logo-loader

VSA CAPITAL MARKET MOVERS - Central Asia Metals: 2018 Full Year Results

no_picture_pai.jpg

Central Asia Metals#: 2018 Full Year Results

For the full report, please click here.

Keep reading VSA research for free – Click here for our position on MIFID2

8cca5f03-3a65-4030-b4e7-e9353ee5674b.png


Robust Full Year Financials

Central Asia Metals (CAML LN) having delivered on production guidance for 2018 released robust full year results underpinned by the low cost base of the group. Revenue of US$192m was up 88% YoY while Kounrad unit costs of US$0.54/lb were up 4% YoY, in line with our forecast. Sasa unit costs were 5% higher YoY. The stronger top line and low cost base meant EBITDA was up 88% YoY to US$125m. Net income from continuing operations was up 48% YoY and with EPS up 8% YoY to 31 cents per share highlighting the accretive nature of the transaction. The full year dividend of 14.5p/sh. was 5% ahead of our estimate.

Ongoing Strong Free Cash Flow Generation

We anticipate copper output of 13.4kt in 2019 with lead and zinc production of 29.4kt and 22.5kt. Although we anticipate modest inflationary pressure from higher power and pumping costs at Kounrad and rising zinc treatment charges at Sasa we expect margins to remain strong with EBITDA of US$120m in 2019. With capital expenditure expected to drop to US$11.2m following the completion of the tailings facility at Sasa, in H1 2019, levered FCF is likely to increase 15% YoY in 2019F to US$84.6m enabling a dividend of 15.7p.sh.

Sasa Mine Review

Having integrated Sasa, management is now focused on enhancing the operational efficiencies via a life of mine review covering all aspects of operations. The first step of this was an updated resource statement which included an increase in lead and zinc grades as well as the conversion of 17% of Golema Reka into the higher Indicated category. This confirms the mine’s current 19 year life although drilling new areas in 2019 offers upside potential to the current resource.   

Reccomendation and Target Price

Although the shares are up 14% YTD, trading on a dividend yield of 6% and at a 12% discount to peers this highlights the ongoing value opportunity and we expect FCF generation to continue to increase in 2019F and 2020F.

We reiterate our Buy recommendation although adjust our target price to 300p which implies 21% upside and 28% on a total return basis.

 

 

 

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Full interview: KRM22 PLC reports growing pipeline of new opportunities

KRM22 PLC's (LON:KRM) Keith Todd speaks to Proactive London's Andrew Scott following the release of the firm's interim results to June 2019. The risk management software firm, which floated in April last year, says its pipeline of new opportunities has increased over the period, but some...

1 hour, 55 minutes ago

3 min read