Serabi Gold PLC

Serabi Gold PLC (LON: SRB) is an FTSE AIM All-Share listed company that is engaged in gold production and exploration.

The Company will release FY21 results in the middle of May 2022.

Investment Rationale for Valuation – Hold at GBX 49.00

• Strategic Targets: The Company aims to become a multi-asset gold miner with production approaching 100,000 ounces within the next few years.
• Accelerated Progress at Coringa Mine: SRB reported better than anticipated results from the underground development at Coringa.
• Decent Prospects at Piaui: As per a recent update on 18 March 2022, Serabi reported positive development from the Palito project. It stated that brownfield diamond drilling has continued to define mineralization in the region.
• Technical Indicator: The price of the stock seems to be consolidating between the lower Bollinger band and middle Bollinger band depicting a bullish price momentum.

Key Risks

• Trimmed FY22 Production Guidance: SRB had trimmed its production guidance from the previous 36,000 to 39,000 ounces to 30,000 ounces for FY22.
• Weak Global Growth Forecast: The World Bank has reduced its global growth forecast for 2022 from 4.1% to 3.2%.

Q1 FY22 Operational Review (for the three months ended 31 March 2022, released on 19 April 2022)

(Source: Company Website)

• Declining Production Volumes: The Company’s gold production witnessed a significant year-on-year fall of around 13% during Q1 FY22.
• Cash Balance: SRB had reported a cash balance of USD 6.9 million at the end of Q1 FY22.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22E)

Conclusion

SRB reported mixed operational results for the first quarter of 2022. Nonetheless, the accelerated mine development and ongoing exploration programmes would support further resource growth.

The stock made a 52-week high and low of GBX 80.00 and GBX 46.00, respectively.

Based on the recent exploration success, decent cash balance, and support from the valuation as done using the above method, we have given a “Hold” recommendation on Serabi Gold PLC at the current market price of GBX 49.00 (as of 20 April 2022, at 01:10 PM GMT+1) with lower double-digit upside potential based on 5.52x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

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.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on 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 subject to the factors discussed above.

Note 3: 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 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.’ 

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 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 unfavorable movement in the stock prices.

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.