Stocks’ Details

Saracen Mineral Holdings Limited

Strong Results in 1HFY20:Saracen Mineral Holdings Limited (ASX: SAR) is engaged in gold mining, processing & sales, and mineral exploration.

Half Yearly Results: During the six months ended 31^st December 2019, the company reported gold production of 216,452 ounces, representing an increase of 22% on the prior corresponding period. Production for the period included a 1-month contribution out of the Super Pit gold mine, acquired by the company. AISC for the period stood at $1,041 per ounce, as compared to $1,030 per ounce, reported in the prior corresponding period. Statutory NPAT for the period came in at $69 million, up 61% on the prior corresponding half. Revenue came in at $409.9 million, rising 45% on pcp. At the end of the period, the company reported cash and cash equivalents amounting to $283.8 million, after making a payment of US$750 million for 50% of the Super Pit gold mine.


Key Performance Measures (Source: Company Reports)
 
FY20 Guidance: For FY20, the company expects production of over 500,000 ounces of gold.As the Super Pit transaction is subject to State Government stamp duty, the company expects the stamp duty valuation work to be completed during 2HFY20, which will be reflected in the accounts for the said period on accrual basis.

Stock Recommendation: The stock of the company gave positive returns of 27.99% over a period of 3 months. The company reported strong results for the first half of FY20 and has reconfirmed the production guidance for FY20. The period ended with a strong balance sheet after investing $84.2 million in growth capital and exploration. Considering the performance in 1HFY20, returns on stock, improvement in production due to addition of the Super Pit mine, further anticipated contribution from the mine, and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $4.210, up 1.937% on 17^th February 2020.

Beach Energy Limited

FY20 Guidance Updated:Beach Energy Limited (ASX: BPT) is engaged in the production and exploration of oil and gas.

1HFY20 Results: During the half-year ended 31^st December 2019, the company reported underlying EBITDA amounting to $622 million. Underlying NPAT for the period came in at $274 million, up 9% on pro forma 1HFY19 underlying NPAT. At the end of the period, the company had a cash balance of $60 million, after paying an interim dividend of 1.0 cents per share. The company has in place a growth program that reported continued progress during the half. During the period, the company drilled 105 wells at a success rate of 83%. Western Flank operated oil production was reported above 22,000 bopd. The company also notified that the Victorian Otway drilling program with Black Watch-1 has commenced and is expected to reach the target depth in March 2020.

FY20 Guidance: Production for the year is expected to be between 27 MMboe – 28 MMboe. Underlying EBITDA is expected in the range of $1.275 billion - $1.35 billion. Capital expenditure for the period is expected between $875 million and $950 million. The above guidance for capital expenditure represents a revision to the previously provided guidance, as a result of infrastructure expansion in the Western Flank to encourage higher levels of oil production.


FY20 Guidance (Source: Company Reports)

Valuation Methodology: EV/Sales Based Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over a period of 1 month, the stock has generated negative returns of 22.43%. The company ended the first half with a strong balance sheet position and upgraded its EBITDA and production guidance on account of a set of positive factors. The management has been focused on maintaining cost discipline in the business, while investing in growth initiatives. We have valued the stock using EV/Sales based relative valuation method and for the purpose, have taken the peer group - Origin Energy Ltd (ASX: ORG), Worley Ltd (ASX: WOR), Senex Energy Ltd (ASX: SXY), etc. As a result, we have arrived at a target price with a correction of single-digit (in % terms). Hence, we have a watch stance on the stock at the current market price of $2.130, up 0.948% on 17^th February 2020.

Imdex Limited

Net Cash up by 29% on PCP:Imdex Limited (ASX: IMD) is a mining technology company, enabling cost-effective operations from exploration to production.

Half Yearly Performance: During the half-year ended 31^st December 2019, the company reported revenue amounting to $127.9 million, up 2% on the prior corresponding period revenue of $125.0 million. Underlying EBITDA came in at $28.1 million, rising 12% on pcp.The Board declared a fully franked interim dividend amounting to 1 cent per share, representing an increase of 25% on pcp. Coming to the operational performance during the half, the company strengthened the quality of rental fleet, with average monthly rental rate up by 12.7% on the previous corresponding half. The company is also in process to commercialise new drilling productivity and drill & blast technologies in the second half of the year. During the year, the company acquired Flexidrill for a consideration of NZ$3 million, adding new drilling productivity technologies on the platform.


Key Metrics (Source: Company Reports)

Outlook: The company has reported a positive start to the drilling activity in the second half, generating its highest revenue for the month of January. Going forward, the company will continue to benefit from a number of catalysts, including new technologies and innovation, that will help reduce costs and increase productivity.

Stock Recommendation: The stock of the company generated positive returns of 16.59% over a period of 6 months. The company has witnessed a positive start to the second half and is expecting further growth through a favourable business environment. Growth will also be supported by a strong balance sheet with net cash amounting to $25.5 million as at 31^st December 2019, up 29% on pcp. Considering the above-stated facts, returns on stock and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $1.515, up 1.338% on 17^th February 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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