The Positives
+ Remarkable performance turnaround driven carbon-in-leach. Following the recovering in production in 3Q18, the output of gold continued to climb higher in 4Q18. This is due to the higher volume of the gold pour from carbon-in-leach (CIL) (31,473oz in FY18 vs former peak of 31,206oz in FY15). Full-year revenue reached a record high of US$39.5mn (8% more than the previous high in FY16) even though the average selling price dropped by 8% YoY in FY18. Since the CIL plant only commenced operation in May-18, there were only two-quarters of revenue contribution this year.
The Negatives
– The dual primary listing in Hong Kong was rejected. In Dec-18, the Hong Kong Stock Exchange rejected the application of dual primary listing due to the unqualified market capitalisation requirement (HK$500mn, equivalent to S$87.7mn). Both the stock market and gold price tanked in 4Q18 when the exchange’s listing committee reviewed the application. The board has not decided whether to resubmit the application or to abandon the plan. Total listing expenses that the company forked out was US$1.99mn.
Outlook
To recap the group’s expansion plan in FY19:
The flotation facility, the potential expansion of CIL capacity and underground mining will scale up the production and sales. The two permanent heap leaching pads are expected to bring down the transportation costs by half. The power line will sustain the operation at lower fuel costs. The realisation of turnaround is expected to continue this year. With the bullish outlook of the gold price, we believe the performance will be better off in FY19.
Maintain BUY with a high
We maintain our BUY recommendation with a higher TP of S$0.31 (previously S$0.29) due to the improvement of production.er TP of S$0.31
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Guangzhi graduated from Singapore Management University with a Master degree in Applied Finance and from South China University of Technology with a Bachelor degree in Electronic Commerce.
The current sector coverages include Energy, Utilities, and Mining sectors. He has 3 years experience in equity research in both Hong Kong and Singapore market. He is the mandarin spokesperson for Phillip Securities Research in relation to China-related projects and all mandarin seminars and client events.
