Centamin Plc

Centamin Plc (LON: CEY) is an FTSE-250 listed Gold Mining Company, which specialises into exploration and developments of minerals.

Investment Highlights – Centamin Plc – Buy at GBX 114.70

• Despite the impact of the covid-19 pandemic, the Company managed to achieve its guidance for the fourth quarter and financial year 2020.
• In the last one month, the Company delivered a positive return of ~1.31% and delivered higher returns compared to the benchmark Index (FTSE-250 Index) of negative ~6.75%.
• As per valuation metrics, EV/Sales & Price/Book Value multiples of the Centamin Plc are currently lower as compared to the corresponding multiples of the Metals & Mining industry, reflecting undervalued valuations.
• From the technical standpoint, 14-day RSI is supporting an upside move (around 43 level), which means the stock price could increase in the short term.

Key Risks

• The Company can face financial loss, production disruption and reputational damage, in case of any accident or negative incident.
• Further, there are significant operational risks associated with COVID-19 related restrictions, geological and weather conditions.

Financial Highlights – Q4 and FY2020 (31 December 2020) (released on 19 January 2021)

(Source: Quarterly Report, Company Website)

• The Company’s Gold production from the Sukari Gold Mine in Q4 FY2020 and FY2020 of 67,996 ounces and 452,320 ounces stood in line with quarterly guidance and annual production guidance, respectively.
• The Company generated a Q4 revenue of USD 150 million, with gold sales of 79,535 oz. Moreover, the FY 2020 revenue was USD 829 million, with gold sales of 468,681 oz.
• On 31 December 2020, the Company witnessed a strong balance sheet, with no hedging, no debt and cash and liquid assets of USD 310 million.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings (NTM) (Illustrative)

Conclusion

The Company has delivered a strong performance in the fourth quarter of the financial year 2020, with a strong balance sheet and free cash flow. In 2021, the capital expenditure is expected to be USD 225 million, with identified growth projects and improve mining flexibility. CEY expects FY 2021 production guidance to be in between 400,000-430,000 ounces. Further, the Company has started a waste stripping programme to improve open pit’s optionality. The stock made a 52-week low and high of GBX 88.28 and GBX 233.30, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Buy” recommendation on Centamin Plc at the current market price of GBX 114.70 (as on 4 February 2021, before the market close at 12:35 PM GMT), with lower double-digit upside potential based on 12.11x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Sylvania Platinum Ltd

Sylvania Platinum Ltd (LON: SLP) is a Mining company engaged in the production and extraction of PGMs (platinum group metals) from arisings and chrome dumps.

The Company will release interim results in February 2021.

Investment Highlights - Sylvania Platinum Ltd – Hold at GBX 101.45

• The Company has delivered a strong performance in the second quarter of FY2021, with record net revenue and higher net profit.
• In the last one year, the Company delivered a significant return of ~149.16% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, EV/Sales multiple of the Sylvania Platinum Ltd is currently lower as compared to the corresponding multiple of the Metals & Mining industry, reflecting undervalued valuations.
• From the technical standpoint, 14-day RSI is supporting an upside move (around 47 level), which means the stock price could increase in the short term.

Key Risks

• Operational risks arise due to weather conditions, failure in the delivery of equipment, etc. could affect the operations of the Company. 
• The Company’s operations are impacted by financial risks such as lack of funding and liquidity. 

Trading Update for Q2 FY2021 (31 December 2020) (released on 29 January 2021)

• The Company’s SDO (Sylvania Dump Operations) for Q2 FY2021 stood at 18,363 ounces (Q1 FY2021: 17,972 ounces).
• The Company reported higher net revenue of $43.7 million in Q2 FY2021 (Q1 FY2021: $41.5 million), with a higher net profit of $20.3 million (Q1 FY2021: $20.1 million).
• The Company’s cash balance as on 31 December 2020 stood at $67.1 million, after income tax, royalties and dividends payment.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales (NTM) (Illustrative)

Conclusion

The Company has shown improved performance on a quarter-on-quarter basis and reported a record net revenue. The operational performance continues to stabilise. Sylvania Platinum has delivered a solid performance in Q2 FY2021 and is on track to achieve set production target of around 70,000 ounces for FY2021. The Company’s operations were not materially impacted by the impact of the covid-19 pandemic. SLP is also benefitted by stronger PGM basket price in the last couple of months. The Company may announce bonus divided based on interim accounts’ review incoming Board meeting in February 2021. The stock made a 52-week low and high of GBX 24.00 and GBX 122.00, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” recommendation for Sylvania Platinum Ltd at the current price of GBX 101.45 (as on 4 February 2021, before the market close at 9:05 AM GMT), and will recommend fresh buying at the right time.

 

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

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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