SINGAPORE (Feb 28): Phillip Capital is upgrading its call on CNMC Goldmine Holdings to “accumulate” with an unchanged target price of 30 cents ahead of a potential turnaround this year.
“In FY18, the primary catalyst that we look forward to is the significant turnaround of gold output, stemming from the replenishment of high-grade ore and higher gold recovery. Another positive factor is the resumption of the uptrend in gold price,” says analyst Chen Guangzhi in a Tuesday report.
“Meanwhile, we expect more capex from flotation facility construction and additional operating expenses from a planned dual primary listing in Hong Kong,” he adds.
CNMC reversed out of the red in the 4Q ended December with earnings of US$1.3 million ($1.7 million) on the back of a decline in management remuneration and employee benefits, compared to a loss of US$1.9 million in the corresponding quarter a year ago.
However, full-year earnings fell 69.4% to US$2.8 million in FY17, from US$9.1 million a year ago.
Revenue continued to fall for CNMC in 4Q17, slipping by 6.2% to US$4.9 million amid below-average production at its flagship Sokor gold mine in Malaysia’s Kelantan state and a drop in sales volume.
CNMC says production has been affected since 4Q16 due to lower ore grades in certain parts of Sokor.
See: CNMC Goldmine swings back to profitability with 4Q earnings of US$1.3 mil
Chen notes that the trial operation of CNMC’s carbon-in-leach (CIL) plant have yielded satisfactory results so far.
“Production at CIL plant [is] expected to kick-start in 2Q18,” says Chen. “With the help of the plant and available high-grade ore stockpiled, it is expected to see a significant improvement of output volume this year.”
Meanwhile, the analyst is also positive on CNMC’s on-going exploration on the Sokor, Pulai, and KelGold projects.
As at 2.35pm, shares of CNMC are trading half a cent up at 26.5 cents, implying an estimated price-to-earnings ratio of 21 times for FY18.
