Regis Resources Limited

RRL Details

Recent Updates: Regis Resources Limited (ASX: RRL) is a gold production company operating at the Duketon Gold Project in the North-Eastern Goldfields of Western Australia and the McPhillamys Gold Project in the Central Western region of NSW.

• Recently, the company informed the market that AXA Equitable Holdings Inc (“EQH”), AllianceBernstein Australia Limited (“ABAL”) has ceased to be a substantial holder of the company, effective from 14 October 2021.
• In another update, the company stated that Jim Beyer, a director in the company, acquired 60,287 ordinary shares and disposed 100,479 performance rights on 28 September 2021.

A Quick Look at FY21 Key Highlights:

• Rise in Top-Line: In FY21, the company’s total revenues increased 8.3% year over year and stood at $819.2 million. The rise in revenues can be attributable to 367,285 ounces of gold sold at an average of $2,229 per ounce in FY21.
• Details of NPAT and EBITDA: In FY21, the company’s NPAT stood at $146 million, and EBITDA of $403 million. The company reported an NPAT margin of 18% and a robust EBITDA margin of 49% in FY21, reflecting the strength of the business.
• Rise in Gold Production: For the year ended 30 June 2021, the company reported total gold production of 372,870 ounces, up ~6% year over year, reflecting strength in Duketon operations and 17,317 ounces from the Tropicana Gold project.
• Enhancing Shareholder’s value: The company declared a final (fully franked) dividend of 3 cents per share, taking the total full-year dividend to 7 cents per share, reflecting a basic and grossed-up yield of 2.8% and 4.0%, respectively.
• Balance Sheet Details: The company ended the period with cash and bullion of $269 million, up from $209 million as at 30 June 2020. Net debt position as of 30 June 2021 stood at $31.3 million.

Dividend Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risks related to the fluctuations in the gold price, foreign currency risk, etc. Further, the COVID-19 pandemic and its associated impacts may disrupt the company’s operations and costs of doing business.

What to Expect: For FY22, RRL expects its gold production to be in the range of 460,000-515,000 ounces with an AISC of between $1,290-1,365/oz, supported by solid production at Duketon and RRL’s 30% interest in Tropicana. Furthermore, RRL expects growth capital expenditure in FY22 to be in the ambit of $155-165 million. The company expects to report its September 2021 quarterly results on 26 October 2021.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of RRL has been corrected by ~22.11% in the last six months and is trading lower than the average 52-week price level band of $1.860 - $4.819, offering a decent opportunity for accumulation. The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company can trade at a slight discount to its peers, considering the fluctuations in gold prices, leveraged balance sheet, the impact of COVID-19 pandemic, etc. For the valuation purpose, peers such as Northern Star Resources Ltd (ASX: NST), OceanaGold Corp (ASX: OGC), and Resolute Mining Ltd (ASX: RSG) and others have been considered. Considering the rise in top-line in FY21, acquisition synergies, rise in gold production in FY21, enhancing shareholder’s values, modest production outlook, current trading level and indicative upside in the valuation, we give a “Buy” rating on the stock at the current market price of $2.20, down by ~1.346% as on 21 October 2021.

RRL Daily Technical Chart, Data Source: REFINITIV

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.