Perenti Global Limited

PRN Details

FY21 Result Highlights: Perenti Global Limited (ASX: PRN) provides surface mining, underground mining, and mining support services. On 27 August 2021, PRN declared that Director Mark Andrew Hine held 141,251 shares via an on-market purchase of 19,480 securities in the firm.

• Steady Underlying Revenue: PRN posted stable underlying revenue of $2,021.8 million in FY21 versus $2,044.6 million in FY20. The Underground mining business posted revenue growth in FY21; however, the impact was higher on surface business, mainly in 1HFY21.
• Statutory Net Loss: The company registered a statutory net loss of $52.3 million in FY21 compared to statutory NPAT of $27.5 million in FY20.
• Reduction in Net Debt: PRN reduced its net debt by 10% YoY to $503.3 million with stable net leverage of 1.3x in FY21.
• Final Dividend: The Board has announced 2.0 cents per share of final dividend, taking the total dividend to 5.5 cents per share for FY21. The dividend stands unfranked with 6 October 2021 as the Record date and 20 October 2021 as the payment date.
• Liquidity Position: PRN had $567.9 million of available liquidity with $264.7 million cash and cash equivalents as of 30 June 2021.

Total Borrowings & Lease Liabilities from 30 June 2020 to 30 June 2021; (Analysis by Kalkine Group)

Key Risks: The company faces the impact of COVID-19 on its surface mining business and overseas operations. PRN faces a tighter labour market in Australia and forex headwinds due to strengthened AUD. 

Outlook:

• As of 30 June 2021, PRN had $6.6 billion of work in hand, with ~$2.8 billion of new contracts and extensions obtained in FY21.
• PRN has over three years of work-in-hand and $11.0 billion of a robust tender pipeline for its contract mining business.
• PRN estimates $2.0-$2.2 billion revenue and $165- $185 million EBIT (at an AUD: USD exchange rate of 0.75) for 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 PRN gave a positive return of 31.48% in the past three months and a negative return of 17.44% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.625 - $1.555. 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 discount than its peers’ average, considering its fall in EBITDA, net loss in FY21, mixed business performance and the risks associated with the COVID-19 and forex changes. For the purpose of valuation, few peers like NRW Holdings Limited (ASX: NRW), Macmahon Holdings Limited (ASX: MAH), Emeco Holdings Limited (ASX: EHL), and others have been considered. Considering the current trading levels, stable revenue, and reduction in net debt in FY21, new contract wins, strong order pipeline for FY22, decent outlook for FY22, and valuation, and associated risks of COVID-19, labour contraction in Australia and exchange rate changes, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.885 as on 3 September 2021, 3:50 PM (GMT+10), Sydney, Eastern Australia.

PRN Daily Technical Chart, Data Source: REFINITIV

Jupiter Mines Limited

JMS Details

Resolution to Remove the MD: Jupiter Mines Limited (ASX: JMS) is a mining firm with 49.9% beneficial interest in Tshipi é Ntle Manganese Mining Proprietary Limited which operates the Tshipi Borwa Manganese Mine in Australia and South Africa. On 17 August 2021, JMS received a request from AMCI Group, LLC (AMCI) to initiate a resolution to remove Mr Priyank Thapliyal, the MD of the company, at the upcoming general (Spill) meeting to be held on or around 19 October 2021. AMCI has placed this request via a notice under sections 249N and 203D of the Corporations Act 20221 (Cth). JMS will keep the shareholders posted about the date of the Spill meeting.

 Q1FY22 Highlights:

• Increase in Sales Revenue: JMS posted $107.4 million of sales revenue in Q1FY221 versus $52.3 million in Q1FY21 due to higher production, sales, and average CIF realised price.
• Production Growth: The company produced 1,049,985 tonnes of manganese in Q1FY22 compared to 694,769 tonnes in Q1FY21 due to the record volumes mined at Tshipi in May 2021.
• Demerger of Juno: In May 2021, JMS demerged the Central Yilgarn Iron Project holding iron ore assets by establishing a new firm - Juno Minerals Limited and got it listed on ASX.

Production Growth from Q4FY21 to Q1FY22; (Analysis by Kalkine Group)

Key Risks:

• Manganese Price Changes: JMS faces changes in manganese price as it produces and exports the mineral overseas.
• Changes in Third-Party Contractor Costs: The company faces fluctuations in the third-party contractor costs on mining and project operations.

Outlook:

• JMS will focus on expanding Tshipi to a 4.5Mtpa operation to leverage upon the growth in steel and EV battery markets and resource depletion at existing mines.
• The company will pay 1HFY22 interim dividend on 18 November 2021 and has announced 4 November 2021 as the record date. The 1HFY22 results will be released on 29 October 2021.

Valuation Methodology: Price to Earnings 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 gave a negative return of 22.22% in the past three months and a negative return of 28.05% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.245 - $0.375. 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 discount than its peers’ median, considering its lower NPAT, net cash from operating activities and cash at bank balance in Q1FY22 and the risks associated with changes in manganese prices and production. For the purpose of valuation, few peers like Rio Tinto Limited (ASX: RIO), BHP Group Limited (ASX: BHP), IGO Limited (ASX: IGO), and others have been considered. Considering the current trading levels, increase in production and revenue in Q1FY22, valuation, and associated risk of changes in the production and manganese prices, and regulatory approvals, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.245 as on 3 September 2021, 12:51 PM, (GMT+10), Sydney, Eastern Australia.

JMS 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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.