SINGAPORE (May 17): Phillip Capital has upgraded CNMC Goldmine Holdings to “buy” with a higher target price of 42 cents on expectations of a strong rebound for its production and earnings this year.
“The first gold pour from [CNMC’s carbon-in-leach (CIL) plant] delivered a substantial improvement in production,” says analyst Chen Guangzhi in a report on Thursday.
Due to an expected substantial improvement from the CIL plant which will be operational in 2Q18, the brokerage is raising its earnings per share (EPS) forecasts for FY18 and FY19 to 1.9 US cents and 2.7 US cents, respectively.
“Currently, the group has conserved a certain amount of high-grade ores specifically for CIL. Meanwhile, management is confident to extract ores that are above the cut-off grade to keep CIL plant’s operation smoothly in a few years,” Chen says.
CNMC saw its 1Q18 earnings surge almost ninefold to US$0.53 million ($0.71 million), as revenue climbed 29% to US$6.10 million on an increase in the production and sales volumes of fine gold, as well as the increase in average realised gold price.
See: CNMC Goldmine's 1Q earnings surge ninefold to $0.71 mil
“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 in the uptrend for gold prices,” Chen says.
Meanwhile, the brokerage believes CNMC, which has three mining concessions in Kelantan, will be unaffected by the recent outcome of the general elections held in Malaysia.
“The core officials of Kelantan state government was unchanged. The large change is at the federal administration,” says Chen. “Hence, the Sokor field projects will continue operations without any change.”
In addition, he notes that the key concessions such as exploration royalties had been renewed years ago.
See: 'Business is as usual' for CNMC, says CEO Chris, after Pakatan Harapan forms Federal government
As at 3.08pm, shares of CNMC are trading half a cent higher at 28 cents, implying an estimated price-to-earnings multiplier of 10.4 times and a price-to-book value of 1.8 times for FY18.
