Anglo Pacific Group Plc

Anglo Pacific Group Plc (LON: APF) is a mining Company, which primarily focusses on royalties associated with the mining of natural resources.

Investment Highlights - Anglo Pacific Group Plc – Speculative Buy at GBX 102.00

• As per valuation metrics, Price/Book Value and Price/Cash Flow multiples of the Anglo Pacific Group Plc are currently lower as compared to the corresponding multiples of the Metals & Mining industry. It reflects, shares are undervalued as compared to the industry.
• Over the course of 4 years (FY15 - FY19), the company’s revenue surged from GBP 8.68 million in FY15 to GBP 55.73 million in FY19, compounded at an annual growth rate (CAGR) of ~59.18 per cent.
• From the technical standpoint, 14-day RSI is in oversold zone and supporting an upside move (around 38 level), which means the stock price could increase in the short term.

Key Risks

• Fluctuations in the commodity price and foreign exchange rate could also affect the profitability and revenue of the Company.
• Operational risks that arise due to weather conditions and failure in the delivery of equipment can affect the performance of the Company. 

Recent News

On 25 September 2020, Anglo Pacific Group announced the commencement of a share buyback programme. The Company will purchase Ordinary Shares of up to £5 million.

Financial & Operational Highlights – H1 FY2020

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2020, due to reduction in the royalty rate at Kestrel, weaker coking coal prices and one-off charge of £1 million at Maracás Menchen, portfolio contribution declined by 43%.
• During the period, the mines producing royalties were fully operational were not materially impacted by the covid-19 crisis, and is expecting operating will restart at Cigar Lake in Q3 FY2020.
• The Company witnessed an increase in net debt to £39.8 million as on 30 June 2020, while net assets declined by 4%, due to lower coal price forecasts.
• APF made an additional investment of £5.7 million in LIORC in Q1 FY2020 and entered an agreement, which will allow the Company to enter into Tranche II of the Incoa.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown a decline in financial performance in the first half of the financial year 2020. Both the top-line and the bottom-line performance declined, while profitability remained in the negative zone. The liquidity position has declined, while the balance sheet remained well-positioned. APF is expecting stronger results across the majority of the portfolio in the second half of the financial year 2020. The Company expects coking coal prices improvement to benefit Kestrel, while LIORC will be benefitted from strong demand and higher iron ore prices. The stock made a 52-week low and high of GBX 98.00 and GBX 215.00, respectively.

Based on the decent prospects and supported by valuation done using the above method, we have given a “Speculative Buy” recommendation for Anglo Pacific Group Plc at the current price of GBX 102.00 (as on 13 October 2020, before the market close at 2:15 PM GMT+1), with a low double-digit-upside potential based on 7.70x Price/NTM Earnings (approx.) on FY20E earnings per share (approx.). 

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

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

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

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.

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. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. 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 do 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 in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.