Coronado Global Resources Inc.

CRN Details

Robust Growth in Net Income Aided by Operational Efficiencies: Coronado Global Resources Inc. (ASX: CRN) operates in Mining, Quarrying, Oil & Gas Extraction and mining activities. With a market update, the company reported that ASX Settlement will remove the Foreign Ownership Restriction (FOR) United States (U.S.) person tag from the Company’s CDIs with effect from 6^th March 2020.

FY19 Operational Highlights for the Period ended 31 December 2019: CRN declared its full-year results, wherein it reported revenue of $2,215.8 million, down 3.5% on y-o-y basis, on account of a weaker metallurgical coal market during H2FY19. The company reported Adjusted EBITDA of $634.2 million, up 5.9% underpinned by lower mining cost per tonne. The company reported net income after tax of $305.5 million, up 80.9% on y-o-y basis. The company reported ROM production of 30.8 Mt, exhibiting a growth of 0.2%. The period was marked by 6.4% improvement in dragline efficiency at Curragh during FY19, on top of the 8.1% improvement in FY18. Sales volumes came in at 19.9 Mt, which is slightly lower than FY18 on account of the increased inventory at US operations. During the period, the company successfully commenced three new mining sources resulted in an increase in the metallurgical coal production. The company reported metallurgical pricing of $128.8 per tonne, down 3.4% compared to FY18, due to soft market conditions.


Key Business Highlights for FY19 (Source: Company Reports)
 
The Board of Directors declared a fully franked dividend of $0.025 per ordinary share with a payment date of 31^st March 2020 and ex-date of 9 March 2020.

Valuation Methodology: Price to Cash Flow Based Relative Valuation

Price to CF based relative valuation (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:The stock of CRN is trading at $1.69 with a market capitalization of ~$1.56 billion. The stock made a 52-week low and high of $1.535 and $3.163 and is currently trading at the lower band of its 52-week trading range. The stock has delivered negative returns of 19.5% and 37.35% in the last three months and six-months, respectively. The company reportedsuccessful eecution of the New Coal Supply Agreement with Stanwell Corporation which completes the acquisition of Stanwell Reserved Area.  Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using price to cash flow based relative valuation method and arrived at a target price of higher single-digit upside (in % terms). Hence, we give a ‘Speculative Buy’ on the stock at the closing price of $1.69, up 4.969% as on 02^nd  March 2020.

 
CRN Daily Technical Chart (Source: Thomson Reuters)
 
 

OceanaGold Corporation

OGC Details

FY20 AISC expected Between US$1,075 oz to US$1,125oz: OceanaGold Corporation (ASX: OGC) is engaged in operating, processing and exploration of gold and other minerals. Recently, OGC has signed a forward gold sale arrangement with the support of members of the Company’s current banking group to deliver 48,000 ounces of gold between September and December 2020. Under this, it will receive a pre-payment of $78.5 million (approximately $1,635 per ounce) on February 28, 2020.

FY19 Financial Highlights for the Period ended 31 December 2019: OGC declared its full-year results, wherein it reported revenue from ordinary activities of US$651.2 million, down 15.7% on y-o-y basis, due to due to zero sales from Didipio plant, during the second half, which partially offset by a 7% higher average gold price from FY18 and increased sales volumes from Haile. The company reported consolidated production of 470,601 ounces of gold and 10,255 tonnes of copper. The business reported all-in sustaining costs (“AISC”) of US$1,061 per ounce. The company reported net profit of US$14.5 million, down 88.1% due to the combination of lower revenue, higher operating costs and higher non-production costs. During the second half, the company reported an unrealised loss of $12.5 million on the fair value of undesignated gold hedges.


Key Income Statement Highlights (Source: Company Reports)

Guidance: FY20, the company expects cash costs of $675 per oz to $725 per oz sold while all-in sustaining costs (AISC) are expected at US$1,075 per oz to US$1,125 per oz sold.

Valuation Methodology: Price to Earnings Based Relative Valuation

Price to Earnings Based Relative Valuation (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:The stock of OGC is trading at $2.27 with a market capitalization of ~$1.56 billion. The stock made a 52-week low and high of $2.18 and $4.81 and is currently trading at the lower band of its 52-week trading range. The stock has delivered negative returns of 11.03% and 29.58% in the last three months and six-months, respectively. The business is working on Martha Underground project and expects its first production to commence in the second quarter of FY21.Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using a relative valuation method, i.e., price to earnings multiple and arrived at a target price of lower double-digit upside (in % terms). Hence, we give a ‘Buy’ rating on the stock at the market price of $2.27, down 9.2% as on 02^nd March 2020.

 
OGC Daily Technical Chart (Source: Thomson Reuters)

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