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Q2 in line, guidance maintained
? Q2 production in line: Centamin has released Q2 production figures of
240kt of gold to be mined from the underground at 5.45g/t. The waste
stripping programme at the pit is progressing ahead of schedule with both
the company’s own fleet and the Capital Drilling fleet ahead of plan. The
plant processed 2.8Mt at an average grade of 1.19g/t versus our expectation
of 2.9Mt at 1.17g/t, with throughput affected by bringing forward a planned
change of the girth gear in the SAG mill. AISC for the period was
USD1,290/oz, above our expectation of USD1,234/oz. Production guidance
of 400koz-430koz/t at an AISC of USD1,150/oz-1,250/oz for the year has
been maintained; we expect production of 430koz at an AISC of
USD1,157/oz. Centamin has agreed terms for 3,164km2 of exploration
concessions across 19 licences in Egypt, with final contracts due to be
signed in Q3. We view this as a material positive as it gives the company
growth options that could leverage off Sukari, including potential satellites
for the mine.
? Balance sheet remains strong: Centamin finished the period with
USD312.1m of cash and liquid assets and with no debt. Revenues for the
period were USD177.5m (Berenberg: USD183m) with an average received
gold price of USD1,822/oz and gold sold of 97.2koz. We expect Q2 EBITDA
of USD78m and NPAT (and post-profit share) of USD28.8m. Capex for the
year has been maintained at USD225m, with 65% now guided for H2 due to
delays.
? Maintain Buy: These are an in-line set of results with guidance
maintained, which we view as a positive after the operational challenges
faced by the company. We increase our price target to GBp138 based on a
blend of 1.2x NAV and 6x EV/EBITDA. We view Centamin as a turnaround
story, with a solid balance sheet that should underpin the ongoing
payment of a dividend – with a 5.5% yield – for 2021, which is at the upper
end of the gold peer group. The main catalyst should be the publication of
the second phase of the Sukari life of mine plan expected in Q4. We have
also updated our ESG matrix for Centamin (see Figure 2).
Current price Price target
GBp102 GBp138
22/07/2021 London Close
Market cap (GBPm) 1,364
Reuters CEY.L
Bloomberg CEY LN
Changes made in this note
Rating: Buy (no change)
Price target: GBp138 (137)
Estimates changes
2021E 2022E 2023E
old ? % old ? % old ? %
Sales 785 -0.8 803 0 748 0
EBITDA 404 -2.8 404 0.0 323 0.0
EPS 0.18 0.6 0.16 0.0 0.10 -0.1
Source: Berenberg estimates
Share data
Shares outstanding (m) 1,156
Enterprise value (GBPm) 1,019
Daily trading volume 7,350,000
Part 2Revenues 652 829 778 803 748
EBITDA 293 438 393 404 323
EBIT 167 313 278 282 202
Net income (adjusted) 77 157 216 187 115
EPS (reported) 0.08 0.14 0.19 0.16 0.10
EPS (adjusted) 0.07 0.14 0.19 0.16 0.10
DPS 0.04 0.09 0.09 0.06 0.04
Dividend payout ratio 61% 66% 49% 40% 43%
Dividend yield 2.7% 5.6% 5.5% 3.9% 2.6%
Capex -93 -139 -242 -204 -181
Free cash flow 156 314 105 209 160
FCF yield 4.3% 8.1% 2.6% 6.9% 4.4%
Y/E net debt (net cash) -278 -291 -265 -284 -290
Net debt / EBITDA -0.95 -0.67 -0.67 -0.70 -0.90
Gross margin 30.2% 39.9% 37.4% 36.7% 28.8%
EBITDA margin 44.9% 52.8% 50.5% 50.4% 43.2%
EBIT margin 25.6% 37.8% 35.8% 35.1% 27.1%
ROCE 12.8% 23.7% 18.9% 18.0% 12.5%
P/E 22.7 11.8 7.6 8.9 14.4
EV/EBITDA 5.1 3.6 3.6 3.5 4.3Revenues 652 829 778 803 748
EBITDA 293 438 393 404 323
EBIT 167 313 278 282 202
Net income (adjusted) 77 157 216 187 115
EPS (reported) 0.08 0.14 0.19 0.16 0.10
EPS (adjusted) 0.07 0.14 0.19 0.16 0.10
DPS 0.04 0.09 0.09 0.06 0.04
Dividend payout ratio 61% 66% 49% 40% 43%
Dividend yield 2.7% 5.6% 5.5% 3.9% 2.6%
Capex -93 -139 -242 -204 -181
Free cash flow 156 314 105 209 160
FCF yield 4.3% 8.1% 2.6% 6.9% 4.4%
Y/E net debt (net cash) -278 -291 -265 -284 -290
Net debt / EBITDA -0.95 -0.67 -0.67 -0.70 -0.90
Gross margin 30.2% 39.9% 37.4% 36.7% 28.8%
EBITDA margin 44.9% 52.8% 50.5% 50.4% 43.2%
EBIT margin 25.6% 37.8% 35.8% 35.1% 27.1%
ROCE 12.8% 23.7% 18.9% 18.0% 12.5%
P/E 22.7 11.8 7.6 8.9 14.4
EV/EBITDA 5.1 3.6 3.6 3.5 4.3
Revenues 652 829 778 803 748
EBITDA 293 438 393 404 323
EBIT 167 313 278 282 202
Net income (adjusted) 77 157 216 187 115
EPS (reported) 0.08 0.14 0.19 0.16 0.10
EPS (adjusted) 0.07 0.14 0.19 0.16 0.10
DPS 0.04 0.09 0.09 0.06 0.04
Dividend payout ratio 61% 66% 49% 40% 43%
Dividend yield 2.7% 5.6% 5.5% 3.9% 2.6%
Capex -93 -139 -242 -204 -181
Free cash flow 156 314 105 209 160
FCF yield 4.3% 8.1% 2.6% 6.9% 4.4%
Y/E net debt (net cash) -278 -291 -265 -284 -290
Net debt / EBITDA -0.95 -0.67 -0.67 -0.70 -0.90
Gross margin 30.2% 39.9% 37.4% 36.7% 28.8%
EBITDA margin 44.9% 52.8% 50.5% 50.4% 43.2%
EBIT margin 25.6% 37.8% 35.8% 35.1% 27.1%
ROCE 12.8% 23.7% 18.9% 18.0% 12.5%
P/E 22.7 11.8 7.6 8.9 14.4
EV/EBITDA 5.1 3.6 3.6 3.5 4.3
Cont
Part 3
? We retain a Buy recommendation for Centamin, as we bel the recent capital markets day provided clarity about the medium- ieve that
term production profile. Centamin retains a solid balance sheet and
should produce 450k-500koz over the longer term with a
sustainable dividend of at least USD100m/year.
? Price target and rating: Our price target, based on 1.2x NAV and 6x
EBITDA is GBp138 per share (from GBp137 per share).
? Valuation methodology: We value Centamin on an equally weighted
blend of NPV (10%) and EV/EBITDA methodologies to generate our
GBp138 price target.
Bloomberg CEY LN
Current price Price target
GBp102 GBp138 Market cap (GBPm) 1,364
22/07/2021 London Close EV (GBPm) 1,019
Trading volume 7,350,000
Free float 98.0%
Non-institutional shareholders Share performance
Management: 2% High 52 weeks GBp232
Current price Price target
GBp102 GBp138 Market cap (GBPm) 1,364
22/07/2021 London Close EV (GBPm) 1,019
Trading volume 7,350,000
Free float 98.0%
Non-institutional shareholders Share performance
Management: 2% High 52 weeks GBp232
Low 52 weeks GBp102
Business description Performance relative to
Centamin is a single-asset gold producer
operating the Sukari mine in Egypt. Sukari
has been in operation since 2009 and has a
20-year mine life from today.
SXXP MSCI Metals
& Mining
1mth -1.6% -2.8%
3mth -14.2% -9.5%
12mth -67.7% -81.8%
Part 4
Profit and loss summary
USDm 2019 2020 2021E 2022E 2023E
Revenues 652 829 778 803 748
EBITDA 293 438 393 404 323
EBITA 177 313 278 282 202
EBIT 167 313 278 282 202
Associates contribution - - - - -
Net interest 6 2 1 1 1
Tax - - - - -
Minorities 0 0 0 0 0
Net income adj. 77 157 216 187 115
EPS reported 0.08 0.14 0.19 0.16 0.10
EPS adjusted 0.07 0.14 0.19 0.16 0.10
Year end shares 1,156 1,156 1,156 1,156 1,156
Average shares 1,153 1,153 1,156 1,156 1,156
DPS 0.04 0.09 0.09 0.06 0.04
Cash flow summary
USDm 2019 2020 2021E 2022E 2023E
Net income 173 315 280 283 204
Depreciation 116 125 115 123 121
Working capital changes -25 10 -50 5 14
Other non-cash items -15 4 2 2 2
Operating cash flow 249 453 347 413 341
Capex -93 -139 -242 -204 -181
FCFE 156 314 105 209 160
Acquisitions, disposals 7 7 0 0 0
Other investment CF -159 -313 -103 -207 -158
Dividends paid -81 -139 -70 -95 -66
Buybacks, issuance 0 -3 0 0 0
Change in net debt 4 -13 27 -19 -6
Net debt (cash negative) -278 -291 -265 -284 -290
FCF per share 0.13 0.27 0.09 0.18 0.14
Cont
part 5
Growth and margins
2019 2020 2021E 2022E 2023E
Revenue growth 8.1% 27.0% -6.1% 3.2% -6.8%
EBITDA growth 13.7% 49.4% -10.2% 2.9% -20.0%
EBIT growth 13.1% 87.5% -11.2% 1.3% -28.2%
EPS adj growth 14.6% 104.4% 37.5% -13.6% -38.5%
FCF growth 15.3% 102.1% -66.7% 99.1% -23.5%
EBITDA margin 44.9% 52.8% 50.5% 50.4% 43.2%
EBIT margin 25.6% 37.8% 35.8% 35.1% 27.1%
Net income margin 11.8% 18.9% 27.8% 23.3% 15.4%
FCF margin 23.9% 37.9% 13.5% 26.0% 21.4%Key ratios
2019 2020 2021E 2022E 2023E
Net debt / equity -21.5% -22.6% -18.4% -18.5% -18.3%
Net debt / EBITDA -0.9 -0.7 -0.7 -0.7 -0.9
Avg cost of debt - - - - -
Tax rate 0.0% 0.0% 0.0% 0.0% 0.0%
Interest cover - - - - -
Payout ratio 60.6% 66.5% 48.8% 40.0% 43.2%
ROCE 12.8% 23.7% 18.9% 18.0% 12.5%
Capex / sales 14.3% 16.8% 31.1% 25.5% 24.2%
Capex / depreciation 80.7% 111.5% 210.4% 166.7% 149.5%
Part 6 Valuation metrics
2019 2020 2021E 2022E 2023E
P / adjusted EPS 22.7 11.8 7.6 8.9 14.4
P / book value 1.3 1.4 1.1 1.1 1.0
FCF yield 4.3% 8.1% 2.6% 6.9% 4.4%
Dividend yield 2.7% 5.6% 5.5% 3.9% 2.6%
EV / sales 2.3 1.9 1.8 1.8 1.9
EV / EBITDA 5.1 3.6 3.6 3.5 4.3
EV / EBIT 8.9 5.1 5.1 5.0 6.9
EV / FCF 9.5 5.1 13.6 6.7 8.8
EV / cap. employed 1.1 1.2 1.0 0.9 0.9
Key risks to our investment thesis
? Gold: With no financial gearing (no debt), Centamin has lower-thanaverage sensitivity to the gold price. Given the strength of the
balance sheet, the Sukari mine will survive a lower price than most.
? Updated mine plan: The updated mine plan, due before the end of
2021, could materially alter our long-term assumptions for both the
open pit and underground mine.
Part 7
Source: Company reports, Berenberg estimates
We have updated our ESG matrix for 2020. In the environmental category the combination
of an increase in the gold price and challenges with production drove a pullback in
greenhouse gas emissions to revenue, but an increase in emissions to tonnes processed
and production. Tailings waste to production also increased due to lower grades being
processed. The 26MW solar farm and associated 7.5MW battery storage system that should
be completed in H1 2022 should have a material and positive impact on emissions moving
forward; however, only 29% of water is recycled water drawn from a sea pipeline and is not
depleting aquifers. The main areas for improvement from an environmental perspective
are the external certification of the environmental management system and a policy on the
management of environmental impacts within the supply chain.
Within the social category the company reported no strikes and fatalities and a lost time
injury frequency rate of 0.84, which is low compared to peers. Centamin scores well in this
category with the main outstanding items being setting targets on diversity and opportunity.
The governance category is more mixed with good independent and female board
representation, but with only 9% of executives being female and only 1.5% of the workforce.
Centamin links executive compensation to ESG performance and has policies on bribery
and corruption, but is not a UN global compact signatory
Report authors
Jonathan Guy
Analyst
+44 20 3753 3379
jonathan.guy@berenberg.com
Richard Hatch
Analyst
+44 20 3753 3070
richard.hatch@berenberg.com
Oliver Grew****
Analyst
+44 20 3753 3215
oliver.grew****@berenberg.com
Please its not possibly to post some of he charts that form part of this report , sorry.
" we expect production of 430koz at an AISC of
USD1,157/oz." ( For 2021)
I missed that in the RNS.
Looks all good to me!