St Barbara Ltd

SBM Details 
· Better than estimated December quarter results lifted the stock sentiment: St Barbara Ltd (ASX: SBM) stock rallied over 6.3% on January 18, 2017 post the release of their second quarter results.  The group delivered a gold production of 98,982 ounces during the December quarter up from 92,547 ounces in the September quarter. The group further reported for their All-In Sustaining Cost (AISC) of A$876 per ounce during the quarter as compared to A$935 per ounce in the first quarter. This performance is mainly driven by their Gwalia (Western Australia) gold production which reached 70,925 ounces during the second quarter from 67,118 ounces in September quarter at AISC of A$716 per ounce. As a result, the free cash flow (cash contribution from operations) reached A$763 million during the quarter from A$83 million in the prior quarter. Mined grade improved to 11.9 g/t Au during the quarter from 10.4 g/t Au in earlier quarter.  

· Recommendation: SBM stock recovered over 25.2% this month after falling over 37.4% in the last six months (as of January 17, 2017). On the other hand, the group’s average realized gold price reached A$1,636 per ounce during the quarter from A$1,737 per ounce in September quarter. This remains a concern along with the volatile commodity environment. We maintain our “Expensive” Recommendation on the stock at the current price of - $ 2.35
 

SBM production, AISC and outlook (Source: Company Reports)

Treasury Wine Estates Ltd

TWE Details
· Improving market sentiments: Treasury Wine Estates Ltd (ASX: TWE) stock rose over 6.1% on January 18, 2017 driven by the improving market sentiments. TWE enhanced their ROCE by 2.8 percentage points to 9.6% in fiscal year of 2016. The group’s EBITS rose more than 50% during fiscal year of 2016, while their core business EBITS rose 37% (excluding the earnings contribution from the Diageo Wine acquisition). TWE Priority Brand portfolio delivered more than 85% of their net sales revenue during the year while their cash conversion was strong at 123%. The group is also focusing in costs and intends to generate at least $100 million of COGS savings.

· Recommendation: Despite delivering a decent performance, TWE stock has corrected over 7.9% in the last three months (as of January 17, 2017) and still trading at a higher level. We maintain our “Expensive” recommendation on the stock at the current price of – $ 11.11

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