Atalaya Mining PLC

Atalaya Mining Plc (ATYM), formerly known by the name, Eastern Mediterranean Resources Public Ltd, is a mineral exploration and development company. The company along with its subsidiaries explores and develops the base and precious metals. It focuses on the development of two projects including Rio Tinto Copper Mine in Spain and Proyecto Touro Project in Spain. The Rio Tinto Copper Mine is involved in the exploration of copper, and Proyecto Touro also carries out copper exploration activities. The company also has exploration licenses in the copper-mining districts of Cyprus, and 1.8 per cent stake in KEFI Minerals Plc, which carries out the exploration activities in the UK.

Financial Highlights (FY 2018, €’000)

(Source: Annual Report, Company Website)

Copper production increased by 13 per cent to 42,114t (2017: 37,164t), in conjunction with a 10.9 per cent rise in received copper prices to US$2.95/lb. Total revenue from operations surged by 18 per cent to €189.5 million(2017: €160.5 million). EBITDA rose by 29.5 per cent to €53.5 million (2017: €41.3 million) while operating cash flow surged by 81.4 per cent to €55.3 million (2017: €30.5 million). Atalaya Mining’s profit surged significantly by 89 per cent in FY2018 to €34.4 million (FY2017: €18.2 million) as its flagship project at Proyecto Riotinto performed ahead of expectations.  The company's working capital surplus declined during the financial year of 2018, on account of an increase in capital expenditure particularly related to the expansion project. Company’s earnings per share (EPS) was €25.4 cents per share in FY18as compared to the EPS of €15.5 cents per share in FY17, an increase of 63.9 per cent. Cash costs increased by 1.6 per cent to US$1.94/lb while on an all-in-sustaining basis costs decreased by 1.7 per cent to US$2.26/lb.

Share Price Performance

Daily Chart as at April-05-19, before the market close (Source: Thomson Reuters)

On 5^th April 2019, at the time of writing (before the market close, at GMT 8:50 AM), ATYM shares weretrading at par from the previous day closing price at GBX 234. Stock's 52 weeks High and Low is GBX 265.00/GBX 188.00 and at the current price level (as indicated in the price chart) shares were trading 11.70% lower than its 52w high level and 24.47% higher against its 52w low level.

Valuation Methodology

(Note: All EUR figures have been converted into GBP; EUR: GBP - 0.85)

Conclusion
Atalaya Mining projects strong growth during FY2019 as derived from the prior expansion project at Proyecto Riotintowith the further development to the 15mtpa project proceeding on track for mechanical completion at the end of the current quarter. The company is expecting production rates to build up during the second half of FY2019. The company’s strong reserves and resources, access to infrastructure and profitable operations are its major strengths, even as lawsuits remain a cause for concern. Nevertheless, strategic growth initiatives, technological advancements, and increasing global usage of copper may provide new growth opportunities to the company. However, rising labour shortage in Europe, operational risks and stringent regulations could affect the company’s operations. Based on a strong growth prospects and supported by valuation done using the above method, we have given a “BUY” recommendation at the closing price of GBX 234 (as on 4^th April 2019) with single-digit upside potential based on 12.32x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 

BBA Aviation PLC

BBA Aviation plc (BBA) is an aviation services company that offers flight support and aftermarket services to the business and commercial aviation markets. It provides a range of licensed parts and MRO services that include engine repair and overhaul services, components, equipment, and spare parts for maturing platforms; transforms non-core products from the original equipment manufacturers; and provides repair, maintenance, and overhaul services to jet engines. It hasoperations in the UK, North America and mainland Europe, Asia, South America and Africa.

Financial Highlights (FY 2018, $ million)

(Source: Annual Report, Company Website)

The company’s continuing revenue surged by 26.4 per cent to $2,347.3 millionas compared with the financial year 2017 of $1,857.3 million, including a contribution of $292.5 million from the acquisition of EPIC and $12.3 million from Ontic licence acquisitions and Firstmark. The group’s continuing underlying operating profit was $340.2 million as compared to $336.5 million in 2017. Continuing underlying operating profit increased by 1.1 per cent to $340.2 million as compared to $336.5 million in 2017. Continuing underlying profit before tax stood at $273.9 million as compared with the financial year 2017 of $275.0 million.  Continuing group profit before tax was $147.2 million as compared to the financial year 2017 of $157.6 million, due to the increase in the exceptional and other items charged. Adjusted basic earnings per share for continuing operations declined by 3.7 per cent to $21.0 cents as compared to $21.8 cents in 2017. Unadjusted basic earnings per share for continuing operations stood at $11.4 cents. The management team is declaring a final dividend per share of $10.07 cents, up by 5 per cent from the last year data due to the Board’s progressive dividend policy and its continued confidence in the company’s future development prospects. The company’s total dividend per share for FY2018 stood at $14.07 cents.

Share Price Performance

Daily Chart as at April-05-19, before the market close (Source: Thomson Reuters)

On 5^th April 2019, at the time of writing (before the market close, at GMT 9:06 AM), BBA shares were trading at GBX 257.40, up by 0.156% against its previous day closing price. Stock's 52 weeks High and Low is GBX 354.00/GBX 207.00. The company’s stock beta was 1.19, reflecting higher volatility movement of the stock as compared with the index.

Recent News
On 2^nd March 2019, Blackstone Group LP of the US acquired undisclosed Logistics Property, lessor of non-residential buildings, from Grosvenor Group PLC, owned by BBA Group PLC, Brunswick Real Estate AB owned by BBA Group PLC, and Kefren Capital Real Estate SL, owned by BBA Group PLC, in a leveraged buyout transaction.

Valuation Methodology

(Note: All USD figures have been converted into GBP; USD: GBP - 0.76)

Conclusion
While broad-based challenges can be seen ahead of the group, the current trading levels still indicate a positive movement in the stock with support coming from a few growth drivers, specifically from Ontic and Signature Flight Support. The company’s improved business performance of Flight Support segment, strong market position and cost efficiency are its major strengths, even as declining working capital remain area of concern. In the future, increasing competition, risks related to unforeseen circumstances and stringent regulations in the aviation industry may impact the company’s performance. However, strategic acquisition, the long-term outlook for the aviation industry and business expansions are likely to present new growth opportunities to the company. Based on a strong growth prospects and supported by valuation done using the above method, we have given a “BUY” recommendation at the closing price of GBX 257.00 (as on 4^th April 2019) with single-digit upside potential based on 1.96x NTM Price/Book Value (approx.) on FY19E book value per share (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters.
*The buy recommendation is valid for the current price as covered in the report (as on Apr-05-19).
 

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