This report is an updated version of the report published on the 4 April 2024 at 3:55 PM AEDT.
Evolution Mining Limited (ASX: EVN)
EVN is an Australia-based gold mining entity that owns five wholly owned mines.
Recommendation Rationale – SELL at AUD 3.860
- Technical Standpoint: The momentum oscillator, 14-day RSI (~73.46) is approaching the overbought zone; and thus, price can face retracement in the short term.
- Financial Performance: EVN’s revenue increased by over 18% YoY and stood at AUD 1,340.20mn in 1HFY24 vs AUD 1,132.80mn in 1HFY23. This growth was supported by higher gold prices and an increase in sold ounces. The company's underlying EBITDA increased by over 28% YoY to AUD 572.60mn in 1HFY24 vs AUD 446.20mn in 1HFY23, supported by topline growth during the period.
- Emerging Risks: Technology changes, fluctuations in metal prices, current adverse macroeconomic conditions, key personnel, and regulatory constraints, climate changes, etc.
- Overvalued Multiples: On forward 12-month forward basis, key valuation multiples (EV/Sales, EV/EBITDA, Price/Earning, Price/Cash Flow, and Price/Book) are higher than the median of the Basic Materials industry.
EVN Daily Chart
Valuation Methodology: EV/Sales Approach (FY June’25E) (Illustrative)
Considering the commodity price fluctuation, lower operating margin in 1HFY24, intense competition in market, and regulatory barriers, the company might trade at a slight discount to its peers. For valuation, few peers such as Newmont Corporation (ASX: NEM), Ramelius Resources Ltd (ASX: RMS), West African Resources Ltd (ASX: WAF), and others have been considered.
Given its current trading levels, recent rally in the share price, and risks associated, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 3.860, at 1:40 PM AEDT, as of 4 April 2024.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is neither an indicator nor a guarantee of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 4 April 2024. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level at which 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 at which 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: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.