Perenti Global Limited

PRN Details

Latest Updates: Perenti Global Limited (ASX: PRN) provides surface and underground mining solutions and runs these segments, namely - surface mining, underground mining, investments, and group functions.

• On 22 April 2022, First Sentier Investors Holdings Pty Limited and its related bodies corporate reduced their shareholding from ~10.72% to ~6.65% in PRN.
• PRN plans to sell upto ~100% of its shares in Chrysos Corporation Limited (Chrysos) via its proposed IPO at the offer price. It currently holds ~7.12 million shares in Chrysos via a subsidiary.

1HFY22 Key Metrics (ended 31 December 2021):

• PRN reported ~18% Y-o-Y growth in revenue in 1HFY22, mainly due to the start of new projects and acceleration of the current growth projects.
• Before interest and tax, the operating cash flows increased from ~$184.2 million in 1HFY21 to ~$190.4 million in 1HFY22. The operating cash conversion rate improved to ~94% in 1HFY22 versus ~92% in 1HFY21.
• Net debt reduced from ~$540.2 million as of 31 December 2020 to ~$522.5 million as of 31 December 2021.

Underlying Results, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces commodity price and demand changes, acquisition risk, a tight labour market due to COVID-19 supply constraints, and wage cost inflation.

Outlook: PRN expects labour constraints and supply challenges to remain throughout FY22. It will continue to advance measures to target leverage of <1.0x in the mid-term. PRN has revised the revenue guidance upwards from ~$2.0 - $2.2 billion given previously to ~$2.2 - ~$2.4 billion for FY22. EBIT guidance for FY22 has been confirmed between ~$165 to ~$185 million.

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 PRN gave a negative return of ~7.28% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.625 - $1.175.  The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average EV/Sales multiple, considering the rise in debt-to-equity ratio in 1HFY22, continuous labour supply constraints, and the acquisition risk. For this purpose of valuation, a few peers like Macmahon Holdings Ltd (ASX: MAH), MACA Ltd (ASX: MLD), NRW Holdings Ltd (ASX: NRW), and others have been considered. Considering the current trading levels, work in hand and organic pipeline, growth in 1HFY22 underlying revenue and EBITDA, improved guidance for FY22 revenue, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.700, down by ~1.408%, as of 27 April 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

PRN Daily Technical Chart, Data Source: REFINITIV 

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. 

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.

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 unless those persons comply with certain safeguards, procedures, and disclosures.

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.