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Msg  239990 of 243416  at  7/20/2021 1:52:33 PM  by

normlasky


TJ - KGC

 Continue to accumulate.  Here's credit suisse take on kgc.  
Their price target is $8. Projecting $1.42 eps in 22.  Note that
their depreciation is about $600 million more than their sustaining
capex which is about $.50 cash per share.  Also, their cash position
will exceed their debt.
 

Upgrade to Outperform: We upgrade Kinross from Neutral to Outperform on valuation, as we see the recent sell-off as overdone. Our target price increases from $7.50 to $8.00. While we appreciate that YTD the company has faced two major operational hurdles the Round Mountain pit wall instability and Tasiast fire we think the impact is mainly limited to 2021, with 2022/23 still looking like strong production years. There could also be upside from a potentially earlier restart of the Tasiast mill vs. the current (somewhat conservative) year-end timeline. In 2022, we expect the company to offset Round Mountain’s lost Phase W ounces with other ore sources, and expect higher grade ounces to be pulled forward at Tasiast. In the past week, KGC’s market cap has declined ~$1.47B, while we estimate the Round Mountain and Tasiast combined EBITDA impact is ~$400M. We also see the stock being supported by buybacks, which could be accelerated in the near-term.

Tasiast situation could have been worse: We came away from KGC’s latest conference call thinking the Tasiast fire damage and operational/financial impact could have been much worse and that the market continues to price in a worse scenario. We think management is being somewhat conservative with the year-end timeline to restart the Tasiast mill (they cited 90% confidence in the year-end timeline), with the mill potentially restarting in 3-4 months. The critical path item is fabricating and installing a new trommel screen. The $50M repair estimate and lost profits may also be partially recovered through insurance (claims process is underway). Overall, we think the production impact (~230koz) will be limited to 2021, with the potential to have a strong start to 2022 with higher grade stockpiles, and no change to the 24k expansion timeline (still mid-2023).

Round Mountain impact also largely limited to 2021: KGC highlighted that it expects a ~70koz negative impact on 2021 production from the Round Mountain pit wall instability, with limited impact in 2022 with ore sourced elsewhere (i.e. not Phase W).
Valuation: Our $8.00 TP is based on a 50/50 weighting of NAV and CFO (adj.) valuation. Our CFO valuation is $9.09 based on 2021/22 CFO of $1.14 using a 9.0x multiple. Our NAV valuation is $7.36 based on $6.76 DCF using a 1.2x multiple, with adjustments at par. On our estimates, Kinross currently trades at ~1.0x P/NAV and ~4.4x P/CF vs. the senior gold peer group at ~1.7x and ~7.6x, respectively, indicating a meaningful discount.

Financial and valuation metrics
Year 12/20A 12/21E 12/22E

Previous rating
Previous target price (12M, US$) Price (21 Jun 21, US$) 52-week price range
Enterprise value (US$ m)

Research AnalystsFahad Tariq, CPA, CA

Neutral 7.50 6.50 10.00 - 6.19 9,175

page1image30928page1image31088page1image31248page1image31416page1image31584

EPS (CS adj.) (US$) Prev. EPS (US$) Revenue (US$ m) EBITDA (US$ m) 1 P/OCF (x) EV/EBITDA (current) Net debt (US$ m) ROIC (%)

Number of shares (m)
Net debt (Next Qtr., US$ m) 1 Net debt/tot eq (Next Qtr.,%)

0.76 0.55 1.42 - - 1.38 4,213.4 3,962.5 5,746.6 2,086.3 1,810.6 3,137.7 4.8 8.0 3.1 4.4 5.0 2.9 699 945 -754 12.76 8.70 22.85

 


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Msg # Subject Author Recs Date Posted
239992 Re: TJ - KGC Traderjacks 0 7/20/2021 2:45:02 PM


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