Stocks’ Details
 

Alumina Limited

Record Alumina Production in 2019: Alumina Limited (ASX: AWC) is involved in bauxite mining, alumina refining and aluminium smelting. The market capitalisation of the company stood at $4.52 Bn as on 31^st March 2020. During 2019, the company reported record alumina production of 12.6 Mt and reported a statutory net profit after tax amounting to US$214.0 million. These results demonstrate the company’s capability to drive attractive returns for shareholders through the cycle. For the same period, AWC announced a fully franked final dividend of 3.6 US cents per share.


FY19 Financial Snapshot (Source: Company Reports)

Growth in Aluminium Demand:  During 2020, the company expects Aluminium demand to rise as trade friction subsides. The company possesses good options to grow low cash cost alumina production in order to meet anticipated future market demand growth.

Valuation Methodology: P/E Multiple Based Relative Valuation

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

Stock Recommendation: AWC possesses a strong balance sheet with low gearing. The company also provided solid and transparent shareholder dividends in 2019. Debt to equity of the company stood at 0.04x in FY19 as compared to the industry median of 0.15x. We have valued the stock using P/E based relative valuation method, and for the purpose, we have taken peers such as BHP Group Ltd (ASX: BHP), Northern Star Resources Ltd (ASX: NST), BlueScope Steel Ltd (ASX: BSL), etc., and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Therefore, considering the decent performance in FY19, record alumina production and deleveraged balance sheet, we give a “Buy” recommendation on the stock at the current market price of $1.460 per share, down by 7.006% on 31^st March 2020.

Perseus Mining Limited

Strong Financial Position During 1H FY20: Perseus Mining Limited (ASX: PRU) is involved in gold production, mineral exploration and development of the gold project with a market capitalisation of $1.18 Bn as on 31^st March 2020. Recently, the company has notified the market updated Life of Mine Plan for its Edikan Gold Mine in Ghana. This plan covers the period starting from 1 July 2020, as well as it is based on the revised mining strategy of PRU, which was implemented in January 2019. This strategy involves the use of a single mining contractor, mining at a reduced rate of total material movement.

For the first half of FY20, Perseus reported a net profit after tax to amounting to $30.4 million and EBITDA from operations stood at $123.9 million, up 43% on yoy. These results reflect a successful transition to an efficient multi-mine, multi-jurisdictional gold producer. 


Strong Financial Position (Source: Company Reports)

Guidance for FY20: For Full Year 2020, the company expects Group Gold Production in the range of 275,000 ounces-295,000 ounces at an AISC expected of between US$850/oz-US$950/oz. As per the recent release, the company is of the view that these forecasts are still valid on the back of production till 27th March 2020 and the guidance cannot be guaranteed for the remainder of the period.

Valuation Methodology: P/E Multiple Based Relative Valuation

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

Stock Recommendation: As at 31^st December 2019, the cash and bullion stood at $114.9 million. We have valued the stock using P/E based relative valuation method, and for the purpose, we have taken peers such as Regis Resources Ltd (ASX: RRL), Evolution Mining Ltd (ASX: EVN), Silver Lake Resources Ltd (ASX: SLR), etc., and arrived at a target price, which is offering correction of higher single-digit (in percentage terms). The stock of Perseus has corrected 9.01% in the span of the last three months, and it is trading above its 52-week low high average. Hence, in light of current trading levels and valuation, we have a watch stance on the stock at the current market price of $0.925 per share, down by 8.416% on 31^st March 2020.

IGO Limited

Measure to Limit Spread of COVID-19: IGO Limited (ASX: IGO) is in the exploration of Nickel, Gold and development of Copper-Zinc-Silver mining. The market capitalisation of the company stood at $2.55 Bn as on 31^st March 2020. The company has recently noted that Moho Resources Ltd has wrapped up its first aircore drill program to follow up gold and arsenic anomalies on the Crossroads prospect at the Burracoppin gold project. However, the results of the same are expected to come in April 2020. 

In order to restrict the spread of COVID-19, the company has undertaken numerous measures, which include health screening, increased hygiene practices etc. Moreover, the company has suspended all exploration activities at Lake Mackay and in the East and West Kimberley regions. The below picture provides an idea of financial highlights of 1H FY20:


1H FY20 Financial Highlights (Source: Company Reports)

Focus for Growth: The company has a continuous focus on growth via exploration & disciplined M&A with a clean energy metals focus. However, it is not certain about the impact of COVID-19 on its operations.

Valuation Methodology: P/E Multiple Based Relative Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
Stock Recommendation: Current ratio of the company stood at 5.27x in 1HFY20 as compared to the industry median of 1.70x. This indicates that IGO is in a decent position to address its short-term obligations against the broader industry. The company has a strong balance sheet with net cash of A$396 Mn at 31 December 2019. We have valued the stock using P/E based relative valuation method, and for the purpose, we have taken peers such as OZ Minerals Ltd (ASX: OZL), Northern Star Resources Ltd (ASX: NST), Regis Resources Ltd (ASX: RRL), etc., and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Therefore, considering the decent liquidity position, strong balance sheet and valuation, we give a “Buy” recommendation on the stock at the current market price of $4.230 per share, down by 2.083% on 31^st March 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

Disclaimer

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.