- •Contents
- •Revisions to our forecasts, TPs and ratings
- •Investment stance
- •Capital cycle favours rising returns
- •Comfortable balance sheets and supportive dividend potential
- •Value relative to other stocks
- •Yield potential through the cycle
- •Mid-cycle cash generation offers supportive yields
- •Where to hide if you are bearish
- •What to buy if you are bullish
- •Limited lives weighing down IRR
- •Yields should compensate for limited lives
- •Positive earnings momentum continues to support share prices
- •Commodity price revisions
- •Commodity section
- •Commodity section
- •Preference for base metals over steelmaking materials
- •Earnings revisions
- •Risks and catalysts
- •Peer comp charts
- •Commodity price and exchange rate forecasts
- •Important publications
- •African Rainbow Minerals
- •Alrosa
- •Anglo American
- •Assore
- •Exxaro
- •Glencore
- •Kumba Iron ore
- •NorNickel
- •Rio Tinto
- •Rusal
- •Vale
- •Gold Fields
- •Harmony
- •Polymetal
- •Anglo American Platinum
- •Lonmin
- •Northam
- •Royal Bafokeng Platinum
- •Sasol
- •Disclosures appendix
vk.com/id446425943
Lonmin – HOLD
Renaissance Capital
1 April 2019
Metals & Mining
Figure 132: Lonmin, $mn (unless otherwise noted)
|
|
|
|
Lonmin |
LONJ.J |
Target price, ZAR: |
17.0 |
Market capitalisation, $mn: |
294 |
Last price, ZAR: |
15.5 |
Enterprise value, $mn: |
180 |
Potential 12-month return: |
9.9% |
Sep-YE |
2017 |
2018 |
2019E |
2020E |
2021E |
Income statement |
|
|
|
|
|
Revenue |
1,166 |
1,345 |
1,447 |
1,364 |
1,292 |
Underlying EBITDA |
38 |
115 |
332 |
358 |
257 |
Underlying EBIT |
-28 |
101 |
312 |
336 |
231 |
Net interest |
-88 |
-30 |
-13 |
-2 |
7 |
Taxation |
18 |
-6 |
-84 |
-93 |
-67 |
Minority interest profit |
156 |
-20 |
-30 |
-33 |
-24 |
Attributable profit |
-998 |
42 |
186 |
207 |
148 |
Underlying earnings |
-103 |
63 |
186 |
207 |
148 |
Sep-YE |
2017 |
2018 |
2019E |
2020E |
2021E |
Cash flow statement |
|
|
|
|
|
Operating cash flow |
79 |
140 |
178 |
266 |
188 |
Capex (net of disposals) |
-100 |
-73 |
-110 |
-109 |
-106 |
Other |
20 |
-34 |
4 |
4 |
0 |
FCF |
-1 |
33 |
72 |
162 |
82 |
Equity shareholders' cash |
-70 |
11 |
63 |
160 |
87 |
Dividends and share buy backs |
0 |
0 |
0 |
0 |
0 |
Movement in net debt |
-70 |
11 |
63 |
160 |
87 |
Cash flow ratios
Underlying EPS, USc |
-37 |
22 |
66 |
73 |
52 |
Working capital turnover, days |
31 |
21 |
|
37 |
38 |
42 |
- ZAR |
-4.87 |
3.06 |
9.40 |
10.50 |
7.50 |
FCF yield |
0% |
28% |
|
58% |
-474% |
-68% |
Thomson Reuters consensus HEPS, ZAR |
|
|
2.19 |
2.50 |
2.33 |
Equity shareholders' yield |
-17% |
5% |
|
21% |
53% |
29% |
DPS declared, USc |
0 |
0 |
0 |
0 |
0 |
Capex/EBITDA |
263% |
63% |
|
33% |
30% |
41% |
Income statement ratios |
|
|
|
|
|
Cash conversion |
0.7x |
0.2x |
0.3x |
0.8x |
0.6x |
|
|
|
|
|
|
Valuation |
|
|
|
|
|
|
|
EBITDA margin |
3% |
9% |
23% |
26% |
20% |
|
|
|
|
|
|
|
EBIT margin |
-2% |
8% |
22% |
25% |
18% |
Calculation of target price |
|
|
|
|
|
ZAR/sh |
EPS growth |
-3% |
161% |
197% |
11% |
-29% |
DCF fair value per share |
|
|
|
|
|
17.5 |
Dividend payout ratio |
0% |
0% |
0% |
0% |
0% |
Total value per share |
|
|
|
|
|
17.5 |
Input assumptions |
|
|
|
|
|
Rounded to |
|
|
|
|
|
17.0 |
|
|
|
|
|
Current share price on 26/3/2019 |
|
|
|
|
|
15.5 |
|
Platinum, $/oz |
955 |
905 |
836 |
888 |
939 |
Expected share price return |
|
|
|
|
|
9.9% |
Palladium, $/oz |
794 |
990 |
1,434 |
1,688 |
1,626 |
Plus: expected dividend yield |
|
|
|
|
|
0.0% |
Rhodium, $/oz |
927 |
1,957 |
2,858 |
4,095 |
3,995 |
Total implied one-year return |
|
|
|
|
|
9.9% |
USD/ZAR |
13.38 |
13.07 |
14.26 |
14.40 |
14.44 |
Implied Lonmin share price based on Sibanye's proposed offer |
|
|
ZAR/sh |
|||
Breakeven price, $/3PGMoz |
927 |
992 |
977 |
1,105 |
1,212 |
|
|
|||||
Platinum volumes, koz |
|
|
|
|
|
At share exchange ratio of 0.967 and assuming market values on 26/3/2019 |
|
16.7 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal in concentrate |
644 |
629 |
640 |
520 |
500 |
Share price range, ZAR: |
|
|
|
|
|
|
Gross refined |
688 |
666 |
658 |
538 |
518 |
12-month high |
16 |
12-month low |
|
7 |
||
Sales |
706 |
676 |
658 |
538 |
518 |
Price move since high |
-3.3% Price move since low |
|
138.0% |
|||
Volume growth |
-4.0% |
-4.3% |
-2.7% |
-18.2% |
-3.7% |
Calculation of WACC |
|
|
|
|
|
|
Balance sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WACC |
11.8% |
Cost of debt |
|
|
5.0% |
||
Net operating assets |
363 |
440 |
592 |
672 |
757 |
Risk-free rate |
4.0% |
Tax rate |
|
|
28% |
|
Investments less rehab provision |
-100 |
-97 |
-97 |
-97 |
-97 |
Equity risk premium |
6.0% |
After-tax cost of debt |
|
3.6% |
||
Equity |
685 |
757 |
943 |
1,150 |
1,298 |
Beta |
1.30 |
Debt weighting |
|
0% |
||
Minority interest |
-323 |
-300 |
-270 |
-237 |
-214 |
Cost of equity |
11.8% |
Terminal growth rate |
|
0.0% |
||
Net debt |
-99 |
-114 |
-177 |
-337 |
-425 |
Valuation ratios |
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|
|
|
|
|
Balance sheet ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sep-YE |
2017 |
2018 |
|
2019E |
2020E |
2021E |
|
Gearing (net debt/(net debt+equity)) |
-16.9% |
-17.7% |
-23.2% |
-41.5% |
-48.6% |
P/E multiple |
-4.1x |
3.7x |
|
1.6x |
1.5x |
2.1x |
Net debt to EBITDA |
-2.6x |
-1.0x |
-0.5x |
-0.9x |
-1.6x |
Dividend yield |
0.0% |
0.0% |
|
0.0% |
0.0% |
0.0% |
RoCE |
-2.1% |
12.0% |
60.5% |
53.1% |
32.4% |
EV/EBITDA |
0.0x |
-1.6x |
|
-0.4x |
-0.8x |
-1.3x |
RoIC (after tax) |
-4.6% |
9.9% |
43.6% |
38.2% |
23.3% |
P/B |
0.6x |
0.3x |
|
0.3x |
0.3x |
0.2x |
RoE |
-8.8% |
8.7% |
21.9% |
19.8% |
12.1% |
NAV per share, ZAR |
32 |
35 |
|
48 |
59 |
66 |
Source: Bloomberg, Thomson Reuters, Renaissance Capital estimates
86