020 per share, down by 10.132% on 28^th February 2020.

Aurelia Metals Limited

1HFY10 EBITDA Margin at 30%: Aurelia Metals Limited (ASX: AMI) is involved in mining and exploration of gold and base metals. The market capitalisation of the company stood at $371.44 Mn as on 28^th February 2020. Perennial Value Management Limited (PVM) has recently made a change to their substantial holdings in the company on 24^th February 2020. The current voting power of PVM stood at 6.34% as compared to the previous voting power of 5.02%.

For 1H FY20, the company reported EBITDA of $50.1 million with Group EBITDA margin of 30%. During the period, AMI discovered high-grade shallow gold and base metals at the Federation project. The company-maintained sales revenue with increased base metals offsetting reduced gold revenue.


Key Performance Indicators (Source: Company Reports)

Increased Base Metal Production: Looking ahead, the company is expecting increased base metals production in 2H FY20. It is anticipating production guidance in the ambit of 85,000 oz -95,000 oz with AISC of A$1,250/oz.

Valuation Methodology: P/BV Based Valuation

P/BV Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: Current ratio of the company stood at 2.11x in 1H FY20 as compared to the industry median of 1.85x. This reflects that the company is in a decent position to address its short-term obligation against the broader industry. Return on equity stood at 7.1% in 1H FY20 versus 5.3% of industry median reflecting decent returns paid to shareholders. We have valued the stock using P/BV based relative valuation approach and arrived at a target price, which is offering an upside of lower double- digit (in percentage terms). Therefore, taking into account the decent liquidity position, returns paid to shareholders and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.395 per share, down by 7.059% on 28^th February 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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