SSR Mining Inc.

SSR Details 

Robust Production Across All Assets: SSR Mining Inc. (ASX: SSR) is engaged in gold mining activities. Its explorations assets include Marigold mine, Copler mine, Seabee mine and Puna mine. The company has witnessed a robust performance across all its assets. Copler in Turkey has contributed a gold production on lower costs. Copler has delivered production of 326,908oz in FY20 at an All-in Sustaining Cost (AISC) of US$748 per oz. SSR’s Marigold has similarly shown a robust annual gold production of 234,443oz. The company has reported a steady state gold production of 31,915oz at an AISC of US$787 per oz through Seabee asset and SSR’s Puna asset has registered a robust silver production of 2.2mn oz at cash costs of US$8.92/oz in Q4FY20.

3-Year Financial Summary (Source: Company Reports)

FY20 Financial Highlights: The company has registered a significant increase in its revenue to ~US$853.08mn in FY20 as compared with ~US$606.85mn in FY19. Further, the company has posted a significant rise in its net profit to ~US$140.46mn in FY20 as compared with ~US$55.75mn in FY19 on the back of higher gold production with a 28% YoY higher average gold price realization of US$1,783 in FY20. The company has registered an increase in its cash and cash equivalent position to US$860.63mn as on 31 December 2020 as compared with US$503.64mn as on 31 December 2019.

Key Risks: The company requires regulatory approvals to carry out its business efficiently. The company may see an impact on its profit margins with an increase in commodity prices. The company operates in multiple countries. Any severe movement in foreign exchange prices may lead to financial losses for the company.

Outlook: SSR is expecting to produce gold in a range of 720,000-800,000 oz at an AISC of $1,050-$1,110 in FY21. In FY21, the company is expecting its brownfield projects to provide growth and give more clarity on the potential scale of growth and timelines within which the growth will be achieved. 

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: In the last one month, the stock of SSR has provided a return of ~5.68% and has corrected by ~12.23% in the last three months. The current market capitalisation of SSR stands at ~$4.40bn as of 3 May 2021. The stock is currently trading below the average 52-week price level range of ~$17.50-~$33.52. On the technical analysis front, the stock has a support level of ~$19.93 and a resistance of ~$21.76. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering an increase in its production cost and an increase in depreciation cost. For this purpose, we have taken peers Northern Star Resources Ltd (ASX: NST), Evolution Mining Ltd (ASX: EVN), Newcrest Mining Ltd (ASX: NCM) to name a few. Considering the company has posted a significant rise in its top-line and bottom-line, higher gold production on higher price realisations, key risks associated with the business, valuation, and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $20.45, up by ~2.198% as on 3 May 2021.

SSR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Premier Investments Limited

PMV Details

Repayment of Jobkeeper’s Funds: Premier Investments Limited (ASX: PMV) operates a range of specialty retail fashion chains within the specialty retail fashion markets in Australia, New Zealand, Asia, and Europe. The Company also has investments in listed securities and money market deposits.

The company has announced on 3 May 2021 regarding repayment of $15.6mn to the JobKeeper. The company has received these funds during 1HFY21 from the JobKeeper during the lockdowns to keep the staff in the jobs and providing them with their contracted hours. The company has witnessed increased trading on reopening of lockdown.

New CEO Appointed for Premier Retail: PMV has announced the appointment of new CEO for its subsidiary Premier Retail. PMV’s chairman Mr. Solomon Lew has announced the name of Mr. Richard Murray for the position of CEO for Premier Retail and Executive Director for PMV. Mr. Murray has delivered a robust performance during his tenure with JB Hi-Fi group and likely to perform on similar lines with Premier Group.

1HFY21 Financial Highlights: The company has registered an increase in its total revenue and other income to $795.78mn in 1HFY21 as compared with $733.87mn in 1HFY20 on the back of resumed trading after reopening of lockdown. The company has registered an increase in its net profit to $188.17mn in 1HFY21 as compared with $99.61mn in 1HFY20. The company has posted an improvement in its cash position to $497.24mn as on 30 January 2021 as compared with $448.83mn as on 25 July 2020.

Current Asset Position (Source: Company Reports)

Key Risks: The company operates in multiple countries. Any severe movement in foreign exchange prices may lead to financial losses for the company. The company is mainly engaged in retailing segment, any disruption in supply chain will lead to decline in sales for the business and may lead to financial loss for the company.

Outlook: PMV is expecting to explore new growth opportunities through utilising its robust balance sheet and continues to grow locally as well as globally in the future. 

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: In the last one month, the stock of PMV has corrected by ~0.68% and has provided a return of ~16.89% in the last three months. The current market capitalisation of PMV stands at ~$4.17bn as of 3 May 2021. The stock is currently trading above the average 52-week price level range of ~$13.95-~$27.33. On the technical analysis front, the stock has a support level of ~$23.90 and a resistance of ~$27.28. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some premium as compared to its peer average, considering the company continues to grow its revenues strongly through online sales, expectation on brand “Smiggle” to rebound and grow, going forward, and a significant investment in its digital platform. For this purpose, we have taken peers Super Retail Group Ltd (ASX: SUL), Mosaic Brands Ltd (ASX: MOZ), Aumake Ltd (ASX: AUK), Michael Hill International Ltd (ASX: MHJ), which comes under Specialty Retail Sector. Considering the company’s rising cash position, increase in its top-line and bottom-line, positive outlook, and valuation, we recommend a “Hold” rating on the stock at the current market price of $25.96, down by ~1.256% as on 3 May 2021.

PMV Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Deterra Royalties Limited

DRR Details

Robust Growth in Quarterly Royalty Revenue: Deterra Royalties Limited (ASX: DRR) owns royalty over iron ore produced from specific tenements of BHP's Mining Area C (MAC) province in Western Australia. The company has seen a robust growth in iron ore royalties of 49% QoQ to $36.3mn in Q3FY21 from Mining Area C (MAC). Due to increase in volume and higher iron ore prices, the growth in royalties from MAC has been witnessed for Q3FY21. The company gets royalty of 1.232% of FOB revenue from the MAC royalty area each quarter.

DRR Royalty Revenue (Source: Company Reports)

1HFY21 Financial Highlights: The company was demerged in November 2020 from Iluka Resources. The company has registered a total revenue of $53.9mn, where Iluka contributed revenue of $29.3mn and Deterra contributed $29.26mn in 1HFY21. Iluka has contributed $24.4mn and DRR contributed $23.4mn to the total underlying EBITDA of $47.8mn in the same period. In 1HFY21, Iluka has contributed $20.4mn and DRR contributed $12.9mn to the total NPAT of $33.3mn. The company has a total cash and cash equivalents of $188,000 as on 31 December 2020. The company has registered a net asset of $13.06mn during the same period.

Key Risks: The company is exposed to liquidity risk. There is always a risk for the company to get failed in meeting its financial obligations as and when they are due to pay. The company requires regulatory approvals to carry out its business efficiently. Any delay in regulatory approval may result in financial losses for the company.

Outlook: DRR is expecting a robust sales volume growth of 2.4 times from MAC production site to reach at 145.0Mwmt, going forward. The company has completed 90% of construction at MAC south flank and expecting production from mid of 2021. 

Stock Recommendation: In the last one month, the stock of DRR has provided a return of ~8.75% and by ~0.23% in the last three months. The current market capitalisation of DRR stands at ~$2.30bn as of 3 May 2021. The stock is currently trading below the average 52-week price level range of ~$3.85-~$5.35. On the technical analysis front, the stock has a support level of ~$4.30 and a resistance of ~$4.51. Considering the expected robust sales volume growth in the forward years, decent portfolio for royalty income, associated risks with the business, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $4.35, down by ~0.458% as on 3 May 2021.

DRR Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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