MACA Limited

MLD Details

Removal from the Index: MACA Limited (ASX: MLD) provides contract mining services and mineral processing services. On 3 September 2021, S&P Dow Jones Indices declared its Quarterly Rebalance of S&P/ASX Indices for September 2021, wherein it notified that MLD will be removed from the S&P/ASX 300 Index effectively before the opening of the Index on 20 September 2021.

FY21 Financial Highlights:

• Revenue Growth: The company posted growth in revenue, up by 48% YoY to $1,173.9 million in FY21. The EBITDA and EBIT rose by 11% and 383%, respectively in FY21 compared to FY20.
• NPAT Increase: The NPAT gained by a whopping 600% YoY to $25.2 million in FY21.
• Final Dividend: The Board has decided to pay a fully franked final dividend of 2.5 cents per share (cps), taking the FY21 dividend to 5.0 cps. The final dividend will be payable to the eligible shareholders on 17 September 2021.
• Liquidity Position: MLD held $122.3 million of cash as of 30 June 2021.
• Net Debt Increased: The company reported an increase in net debt from $73.4 million as of 30 June 2020 to $180.2 million as of 30 June 2021.

Cash & Cash Equivalents from FY19-FY21; (Analysis by Kalkine Group)

Key Risks: MLD faces foreign exchange headwinds and interest-rate sensitivity which may impact its borrowings and cash position.  

Outlook:

• As of 30 June 2021, MLD had $3.1 billion of work-in-hand position, up by 34% YoY. The company has secured work-in-hand worth ~$1.2 billion for its Mining division for FY22.
• The company expects to deliver revenue of $1.4 billion (out of which 85% stands secured as of 21 August 2021) in FY22.

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 MLD gave a negative return of 16.08% in the past six months and a negative return of 21.63% in the past nine months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.710 - $1.515. The stock has been valued using an Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). However, the company might trade at a slight discount than its peers’ median, considering the increase in net debt and total liabilities in FY21 and the continued impact of COVID-19 on the Mining and Construction industry to source labour locally. For the purpose of valuation, few peers like Aeon Metals Limited (ASX: AML), Metro Mining Limited (ASX: MMI), Macmahon Holdings Limited (ASX: MAH) have been considered. Considering the current trading levels, decent financial results in FY21, growth outlook and order pipeline for FY22, valuation, we give a ‘Buy’ rating on the stock at the current market price of $0.835, as on 6 September 2021, 3:50 PM, (GMT+10), Sydney, Eastern Australia.  

MLD Daily Technical Chart, Data Source: REFINITIV 

Dacian Gold Limited

DCN Details

FY21 Key Takeaways: Dacian Gold Limited (ASX: DCN) engages in the mining, exploration, and production of gold. 

• Decline in Revenue: DCN posted a revenue decline of 11% YoY to $241.62 million in FY21.
• EBITDA Growth: The company generated an EBITDA of $58.84 million, up by 52% YoY in FY21.
• Lower Production: DCN reported 106,919 oz of gold production in FY21, down by 23% YoY at a reduced AISC (All-in sustaining cost) of $1,556 per ounce.
• Increase in Average Gold Price Realised: The average gold price realised increased by 16% YoY to $2,226 per ounce in FY21.
• Integration of Redcliffe Gold Project: In March 2021, DCN integrated the Redcliffe Project Pty Limited, former NTM Gold Limited, into DCN’s operations. On 5 March 2021, the Supreme Court of Western Australia Limited approved the merger of NTM Gold Limited. 
• Debt Reduction: The Group repaid $47.9 million for Project Debt Facility in FY21 and reduced the borrowings to $16.2 million as of 30 June 2021 from $64.1 million as of 30 June 2020.
• Cash Position: The Group held $35.9 million cash on hand as of 30 June 2021.

Revenue & NPAT from FY17-FY21; (Analysis by Kalkine Group)

Key Risks:

• Gold Price Changes: On 5 March 2021, the Supreme Court of Western Australia Limited approved the merger of NTM Gold Limited.
• COVID-19 Uncertainties: During COVID-19 lockdowns, the company’s site personnel had to extend rosters to be at site until flights restarted to enable regular workforce roster rotation.

Outlook: DCN estimates 100,000-110,000oz gold production range at an AISC of 1,550- 1,700 per ounce in FY22. The company estimates to spend $66 million on growth capital in FY22.

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 DCN gave a negative return of 22.72% in the past three months and a negative return of 42.56% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $0.210 - $0.565. The stock has been valued using an Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium than its peers’ median, considering the debt repayment and reduced borrowings in FY21, expanded portfolio due to Redcliffe Project acquisition in March 2021, and upgrade mineral resource estimate at the Redcliffe Project. For the purpose of valuation, few peers like Sandfire Resources Limited (ASX: SFR), Resolute Mining Limited (ASX: RSG), Westgold Resources Limited (ASX: WGX), and others have been considered. Considering the current trading levels, reduced level of borrowings in FY21, resource upgrade activities, valuation, and associated risks of COVID-19, labour availability & mobility, gold price changes, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.213, as on 6 September 2021, 10:56 AM, (GMT+10), Sydney, Eastern Australia.  

DCN 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.

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