- •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
Northam Platinum – SELL
Renaissance Capital
1 April 2019
Metals & Mining
Figure 133: Northam Platinum, ZARmn (unless otherwise noted)
|
|
|
|
Northam |
NHMJ.J |
Target price, ZAR: |
60 |
Market capitalisation, ZARmn: |
34,543 |
Last price, ZAR: |
67 |
Enterprise value, ZARmn: |
35,810 |
Potential 12-month return: |
-10.8% |
Jun-YE |
|
2017 |
2018 |
2019E |
2020E |
2021E |
Income statement |
|
|
|
|
|
|
Revenue |
|
6,865 |
7,553 |
12,445 |
17,258 |
19,287 |
Underlying EBITDA |
|
1,068 |
1,268 |
3,799 |
6,794 |
7,755 |
Underlying EBIT |
|
616 |
826 |
3,271 |
6,221 |
7,118 |
Equity accounted income |
|
5 |
4 |
6 |
0 |
0 |
Net interest |
|
-984 |
-1,137 |
-1,437 |
-1,542 |
-1,678 |
Other operating items |
|
-57 |
-164 |
-308 |
-274 |
-286 |
Taxation |
|
-212 |
-232 |
-813 |
-1,662 |
-1,932 |
Minority interest in profit |
|
0 |
0 |
0 |
0 |
0 |
Attributable profit |
|
-634 |
-702 |
719 |
2,743 |
3,221 |
Headline earnings |
|
-635 |
-699 |
716 |
2,743 |
3,221 |
HEPS, ZAc |
|
-182 |
-201 |
204 |
784 |
921 |
Normalised HEPS, ZAc |
|
78 |
83 |
399 |
841 |
978 |
Thomson Reuters consensus HEPS, ZAc |
|
|
-21 |
203 |
323 |
|
DPS declared, ZAc |
|
0 |
0 |
0 |
0 |
0 |
Underlying EBIT |
|
177 |
298 |
1,766 |
2,853 |
2,810 |
Zondereinde operations |
|
|||||
EBIT margin |
|
4% |
7% |
22% |
29% |
27% |
Booysendal operations |
|
437 |
525 |
1,504 |
3,368 |
4,308 |
EBIT margin |
|
17% |
17% |
35% |
46% |
48% |
EBIT |
|
616 |
826 |
3,271 |
6,221 |
7,118 |
Income statement ratios |
|
|
|
|
|
|
EBITDA margin |
|
16% |
17% |
31% |
39% |
40% |
EBIT margin |
|
9% |
11% |
26% |
36% |
37% |
HEPS growth |
|
-29% |
-10% |
202% |
283% |
17% |
Dividend payout ratio |
|
0% |
0% |
0% |
0% |
0% |
Input assumptions |
|
|
|
|
|
|
Platinum, $/oz |
|
988 |
940 |
827 |
875 |
920 |
Palladium, $/oz |
|
738 |
977 |
1,272 |
1,663 |
1,663 |
Rhodium, $/oz |
|
821 |
1,634 |
2,651 |
3,833 |
4,122 |
$/ZAR |
|
13.60 |
12.85 |
14.18 |
14.40 |
14.41 |
3PGM sales volumes (excl. third party) |
|
|
|
|
|
|
Zondereinde operations |
lumes |
230 |
178 |
385 |
347 |
347 |
Booysendal operations |
lumes |
188 |
199 |
233 |
331 |
397 |
Group |
|
418 |
377 |
618 |
678 |
744 |
Volume growth |
|
-0.5% |
-9.7% |
63.9% |
9.7% |
9.7% |
3PGM breakeven price, $/oz |
832 |
921 |
793 |
857 |
906 |
|
Zondereinde operations |
|
|||||
Booysendal operations |
|
653 |
741 |
633 |
696 |
706 |
Group (mined production) |
751 |
826 |
733 |
778 |
799 |
|
Contribution to FY19E underlying EBITDA
Jun-YE |
|
2017 |
2018 |
2019E |
2020E |
2021E |
Balance sheet |
|
|
|
|
|
|
Net operating assets |
|
15,261 |
19,650 |
19,900 |
21,132 |
22,277 |
Investments |
|
8 |
0 |
19 |
19 |
19 |
Equity |
|
8,092 |
7,387 |
8,112 |
10,854 |
14,075 |
Minority interest |
|
0 |
0 |
0 |
0 |
0 |
Net debt |
|
7,177 |
12,263 |
11,807 |
10,296 |
8,221 |
Balance sheet ratios |
|
|
|
|
|
|
Gearing (net debt/(net debt+equity)) |
|
47.0% |
62.4% |
59.3% |
48.7% |
36.9% |
Net debt to EBITDA |
|
6.7x |
9.7x |
3.1x |
1.5x |
1.1x |
RoCE |
|
3.9% |
4.4% |
15.0% |
27.4% |
29.6% |
RoIC (after tax) |
|
4.2% |
5.9% |
15.4% |
22.3% |
22.3% |
RoE |
|
-7.5% |
-9.0% |
9.2% |
28.9% |
25.8% |
Cash flow statement |
|
|
|
|
|
|
Operating cash flow |
|
934 |
225 |
4,542 |
5,305 |
5,850 |
Capex (net of disposals) |
|
-1,645 |
-3,778 |
-2,350 |
-1,980 |
-1,791 |
Other |
|
-433 |
-413 |
-317 |
-274 |
-286 |
FCF |
|
-1,143 |
-3,966 |
1,875 |
3,050 |
3,773 |
Equity shareholders' cash |
|
-1,127 |
-3,980 |
1,760 |
3,041 |
3,822 |
Dividends and share buy backs |
|
0 |
0 |
0 |
0 |
0 |
Non-cash increase in debt |
|
-1,017 |
-1,107 |
-1,304 |
-1,530 |
-1,748 |
Movement in net debt |
|
-2,144 |
-5,086 |
456 |
1,511 |
2,075 |
Cash flow ratios |
|
58 |
118 |
52 |
44 |
43 |
Working capital days |
|
|||||
FCF yield |
|
-4.8% |
-14.3% |
5.3% |
9.0% |
11.9% |
Equity shareholders' yield |
|
-6.7% |
-25.7% |
7.5% |
12.9% |
16.2% |
Capex/EBITDA |
|
154.0% |
297.9% |
61.9% |
29.1% |
23.1% |
Cash conversion |
|
1.8x |
5.7x |
2.5x |
1.1x |
1.2x |
Valuation |
|
|
|
|
|
|
SoTP DCF fair value and calculation of target price |
|
|
ZARmn |
ZAR/sh |
||
Zondereinde operations |
|
|
|
11,450 |
32.7 |
|
Booysendal operations |
|
|
|
22,010 |
62.9 |
|
Other |
|
|
|
-277 |
-0.8 |
|
Enterprise value |
|
|
|
33,184 |
94.8 |
|
Investments as at 30 June 2018 |
|
|
|
0 |
0.0 |
|
Net debt as at 30 June 2018 |
|
|
|
-12,263 |
-35.1 |
|
Cash used in share buy-backs during 2019E |
|
|
|
0 |
0.0 |
|
Minority interest |
|
|
|
0 |
0.0 |
|
Equity value |
|
|
|
20,920 |
59.8 |
|
Rounded to |
|
|
|
|
60 |
|
Current share price on 26/3/2019 |
|
|
|
|
67.3 |
|
Expected share price return |
|
|
|
|
-10.8% |
|
Plus: expected dividend yield |
|
|
|
|
0.0% |
|
Total implied one-year return |
|
|
|
|
-10.8% |
|
Share price range, ZAR:
|
12-month high |
68 |
12-month low |
|
32 |
||
|
Price move since high |
-1.2% |
Price move since low |
|
112.6% |
||
Booysendal |
Calculation of WACC |
|
|
|
|
|
|
48% |
WACC |
14.5% |
Cost of debt |
|
|
12.5% |
|
|
Risk-free rate |
9.0% |
Tax rate |
|
|
28% |
|
|
Equity risk premium |
6.0% |
After-tax cost of debt |
|
9.0% |
||
|
Beta |
1.3 |
Debt weighting |
|
30% |
||
Zondereinde |
Cost of equity |
16.8% |
Terminal growth rate |
|
6.0% |
||
52% |
|
|
|
|
|
|
|
|
Valuation ratios |
|
|
|
|
|
|
|
Jun-YE |
2017 |
2018 |
|
2019E |
2020E |
2021E |
|
P/E multiple |
-26.4x |
-22.1x |
|
32.9x |
8.6x |
7.3x |
|
Normalised P/E multiple |
61.5x |
53.5x |
|
16.9x |
8.0x |
6.9x |
|
Dividend yield |
0.0% |
0.0% |
|
0.0% |
0.0% |
0.0% |
|
EV/EBITDA |
22.4x |
21.9x |
|
9.3x |
5.0x |
4.1x |
|
P/B |
2.1x |
2.1x |
|
2.9x |
2.2x |
1.7x |
|
NAV per share, ZAR |
23 |
21 |
|
23 |
31 |
40 |
Source: Bloomberg, Thomson Reuters, Renaissance Capital estimates
87