Stocks’ Details

South32 Limited

Update on Buyback Share Event: South32 Limited’s (ASX: S32) stock surged up 6.5 per cent in last five days as on April 17, 2018 with commodity price movement, while the group updated the market about the progress on several transactions under its ongoing buy-back event. The company intends to buy back shares with an aggregate consideration under US $500 million. Recently, the group has stated that Cerro Matoso operation accepted notification of the decision that is passed by the Constitutional Court of Colombia in relation to alleged health and environmental impact on the community surrounding Cerra Matoso operation. In addition to this, the management of the company is in the process of appealing the decision. On the other hand, the group has signed an exclusive option agreement (EOA) with Inca Minerals Limited; and as per the deal, South32 is funding a geophysical survey at Inca’s Greater Riqueza zinc-silver-lead project in Peru in return for a 60 per cent earn-in on the project. We expect that this exclusive option agreement between Inca and South32 is an important step in the project’s progression because this deal will provide a robust, reputable and reliable path in years ahead. During 1H FY18, the group recorded revenue growth of 8% due to higher price realisation. However, statutory profit after tax was down by 12% to $543 Mn in 1HFY18 as compared to 1HFY17. The ordinary dividend increased by 19% and a special dividend of 3 cents per share was also implemented.Based on the ongoing development, we give a “Hold” recommendation on the stock at the current price of $ 3.710, while its quarterly update is expected to be out soon.
 

1H FY18 Financial Highlights (Source: Company Reports)
 

Western Areas Limited

FY18 Guidance Metrics on Track: Western Areas Limited’s (ASX: WSA) stock was also up 5.1% in last five days as on April 17, 2018, and rose up 2.6% on April 18, 2018, at the back of gained momentum in commodity prices. Recently, the group has given update on Drill Hole MAD88 at Mt Alexander project. As per the update, MAD88 intersected ultramafic from 55m to 77m downhole of nickel-copper sulphide mineralisation. Further, the management stated that MAD88 is an important drill hole program that will support the potential for further mineralisation in the Stricklands ultramafic resulting into rise in production of minerals. Besides this, the group has also approved plans to launch a $32 million early works program on the Odysseus project at its Cosmos nickel operations in Western Australia. The Odysseus early capital works program is an eighteen?month program and will commence later this month. This will also bring Odysseus to development ready status month.

On the other hand, Western Areas has delivered a robust financial result, with a return to underlying profitability despite a volatile nickel price during first half of the year.  Key financial metrics have improved during the same period. EBITDA amounted to $36.3 Mn in 1HFY18 as against 1HFY17, and EBITDA margin registered growth to 31.4% in 1HFY18 which have flowed through to the reported NPAT ($3.5 Mn). Importantly, the Company is in a sound financial position to fund and complete several organic growth projects being either commissioned or under active consideration, in the immediate and near term. The first half is on track to meet all full year operational guidance metrics. The Company advises that guidance for the year ending 30 June 2018 remains unchanged. Going forward, the company’s outlook seems to be bright at the back of nickel sulphide market supported by rise in demand for Class 1 nickel sulphides in the battery and electric vehicle (EV) sector which will grow substantially, thus, resulting into overall growth of the company in years to come. Based on aforesaid reasons, we maintain our “Hold” recommendation on the stock at the current price of $ $ 3.580.


FY18 Guidance on Track (Source: Company Reports)

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