Central Asia Metals PLC

Central Asia Metals PLC (LON: CAML) is a FTSE AIM UK 50 index listed Company that owns 100% of the Sasa zinc-lead mine in North Macedonia and 100% of the Kounrad SX-EW copper project in central Kazakhstan.

Rationale for Valuation – HOLD at GBX 245.00

• Strong Fundamentals: CAML demonstrated robust financial performance in H1 FY21, driven by strong commodity prices. The Group free cash flow increased to US$48.9 million in H1 FY21 (H1 FY20: US$21.2 million).
• Reduced Debt: Since H1 FY21, CAML made the US$10 million accelerated debt repayment. Therefore, the corporate debt facility is likely to be zero by August 2022.
• Copper Price Outlook: The Copper industry is fundamentally strong for the long run with the advancement of green transportation and renewable energies.
• Technical Indicator: From a technical standpoint, the stock price is trading above the 20-day EMA (GBX 242.00), reflecting a bullish price momentum.
• Undervalued Multiples: On a forward 12-month basis – EV/EBITDA, Price/Earnings, and Price/Cash Flow, valuation multiples are quite undervalued against the corresponding multiples of the Basic Materials sector.

Key Risks

• Demand Uncertainty: The copper prices can drop significantly as sluggish economic growth keeps a lid on demand.
• Pandemic Impact: The factory activities are also growing at lower pace due to the resurgence in Covid-19 cases globally.

Operations Update (as on 7 October 2021)

 (Source: Company Website)

• Safe Performance: During Q3 FY21, there was no lost time injuries at either Kounrad or Sasa mine.
• Production: During Q3 FY21, Kounrad produced 4,146 tonnes of copper, while the Sasa mine produced 5,742 tonnes of zinc concentrate and 6,927 tonnes of lead concentrate.
• Outlook: The Kounrad mine was expected to deliver at the top end of FY21 guidance (12,500 to 13,500 tonnes of copper), while the Sasa mine was anticipated to achieve lower end of FY guidance (23,000 to 25,000 tonnes of zinc).

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative)

Conclusion 

In H1 FY21, CAML raised dividend to 8 pence per share on the back of commodity prices boost, representing 40% of free cash flow (FCF). The Group is close to a debt-free milestone following the additional debt repayment in H1 FY21, reflecting the continued focus on delivering value to its shareholders. The outlook for the remainder of FY21 is positive on the back of strong demand outlook. The stock made a 52-week High and Low of GBX 298.00 and GBX 204.50, respectively.

Based on the resilient production, increased dividend, strong financial performance, strengthened balance sheet, supported by the valuation conducted above, we have given a “HOLD” stance on Central Asia Metals PLC at the closing price of GBX 245.00 (as on 10 December 2021).

Numis Corporation PLC

Numis Corporation PLC (LON: NUM) is a FTSE AIM UK 50 index listed independent institutional stockbroker and corporate advisor.

Rationale for Valuation – HOLD at GBX 322.00

• Strong Momentum: Driven by the recovery in IPO volumes and M&A, there was a 52% year-on-year growth in Investment Banking revenue. Numis also reported further market share gains in UK equities.
• Bright Prospects: Numis’ pipeline also remained robust, and the wider market outlook is positive. It also expects to launch several IPOs in FY22, and continuing progress on its strategic priorities.
• Solid Top-line Growth: Numis has delivered annual revenue growth of 44% over three years, on the back of continued strategic focus on its private markets Growth Capital Solutions business.
• Technical Indicator: From a technical standpoint, 14-day RSI (~42.80) is in the oversold territory, while the stock price is hovering close to the lower standard deviation of the Bollinger Bands.
• Undervalued Multiples: On a forward 12-month basis – EV/Sales, EV/EBITDA, and Price/Earnings valuation multiples of Numis are undervalued against the Investment Banking & Investment Services sector.

Key Risks

• Macroeconomic uncertainty: Surging inflation has curbed growth in the UK service sector, and consequently, the UK Services Purchasing Managers' Index fell from 59.1 in October 2021 to 58.5 in November 2021.
• Weak UK GDP: The UK economy witnessed a slowdown as the GDP grew quarter-on-quarter by around 1.3% during Q3 FY21, which remained merely lower-than-expected growth of around 1.50%.
• Market Risk: The Company is also exposed to market risk with high volatility in equity market, and loss of clients with subdued investors’ sentiments.
• Macroeconomic Risk: The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial markets.

Financial Highlights (for the year ended 30 September 2021, as on 8 December 2021)

(Source: Company Website)

• Revenue Growth: During FY21, revenue jumped over 39% on FY20, reflecting a strong trading momentum.
• Profit Growth: The profit before tax grew around 100% on FY20, reflecting the benefit of operational gearing. Similarly, net assets were also up by 18.5% year-on-year to £186.7 million.
• Dividend: Numis has maintained the consistent distribution, as full-year dividend rebased to 13.5 pence.
• Liquidity: It also reported a 7% year-on-year increase in cash balance to £134.1 million (FY20: £125.2 million).

Share Price Chart (since 02 February 2021)

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative)

Conclusion

Numis’ pipeline remained strong and overall market outlook is positive. Given the favourable market backdrop, the Group has increased its capital allocation and delivered growth in top-line and bottom-line items. It also experienced market share gains, resilient research payments, and good activity levels in UK equities. In a nutshell, FY21 remained an excellent year for Numis, and it well-positioned to generate incremental shareholders’ value. The stock made a 52 week High and Low of GBX 419.86 and GBX 308.50, respectively. 

Based on robust revenue growth, strong profit generation, significant progress on strategic priorities, favorable market dynamics, supported by the valuation conducted above, we have given a “HOLD” recommendation on Numis Corporation PLC at the closing market price of around GBX 322.00 (as on 10 December 2021).  

*All forecasted figures and Peer information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

 Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

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