Independence Group NL

IGO’s FY 2018 Performance Aided by Tropicana and Nova: Independence Group NL (ASX: IGO) ended FY 2018 with a strong performance with regards to the EBITDA (earnings before interest, tax, depreciation, and amortization) as well as revenues. The robust FY 2018 performance was underpinned by Tropicana as well as Nova. The year also marked the full production commercial production year at Nova. The company’s divestments with respect to the Jaguar as well as Stockman was also done.


Underlying EBITDA Components of FY 2018 (Source: Company Reports)

In FY 2018, Independence Group also managed to reduce its debts on the YoY basis. The company witnessed strong momentum across the key financial metrics in FY 2018 as compared to FY 2017. The company’s revenues and other income rose 85% YoY in FY 2018 to $780.6 million. The commercial production activities which were carried out at Nova, as well as contribution from Tropicana, have positively impacted the company’s net cash flow from operations in FY 2018 on the YoY basis. The company saw positive momentum from the Tropicana revenue as well as earnings in FY 2018 on the YoY basis thanks to the increased Australian dollar gold prices as well as gold sales.

A Look at Drivers and Outlook for Tropicana: The robust momentum in the production of gold in FY 2018 on the YoY basis was broadly in line with respect to the improved mill feed grades. This was witnessed because of the grade streaming strategy which the company decided to adopt at the end of FY 2018. The construction work with respect to second 6MW ball mill has been initiated and the company believes that it could be ended by December 2018.

Selling Gold Ounces Helped IGO in September 2018 quarter: In September 2018 quarter, Independence Group NL generated revenues and other income amounting to A$167.4 million of which Nova contributed $107.2 million and Tropicana has made the contribution of A$60.7 million. As compared to the previous quarter, the revenues and other income from Nova witnessed a decline in September 2018 quarter on the back of a fall in the A$ nickel prices. Moving forward, the price fluctuations in the nickel prices might impact Nova’s revenues and other income.

The revenues and other income with respect to the Tropicana rose in September 2018 on a quarter-over-quarter basis on the back of the 6% higher selling of the ounces.

Stock Analysis from Technical Standpoint: A technical indicator, Relative Strength Index or RSI, has been applied on the daily chart of Independence Group by considering the default values. As per the observation, the 14-day RSI is near its oversold region. Even though the stock price has just started to rebound, it might again move towards the oversold region. Once it reaches the oversold region, a rebound is expected which would create bullish momentum. However, as per Moving Average Convergence Divergence or MACD indicator, the MACD line has crossed the signal line and is moving downward. As a result, we maintain our “Hold” rating on the stock at the current market price of A$4.060 per share, up 2% on October 30, 2018.
 
 

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