Stocks’ Details
 

Regis Resources Limited

Improvement in Cash Position: Regis Resources Limited (ASX: RRL) is engaged in the exploration of gold and minerals. The market capitalisation of the company stood at A$2.35 Bn as on 22^nd January 2020. The company recently announced that the December 2019 quarter has proved to be a strong quarter of cash generation, where cash and bullion witnessed a rise of $21.4 million. This has been supported by increased quarterly gold production as well as a higher gold price. AISC for the quarter stood at $1,219 per ounce. This reflects a decline in AISC as compared to the previous quarter, which is a result of increased production after increased head grade largely at Garden Well and slightly improved recoveries.


Operating Results for Quarter (Source: Company Reports)

Guidance:For FY20, the company is expecting production in the range of 340,000- 370,000 oz. RRL’s full-year AISC is anticipated to be at the upper end of the guidance range, after excluding the extra royalty cost impact associated with the higher prevailing gold price.

Valuation Methodology: P/E Multiple Approach

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

Stock Recommendation: The process of responding to submissions received has started with the completion of the McPhillamys Development Application as well as the Environmental Impact Statement public exhibition period. We have valued the stock using P/E based relative valuation approach, and for the purpose, we have taken peers such as Western Areas Ltd (ASX: WSA), Evolution Mining Ltd (ASX: EVN) and St Barbara Ltd (ASX: SBM) and arrived at a target price of lower double-digit upside (in percentage terms). Therefore, considering the decent performance in December 2019 quarter, favourable outlook, and valuations, we maintain a “Hold” rating on the stock at the current market price of A$4.640 per share, up 0.433% on 22^nd January 2020.

OceanaGold Corporation

Changes in Credit Facility: OceanaGold Corporation (ASX: OGC) is a multinational, mid-tier gold mining company. The market capitalisation of the company stood at A$1.72 Bn as on 22^nd January 2020. The company recently announced that Nora Scheinkestel has been ceased to be a substantial holder on 19^th December 2019. In another update, the company mentioned that it has amended its current Revolving Credit Facility amounting to $200 million with its banking partners - Scotiabank, Citi, HSBC, Commonwealth Bank of Australia, Natixis, and BNP Paribas. Under the changes, the company has eliminated 2019 amortisation or “step-down” with the facility to remain at the amount of $200 million, together with an extension of the facility, which will now be maturing on 31^st December 2021. The following picture provides an overview of the results for Q3 FY19:


Results Overview (Source: Company Reports)

Outlook: The company is expecting increased production from Macraes and Haile. It is also anticipating AISC for Q4 to be lower, with higher production at Macraes and Haile. 

Valuation Methodology: P/E Multiple Approach

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

Stock Recommendation: During Q3 FY19, the Haile operations delivered a third consecutive quarter of operating improvements. Gross margin and EBITDA margin of the company stood at 41.3% and 26.0% in Q3 FY19 as compared to the industry median of 7.5% and 3.3%, respectively.  We have valued the stock using P/E based relative valuation approach and for this purpose, we have taken peers such as Evolution Mining Ltd (ASX: EVN), St Barbara Ltd (ASX: SBM) and Regis Resources Ltd (ASX: RRL) and arrived at a target price with lower double-digit upside (in percentage terms). Therefore, in the light of decent growth in margins, expected increase in production, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of A$2.700 per share, down 2.174% on 22^nd January 2020.
 
 

Senex Energy Limited

Update on Surat Basin Operations: Senex Energy Limited (ASX: SXY) is engaged in the production, exploration and development of petroleum. The market capitalisation of the company stood at A$495.06 Mn as on 22^nd January 2020. The company has recently notified the market with the updates on Surat Basin operations and stated that Roma North production has surpassed 13.5 TJ/day (terajoules per day), and it is tracking towards the plant’s initial capacity of 16 TJ/day or around 6 PJ/year (petajoules per day). With respect to Atlas, the first 23 wells are online and producing more than 6.5 TJ/day during the early ramp-up phase, with most wells being online for less than nine weeks. The following picture depicts an idea of financial performance for September 2019 quarter:


Financial Performance (Source: Company Reports)

Focused on Strategy: The company is in a robust position to survive volatility in global markets and the uncertainty in the local market as SXY pursues its strategy of building an east coast natural gas business. 

Valuation Methodology: P/B Multiple Approach

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

Stock Recommendation: As per the key personnel of the company, Senex is well-financed. The cash-generating Cooper Basin operations have continued to deliver the required results to finance operating as well as capital expenditure throughout the business. Current ratio of the company stood at 3.61x in FY19 as compared to the industry median of 1.21x. This reflects that the company is in a decent position to address its short-term obligations as compared to the broader industry. We have valued the stock using a P/B based relative valuation approach and arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, considering the decent liquidity position, favourable valuations, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.350 per share, up 2.941% on 22^nd January 2020.

 
Comparative Price Chart (Source: Thomson Reuters)

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