Stocks’ Details

Resolute Mining Limited

Sale of Bibiani Gold Mine: Resolute Mining Limited (ASX: RSG) is engaged in gold mining, development of resource projects and prospecting and exploration for minerals. The market capitalisation of the company stood at $778.24 million as on 21^st January 2021. For the quarter ended 31^st December 2020, the company recorded gold production of 89,888 ounces, which brought total gold poured in CY20 to 395,136oz. This was slightly below the lower end of the revised CY20 production guidance of 400,000oz. AISC for CY20 stood at US$1,074/oz, which was in line with the revised cost guidance range of US$980/oz to US$1,080/oz. On 15^th December 2020, the company inked a binding agreement to sell the Bibiani Gold Mine in Ghana to Chifeng Jilong Gold Mining Co. Ltd for the cash consideration of US$5 million deposit on signing the agreement and US$100 million on completion. During 1H FY20, the company reported gold production of 217,946 ounces, reflecting a rise of 24% over 1H FY19. Sales for the half year stood at 212,668oz at an average gold price received of US$1,427/oz. During the half-year, the company recorded revenue and underlying EBITDA amounting to US$305 million and US$107 million, indicating a rise of 33% and 96% over 1H FY19, respectively.

Key Metrics (Source: Company Reports)

Guidance: For the 12 months ending 31^st December 2021, the company expects gold production in the range of 350,000oz to 375,000oz at an AISC between US$1,200/oz and US$1,275/oz.

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: As on 31^st December 2020, the cash and bullion of the company stood at US$106 million, and total debt stood at US$337 million. In the last one and three months, the stock of RSG has corrected 9.74% and 17.99%, respectively. As a result, the stock is trading towards its 52-week low of $0.605, offering decent opportunity for accumulation. 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). For the purpose, we have taken peers such as St Barbara Ltd (ASX: SBM), OceanaGold Corp (ASX: OGC) and Westgold Resources Ltd (ASX: WGX), to name few. On a technical analysis front, the stock has a support level of ~$0.659 and a resistance level of ~$0.869. Thus, considering the decent production level, guidance, rising revenue and underlying EBITDA and current trading level, we give a “Buy” recommendation on the stock at the current market price of $0.715 per share, up by 1.418% on 21^st January 2021.

Ishares Europe ETF

Distribution Declared by Responsible Entity: Ishares Europe ETF (ASX: IEU) tracks the investment results of the S&P Europe 350TM, which measures the performance of the stocks of leading companies in the following countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. As on 21^st January 2021, the net assets of the funds stood at $540.44 million. On 24^th December 2020, the responsible entity of the fund “BlackRock Investment Management (Australia) Limited” has declared a cash distribution of 37.557460 cents per unit for the period ending 21^st December 2020.

Cash Distribution (Source: Reports)

Financial Highlights: For the year ended 30^th June 2020, the fund recorded loss amounting to $34.85 million and the distribution paid and payable for the period amounted to $18.71 million. In the span of one year, the fund witnessed the negative return of 5.10%.

Recommendation: As on 30^th June 2020, the fund had cash and cash equivalents of $193k as compared to $15.3 million as on 30^th June 2019. As on 21^st January 2021, the fund reported tracking error of 2.21%, which indicates that the portfolio is not following the benchmark index. In addition, we have considered 14-day RSI, and it was observed that the fund is currently in the overbought zone and may witness some correction, going forward. On a technical analysis front, the fund has a support level of ~$55.753 and a resistance level of ~$65.223. Thus, considering the high tracking error, RSI levels and low returns in the past year, we advise investors to book profit and give “Sell” rating on the fund at the current market price of $63.79 per share, up by 0.48% on 21^st January 2021.

PTB Group Limited

Decent Growth in Topline and Bottom Line: PTB Group Limited (ASX: PTB) provides specialist turbine repair and overhaul services, aircraft leasing and parts sales. The market capitalisation of the company stood at $85.68 million as on 21^st January 2021. Recently, the company announced the sale of its Warriewood properties to a private commercial property trust for cash consideration of $9.5 million. The company would use the proceeds from the sale to repay CBA debt and support growth in the North American market. This sale is likely to generate a pre-tax profit of $5.8 million after agency commissions. For the year ended 30^th June 2020, the company recorded revenue amounting to $78.14 million as compared to $51.48 million in FY19. Profit for the year amounted to $4.02 million against $3.9 million in FY19. During FY20, the company declared a fully franked final dividend of $0.025 per share, which took the full-year dividend to $0.05 per share.

Key Financials (Source: Company Reports)

Outlook: For FY21, the company is expecting to pay a dividend in the range of $2.3 million to $4.5 million or 1.8 to 3.6 cents per share.

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 the conservative balance sheet, which was comprised of the cash balance of $15.2 million. The stock of PTB has moved up by 43.61% in the last nine months. Considering this, we have valued the stock using the price to cash flow multiple based illustrative relative valuation method and arrived at a target price with correction of mid-single-digit upside (in percentage terms). In addition, we have considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction, going forward. On a technical analysis front, the stock has a support level of ~$0.649 and a resistance level of ~$0.771. Hence, considering the returns on stocks, current trading levels, RSI levels and key risks with the business, we advise investors to book profit and give a “Sell” rating on the stock at the current market price of $0.675 per share, up by 0.746% on 21 January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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