Central Asia Metals PLC (LON: CAML)

Central Asia Metals PLC is an FTSE AIM UK 50 Index listed United Kingdom-based copper producer. It has operations in Kounrad, Kazakhstan, and Macedonia. The Company operates in three segments. It also operates Shuak, which is a copper and gold exploration.

Recent trend of dividend payments

CAML had paid a final dividend of 12 pence per share on 30 May 2022, while the ex-dividend date was 05 May 2022. Moreover, the Company had already paid an interim dividend of 8 pence per share. Thus, the total FY21 dividend remained around 20 pence per share, an increase of around 42.75% from 14 pence per share paid for FY20.

Growth Prospects

• Targeting Low Cost & High Margins: The Company continues to focus on increasing production volume while aiming to continue efficient operations to unlock maximum value and profitable operations.
• Net Zero Targets: CAML has anticipated a target of 50% reduction in Scope 1 and Scope 2 greenhouse gas ('GHG') emissions by 2030 versus 2020. Moreover, it aims to achieve net zero emissions by 2050.

Key Risks 

• Weak Production Guidance: CAML had anticipated a significant year on year decline in copper and zinc production during FY22 when compared with the 2021 levels.
• Federal Reserve Rate Hike: The Federal Reserve has announced its biggest interest rate hike since 1994, an increase of around 75 basis points, while also pointing to further steady rises this year. Moreover, the Bank of England also came up with a fifth consecutive interest rate hike of 0.25% on 16 June 2022.
• Record UK Inflation: According to the Office for National Statistics, the UK GDP grew only 0.2% for the three months through April 2022 after 0.8% in the previous three-month period.

Key Fundamental and Shareholders Statistics of Central Asia Metals PLC. 

Fidelity International is the most significant shareholder as it holds nearly 14.85 million shares.

Q1 FY22 Operational Update (for the three months ended 31 March 2022, as of 07 April 2022)

(Source: Company Filings)

• Decent Copper Production: The copper production witnessed a year-on-year growth of around 5.0% during Q1 FY22.
• Sasa Mine Production: CAML has reported 5,240 tonnes of zinc production and 6,736 tonnes of lead production from Sasa Mine.

FY21 Financial Highlights (for the year ended 31 December 2021, as of 08 March 2022)

(Source: Company Filings)

• Top-Line Business: The Company’s top-line revenue grew by around 39.49% during FY21, driven by favourable commodity prices.
• Profitability: On the profitability front, the earnings per share from continued operations has improved from 24.78 US cents in FY20 to 47.69 US cents during FY21.
• Balance Sheet: The cash balance stood at USD 59.2 million as of 31 December 2021.

Share Price Performance Analysis

On 22 June 2022 at 10:41 AM GMT+1, CAML’s shares were trading at GBX 230.00, down by 3.16% against the previous day closing price. Stock 52-week High and Low were GBX 284.50 and GBX 187.47, respectively.

On a daily chart, the stock price is hovering around the lower Bollinger band, indicating an upside potential in the stock price. Also, the 14-days RSI of ~36.19 illustrates an oversold territory.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

CAML has delivered its most profitable year to date with Group EBITDA of USD 141.5 million during FY21 and ended the year with a strong balance sheet. In terms of production guidance, CAML anticipates zinc production ranging from 20,000 tonnes to 22,000 tonnes and lead production between 27,000 tonnes and 29,000 tonnes. On the other hand, the Company had anticipated achieving full year FY22 copper production target of between 12,500 tonnes and 13,500 tonnes. Overall, the Company will continue to deliver long-term value to all the stakeholder despite ongoing challenges.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the record profitability during FY21, solid growth in the FY21 dividend, strong balance sheet, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Central Asia Metals PLC at the current market price of GBX 230.00 (as of 22 June 2022 at 10:41 AM GMT+1), with lower-double digit upside potential based on 6.18x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

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 for 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.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.  

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 the 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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