Perseus Mining Limited
PRU Details
Acquisition of Orca: Perseus Mining Limited (ASX: PRU) is engaged in the mining and exploration of gold. As announced on 28 February 2022, PRU has signed a definitive agreement with Orca Gold Inc. for the acquisition of all of the outstanding common shares of Orca. PRU will pay a total consideration of C$215 million, which include C$17 million in cash previously paid to acquire its initial 15% equity interest and C$198 million in Perseus shares for the remaining stake.
1HFY22 Operational and Financial Summary: During 1HFY22, PRU witnessed improvement throughout all key metrics, including revenue, EBITDA, profit after tax and operating cash flow. This allowed the company to declare an interim dividend of 0.81 cents Australian per share.
Financial Summary (Source: Analysis by Kalkine Group)
Key Risks: PRU’s operational and financial performance could be impacted by the adverse movement in the prices of gold as it generates a major portion of revenue from the sale of gold. The company’s business could be affected by an extreme change in climate, which could temporarily pause its operations.
Outlook: For FY22, PRU is aiming at the corporate objective of producing over 500,000 ounces of gold at a margin of over US$400 per ounce. In addition, it anticipates producing gold in the range of 471,000 to 506,000 ounces at an ASIC of US$932 to US$1,020 per ounce.
Valuation Methodology: P/E 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 PRU is trading near to its 52-week high level of $2.020. The stock has provided returns of ~29.25% in the past three months. The stock has a support and resistance level of $1.46 and $2.10, respectively. The stock has been valued using the P/E multiple-based illustrative relative valuation and arrived at a target price with a correction of high-single-digit (in % terms). The company can trade at a slight discount to its peers’ median P/E multiple, considering the COVID-19 disruptions and low gross margins. For this purpose of valuation, peers such as Regis Resources Ltd (ASX: RRL), St Barbara Ltd (ASX: SBM), and OceanaGold Corp (ASX: OGC) have been considered. Considering the expected correction, solid rally in the past months, current trading levels, current volatility due to Russia-Ukraine Tension, and key risks associated with the business, we advise investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $2.000 as on 08 March 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.
PRU Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions 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 is subject to the factors discussed above.
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