Stocks’ Details

SSR Mining Inc.

A Quick Look at Q3 FY20: SSR Mining Inc. (ASX: SSR) is a gold mining company with four producing assets in the USA, Turkey, Canada, and Argentina. The market capitalisation of the company stood at $4.83 billion as on 19^th January 2021. During Q3 FY20, the company finished a transaction with Alacer in order to establish a leading intermediate precious metals producer with robust margins and strong free cash flow generation. The company’s YTD (12 November 2020) production stood at 491,821 ounces of gold across the four operations. During the quarter, the company reported revenue amounting to US$225.41 million as compared to US$147.84 million in Q3 FY19. The company recorded net income of US$26.8 million and adjusted attributable net income of US$67.8 million during the quarter.

Key Financials (Source: Company Reports)

Guidance: For FY20, the company expects gold production in the range of 680,000 to 760,000 across its four operations at an AISC of $965 to $1,040 per gold equivalent ounce. The company is likely to release its Q4 FY20 results on 19^th February 2021.

Stock Recommendation: During Q3 FY20, the company reported a current ratio of 5.37x as compared to the industry median of 2.51x. This indicates that the company is well-placed to settle its short-term obligations against the broader industry.  The company closed the quarter with an increased cash balance of US$772.8 million. The stock of SSR has corrected by 14.83% and 16.29% in the last one and three months, respectively. The stock is currently trading towards its 52-week low level of $21.610, offering decent opportunity for accumulation. On a technical analysis front, the stock has a support level of ~$21.543 and a resistance level of ~$24.469. Thus, considering in light of the growth in revenue, increased cash position, decent liquidity position and current trading level, we give a “Buy” recommendation on the stock at the current market price of $22.200 per share, up by 0.909% on 19^th January 2021.

Perseus Mining Limited

Rise in Gold Production: Perseus Mining Limited (ASX: PRU) is involved in the gold production, mineral exploration and gold project development in the Republic of Ghana and the Republic of Côte d’Ivoire. The market capitalisation of the company stood at $1.43 billion as on 19^th January 2021. On 18^th December 2020, the company announced that it has successfully completed the first pour of gold at its Yaouré Gold Mine in Côte d’Ivoir, nearly five weeks ahead of schedule. In addition, the company is expecting to declare Commercial Production at Yaouré in March 2021 quarter. During the quarter ended 30^th September 2020, the two operating gold mines of the company Edikan in Ghana and Sissingué in Côte d’Ivoire have showcased strong performance despite the challenges posed by the COVID-19 pandemic and very extreme wet season in Côte d’Ivoire. During the same quarter, the company produced 68,772 ounces of gold, reflecting a rise of 6% as compared to the prior quarter. The AISC for the quarter stood at US$964 per ounce with an increase of 3% over the previous quarter. In addition, gold sales for the three months period fell by 23% to 60,441 ounces.

Key Metrics (Source: Company Reports)

Guidance: For 1H FY20, the company expects gold production in the range of 125,500 to 139,000 ounces at an AISC of between US$940 to US$1,025 per ounce. The company is likely to release its 1H FY21 results on 18^th February 2021.

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: The company closed September 2020 quarter with a net debt position of US$2.6 million, which was US$16.2 million lower than the figure at the end of June 2020 quarter. Current ratio of the company stood at 3.30x in FY20 as compared to the industry median of 1.74x, which implies that the company is well-placed to address its short-term obligations against the broader industry. The 52-week low-high range for the stock stands at $0.630 - $1.660, respectively. We have valued the stock using the price to cash flow multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in percentage terms). On a technical analysis front, the stock of PRU has a support level of ~$1.072 and a resistance level of ~$1.427. Therefore, in light of the growth in gold production, guidance, and improvement in net debt position, we give a “Buy” recommendation on the stock at the current market price of $1.185 per share, up by 1.282% on 19th January 2021. 

Austal Limited

Decent Growth in Revenue: Austal Limited (ASX: ASB) is engaged in the designing, manufacturing, and support of high-performance vessels for commercial and defence customers worldwide. The market capitalisation of the company stood at ~$880.91 million as on 19^th January 2021. On 7^th December 2020, the company notified the market that Austal USA has delivered its 13^th Independence-class Littoral Combat Ship (LCS) to the U.S. Navy. During FY20, the company surpassed the toll of $2 billion in revenue and reported revenue of $2.086 billion in FY20 with YoY growth of 13%. This was supported by the expansion of commercial shipbuilding, revenue growth in the USA and favourable FX translation. NPAT for the year amounted to $89.0 million as compared to $61.4 million in FY19.

Key Financials (Source: Company Reports)

Guidance: The company commenced FY21 with an order book of $4.3 billion. For FY21, the company expects to report EBIT of $125 million and revenue of $1.8 billion.

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: The company closed FY20 with a net cash position of $272.4 million as compared to $150.7 million as on 30^th June 2019. This allows the company to strategically place the business to capture future steel shipbuilding opportunities in the USA and Australasia. We have valued the stock using the price/cash flow multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in percentage terms). On the technical analysis front, the stock has a support level of ~A$2.26 and a resistance level of ~A$3.014. Therefore, considering the growth in topline, decent order book, and increased cash position, we give a “Buy” recommendation on the stock at the current market price of $2.500 per share, up by 2.040% on 19^th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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