Shanta Gold Limited (LSE: SHG)

Shanta Gold Limited (LSE: SHG) is an FTSE AIM All-Share listed company, engaged in gold production and exploration. The Company holds exploration properties in Lupa Goldfield. Its Tanzanian assets include the New Luika Gold Mine (New Luika) and the Singida Gold Project (Singida).

Investment Rationale – Sell at GBX 12.37

• Profit Booking: SHG’s stock price has surpassed the R1 level suggested in the previous report published on 13 February 2023. Considering the market conditions and the price action, it is prudent to exit the stock as its close to the R2.
• Decrease in Revenue & Net Earnings: During H1 FY22, the company reported a decrease in total revenue to USD 51.90 mn as compared to USD 57.77 mn in H1 FY21. Further, the company reported a loss after tax of USD 3.11 mn when measured against the profit before tax of USD 3.12 mn in H1 FY21.
• Sluggish Profitability Margins: For H1 FY22, the Gross margin of the group was 21.4% against the industry median of 44.20% and the Net margin of SHG was pushed to negative 6.9% in the same period (H1 FY22) against the industry median of positive Net margin of 8.9%.
• Expensive Valuation: The stock of SHG is currently offered at 13.2x on Price/ Earnings based relative valuation (NTM) as compared to the industry (Basic Materials) median of 9.8x.

Share Price Chart  

Conclusion

Based on the notional gains, macroeconomic challenges, and price action stance, a "SELL" recommendation on Shanta Gold Limited has been given at the current market price of GBX 12.37 (as of 20 March 2023, 08:55 AM GMT).

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 20 March 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which 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 scenario.

Note 5: ‘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 6: Dividend Yield may vary as per the stock price movement.

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