CNMC Goldmine Holdings Limited - Phillip Securities 2019-08-19: On The Bull Run

CNMC GOLDMINE HOLDINGS LIMITED (SGX:5TP) | SGinvestors.io CNMC GOLDMINE HOLDINGS LIMITED (SGX:5TP)

CNMC Goldmine Holdings Limited - On The Bull Run

  • CNMC GOLDMINE HOLDINGS LIMITED (SGX:5TP)'s 2Q19 revenue and PATMI missed our expectation due to lower ore grade and higher effective tax rate.
  • Gold price is on the bull run after rallying back to a 6-year high of US$1,400/oz.
  • Expect underground mining to mitigate lower ore grade issue.
  • Revenue propelling and cost reduction plans are on track.
  • We adjust the FY19e and FY20e average selling price to US$1,350/oz (+3.8%) and US$1,400/oz (+3.7%) upward respectively while tweak down the FY19e implied gold grade to 0.48g/tonne (previously 0.49g/tonne). Accordingly, the present value of FCFE increases by 6.8%.
  • Meanwhile, the updated cost of equity drops 0.5 ppt to 12.5%. The last done price is 10% lower than our updated target price due to the recent price appreciation. We downgrade our call from BUY to ACCUMULATE with a higher Target Price of S$0.33 (Previously S$0.31).



The Positive


Gold price is on the bull run after rallying back to a 6-year high.

  • In 2Q19, the gold price averaged at US$1,308.5/oz (up 0.1% y-o-y and 0.4% q-o-q). The improving spot gold market resulted in the 1.6% y-o-y and 1.8% q-o-q growth in average realised selling price. It’s worth noting that the gold price surpassed US$1,400/oz, which is a 6-year high since Apr-13 by the end of Jun-19. As of mid-Aug-19, the gold price is holding up at above US$1,500/oz.


The Negatives


Lower ore grade led to a decline in q-o-q production.

  • In 2Q19, the gold output dipped by 5.3% q-o-q to 7,600oz due to lower ore grade. As of Jun- 19, all the output were from open-pit mining whose ore grade is lower than underground mining. During the period, the carbon-in-leach plant was more than 100% utilised with a daily ore processing capacity of 500 tonnes. However, phase one underground mining has commenced operation by the end of Jun-19. The lower ore grade issue is expected to be mitigated in 2H19.


Outlook

  • The expansion plan (see attached PDF report) enables CNMC Goldmine to boost production and lower operating costs further.


Downgrade to ACCUMULATE with a higher Target Price of S$0.33

  • We adjust the FY19e and FY20e average selling price to US$1,350/oz (+3.8%) and US$1,400/oz (+3.7%) upward respectively while tweak down the FY19e implied gold grade to 0.48g/tonne (previously 0.49g/tonne). Accordingly, the present value of FCFE increases by 6.8%. Meanwhile, the updated cost of equity drops 0.5 ppt to 12.5%.
  • CNMC Goldmine's the last done price is 10% lower than our updated target price due to the recent price appreciation. We downgrade our call from BUY to ACCUMULATE with a higher Target Price of S$0.33 (previously S$0.31).





Chen Guangzhi Phillip Securities Research | https://www.stocksbnb.com/ 2019-08-19
SGX Stock Analyst Report ACCUMULATE DOWNGRADE BUY 0.33 UP 0.310



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