St Barbara Limited

SBM Details

Business Update: St Barbara Limited (ASX: SBM) engages in gold mining and explores silver deposits. It operates through Leonora Operations, Simberi Operations, and Atlantic Operations. As per the recent announcement, the company has ceased 218,472 shares due to a lapse of conditional right to securities.

FY21 Financial Performance:

• SBM has recorded a revenue of $740.24 million in FY21, down from $827.72 million on a pcp basis, impacting due to low performance at Leonora and Simberi.
• However, the company has achieved a current trade and other receivables of $40.3 million in FY21 vs $11.22 million in FY20.
• It has reported an underlying net profit of $80.62 million in FY21 against a profit of $108.47 million in FY20, depicting a decline in costs associated with the Building Brilliance transformation program and the impairment and exploration write-offs at Atlantic Gold.
• The company’s cash position stood at $133.37 million as of 30 June 2021 vs $405.5 million as of 30 June 2020.

Other Income Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company has a significant challenge in its operations, workforce, and local community health during the COVID-19 pandemic and is still uncertain, going forward.
• Logistic Risk- The company is prone to the risk associated with its logistic and sales activities that could impact its operations in the near-term future.

Outlook:

• The company focuses on maintaining a low total recordable injury frequency rate (TRIFR) through training programs and improved supervision of employees and contractors.
• It is looking towards strategic acquisitions and exploration opportunities to drive potential growth into future operations.
• The management aims to reduce operational cost, recovery through the Building Brilliance program and increase mine like Simberi Oxides and Touquoy through an optimistic mine plan.
• The company focuses on executing brownfield expansion projects across all its operations. Further, it enhances operational productivity and cost-efficiency at Building Brilliance by extending corporate activities in 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 SBM is trading below its average 52-weeks' levels of $1.255-$3.060. The stock of SBM gave a positive return of ~3.57% in the past one week and a negative return of ~31.41% in the past nine months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers, considering the uncertainty led by COVID-19 pandemic, supply chain disruption, and also taking into consideration that the company has been trading at a discount in the past three years over its peers’ average EV/Sales multiple. For the purpose of valuation, peers such as Regis Resources Ltd (ASX: RRL), Ramelius Resources Ltd (ASX: RMS), Silver Lake Resources Ltd (ASX: SLR) and others have been considered. Considering the current trading levels, indicative upside in valuation, expanding brownfield project, strategic acquisition, optimistic outlook, we recommend a 'Buy' rating on the stock at the current market price of $1.515, as on 18 October 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

SBM Daily Technical Chart, Data Source: REFINITIV

Jupiter Mines Limited 

JMS Details

Q2FY22 and year to date FY2022 Financial Highlights: Jupiter Mines Limited (ASX: JMS) is engaged in developing, operating mineral resource properties and explores manganese deposit 

• The company has recorded an improved mining volume of 3.94 million bcm in Q2FY22 against 3.41 million bcm in 2QFY22 and mentioned 7.89 million YTD in FY22.
• Additionally, the company has incurred a net profit after tax of $15.3 million in Q2FY22, a decrease from $16.2 million in Q1FY22, driven by decreased sales volume and excavator breakdowns, inclement weather, and operator issues.
• However, the supply volume is ahead of six months target and supply almost 1.8 million tonnes through on-land logistics during the first half of FY22.
• It has delivered an improved EBITDA performance of $30.4 million in Q2FY22, compared to $26.0 million in the previous quarter.
• The company’s cash position stood at $68.71 million (inclusive share of Tshipi cash) at the end of the August quarter.

Net Cash from Operating Activities Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• Production Risk- The company is exposed to production risk due to labour shortfall and lockdown restriction during the COVID -19 pandemic, and still, the uncertainty prevails.
• Logistic Risk- The company has significant logistic disruptions on the Port Elizabeth and Saldanha Bay corridors might impact the company’s operations, going forward.

Outlook: The company continues to focus on improving Lost Time Injury Frequency Rate (LTIFR) that might improve the company’s performance in the near term. JMS remains on track to strategies and monitor the undrawn credit facilities and maintain reputable credit profile.

Valuation Methodology: Price/Earning Value 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 JMS is trading below its average 52-weeks' levels of $0.202-$0.375. The stock of JMS gave a positive return of ~11.62% in the past one month and a negative return of ~22.91% in the past nine months. The stock has been valued using the Price/Earnings multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers’ average P/E multiple, considering that the company has been trading at a discount in the past three years over its peers’ average P/E multiple, the potential legal risks associated with Tshipi’s registration, interest rate risk, etc. For the purpose of valuation, peers such as Macmahon Holdings Ltd (ASX: MAH), Mineral Resources Ltd (ASX: MIN), Sims Ltd (ASX: SGM) and others have been considered. Considering the current trading levels, indicative upside in valuation, increased production, decent targeted sales volume, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.240, as on 18 October 2021.

JMS 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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.

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