Latest Research

Matrix Composites & Engineering (MCE) - Subdued FY17 Results

Matrix Composites & Engineering LogoFor MCE FY17 results were difficult, but largely expected. An underlying EBITDA loss of $4.4m reflects the subdued offshore oil and gas sector. Negligible sales in MCE’s core riser buoyancy market and a bleak outlook for new offshore rig builds has forced the Company to diversify its product offering to better utilise its state-of-the-art manufacturing facility in Henderson. Whilst some early success has been had, in particular with Matrix LGS (the Company’s low drag buoyancy products), we believe it will take time to penetrate new markets. Given a high level of uncertainty and a likely very soft FY18 we maintain our HOLD call on a revised DCF valuation of $0.38/share (previously $0.43/share).

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Ausdrill (ASL) - Winning In Africa

Ausdrill Limited LogoAfrica drove strong FY17 performance, and there’s more to come. The $1.6b in awards during FY17 largely came out of Africa, and will drive strong growth in FY18 (ASL guidance is for 30-40% earnings growth), while an exceptional tender pipeline here augurs well for FY19 and beyond. There are risks to managing and funding such strong growth, but ASL is well positioned in our view. We remain attracted to the business quality and outlook, but maintain a hold call on a revised valuation of $2.20 (prior $1.95).

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ST Barbara Ltd (SBM) - The Comeback Kid

St Barbara Ltd LogoSt Barbara Ltd (SBM) reported double digit growth for their FY17 results with underlying NPAT of $160m (+26% y-o-y), operating cashflow of $303m (+25% y-o-y) and EBITDA of $321m (+13% Y-o-Y). Consolidated gold production for FY17 came in at 381koz at an AISC of $907/oz, at a realised gold price of A$1,685/oz generating EBITDA margins of 50%. FY18 guidance of 350-375koz @ AISC $970-1,035/oz was announced, with production back-weighted to 2HFY18 to incorporate mine sequencing from Gwalia as the extension project is implemented. SBM announced its maiden dividend of 6cps (2% dividend yield), but remains cautious on a consistent policy pending balance sheet strength. FY17 was a standout year with over $228m of debt repaid. SBM has made a stellar comeback, and is appealing longer term. However, with capex expected to double and lower forecast FY18 production and higher costs at Gwalia we see limited upside versus our valuation at this juncture. HOLD maintained.

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Northern Star (NST) - A Solid FY17 Result

Northern Star LogoNorthern Star Resources (NST) reported double digit growth for their FY17 results with NPAT of $215.3m (+42% y-o-y), EPS up 42% and a final dividend of 6cps (+50% y-o-y). FY17 gold sales came in at 527koz @ $1,675/oz (vs production of 515koz @ AISC $1,013/oz) generating EBITDA margins of 52%. FY18 production is guided at 525-575koz at an AISC of $1000-1050/oz moving to >600kozpa in FY19 as infrastructure reaches maturity at Jundee and Kalgoorlie Operations to support additional throughput. NST announced a shift in its dividend policy which will see it pay out 6% of its revenue and maintain a minimum cash balance of $300m which is earmarked for working capital, opportunistic M&A and organic growth. This is a solid result and we expect to see continued organic growth through exploration success in FY18. NST remains our preferred pick in the gold space. BUY, TP $5.25ps.

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Metro Mining (MMI) - Barging Ahead

Metro Mining LogoMetro Mining (MMI) is progressing rapidly on its Bauxite Hills project in the Cape York Peninsula in Queensland. Earth moving equipment and construction steel for the barge loadout facility are being delivered to site via barges. Due to the simple nature of the operation, construction is expected to take just 4-5 months. MMI is fully funded after securing $40m in debt facilities with Sprott Private Resource Lending and Ingatatus AG Pty and raising $38m via an equity issuance at $13.5¢. The Company is poised to benefit from the rapidly expanding seaborn bauxite market into China by ramping up to ~6Mtpa of DSO product within four years. At current prices, the project would achieve >$25/t margins, facilitating rapid payback of development capex (pre-production capex ~$36m). Argonaut maintains a BUY recommendation with a $0.42 target price.

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