vk.com/id446425943
Assore – HOLD
Renaissance Capital
6 February 2019
Metals & Mining
Figure 80: Assore, ZARmn (unless otherwise noted)
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Assore |
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ASRJ.J |
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Target price, ZAR: |
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320 |
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Market capitalisation, ZARmn: |
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48,636 |
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Last price, ZAR: |
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347 |
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Enterprise value, ZARmn: |
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41,714 |
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Potential 12-month return: |
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0.9% |
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Jun-YE |
2017 |
2018 |
2019E |
2020E |
2021E |
Jun-YE |
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2017 |
2018 |
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2019E |
2020E |
2021E |
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Income statement |
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Balance sheet |
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Revenue |
5,945 |
6,306 |
5,738 |
6,181 |
6,499 |
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Net operating assets |
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17,547 |
17,915 |
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17,012 |
17,072 |
17,111 |
Underlying EBITDA |
2,237 |
1,846 |
1,717 |
1,714 |
1,799 |
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Investments |
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253 |
270 |
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208 |
208 |
208 |
Underlying EBIT |
2,120 |
1,683 |
1,530 |
1,512 |
1,587 |
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Equity |
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22,872 |
26,091 |
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28,160 |
28,694 |
29,225 |
Investment and other income |
372 |
649 |
738 |
885 |
1,098 |
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Minority interest |
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-24 |
-41 |
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-44 |
-48 |
-52 |
Interest paid |
-20 |
-19 |
-12 |
0 |
0 |
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Net (cash) debt |
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-5,047 |
-7,865 |
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-10,896 |
-11,367 |
-11,854 |
Taxation |
-583 |
-646 |
-632 |
-671 |
-752 |
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Balance sheet ratios |
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Equity income |
3,249 |
3,508 |
4,059 |
2,731 |
2,104 |
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Minority interest in profit |
-117 |
-56 |
17 |
18 |
18 |
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Gearing* |
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-28.3% |
-43.2% |
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-63.1% |
-65.6% |
-68.2% |
Net profit for the year |
5,021 |
5,119 |
5,701 |
4,476 |
4,055 |
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Net debt to EBITDA plus equity income |
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-0.9x |
-1.5x |
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-1.9x |
-2.6x |
-3.0x |
Headline earnings |
5,209 |
5,109 |
5,701 |
4,476 |
4,055 |
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RoCE |
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39.5% |
35.0% |
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40.6% |
30.8% |
26.2% |
HEPS, ZAc |
5,410 |
4,953 |
5,527 |
4,339 |
3,932 |
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RoIC (after tax) |
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30.8% |
27.3% |
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31.7% |
24.0% |
20.4% |
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RoE (ex. cash) |
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28.6% |
25.6% |
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28.4% |
20.8% |
17.0% |
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Thomson Reuters consensus EPS, ZAc |
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5,481 |
4,599 |
4,242 |
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*net debt/(net debt+equity) |
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DPS declared, ZAc |
1,400 |
2,200 |
2,860 |
2,570 |
2,620 |
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Cash flow statement |
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Underlying EBIT |
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Operating cash flow |
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4,904 |
4,746 |
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6,338 |
4,057 |
3,503 |
Other mining and trading business |
1,200 |
704 |
460 |
549 |
627 |
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Capex |
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-127 |
-367 |
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-274 |
-296 |
-296 |
EBIT margin |
20% |
11% |
8% |
9% |
10% |
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Other cash flows |
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-1,422 |
-25 |
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0 |
0 |
0 |
Commissions on sales and technical fees |
920 |
979 |
1,070 |
964 |
960 |
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FCF |
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3,356 |
4,354 |
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6,064 |
3,761 |
3,207 |
Total consolidated |
2,120 |
1,683 |
1,530 |
1,512 |
1,587 |
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Equity shareholders' cash |
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3,473 |
4,718 |
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6,663 |
4,412 |
4,012 |
Equity accounted: Assmang |
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Dividends and share buy-backs |
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-1,095 |
-1,900 |
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-3,632 |
-3,942 |
-3,525 |
Iron ore |
2,881 |
2,115 |
3,038 |
2,045 |
1,237 |
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Movement in net debt |
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2,378 |
2,818 |
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3,031 |
471 |
487 |
EBIT margin |
36% |
29% |
36% |
27% |
18% |
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Cash flow ratios |
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Manganese |
1,681 |
2,553 |
2,663 |
1,809 |
1,757 |
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EBIT margin |
33% |
40% |
38% |
29% |
26% |
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Working capital days |
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30 |
12 |
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16 |
14 |
12 |
Chrome |
-5 |
-29 |
0 |
0 |
0 |
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Capex/EBITDA * |
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19.8% |
25.6% |
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24.5% |
29.7% |
30.5% |
Underlying EBIT* |
6,677 |
6,322 |
7,230 |
5,366 |
4,581 |
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FCF yield |
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20.2% |
19.4% |
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24.4% |
15.4% |
13.4% |
Income statement ratios |
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Equity shareholders' yield |
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16.0% |
15.5% |
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18.6% |
12.3% |
11.2% |
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Cash conversion |
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0.7x |
0.9x |
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1.2x |
1.0x |
1.0x |
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EBITDA margin * |
41% |
37% |
40% |
33% |
29% |
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Valuation |
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EBIT margin * |
35% |
31% |
34% |
27% |
23% |
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HEPS growth |
220% |
-8% |
12% |
-21% |
-9% |
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SoTP DCF fair value |
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ZARmn |
ZAR/sh |
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Dividend payout ratio |
38% |
60% |
70% |
80% |
90% |
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Assmang |
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20,462 |
147 |
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Input assumptions |
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Marketing fee |
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5,349 |
38 |
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Other mining and trading |
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3,240 |
23 |
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Iron ore spot (CIF China), $/t |
69 |
67 |
71 |
71 |
65 |
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Other |
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0 |
0 |
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Manganese ore (44%, CIF China), $/mtu |
5.72 |
6.79 |
6.32 |
5.24 |
5.41 |
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Enterprise value |
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29,050 |
208 |
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Ferro Manganese - CIF, $/t |
1,166 |
1,341 |
1,169 |
1,100 |
1,135 |
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Other Investments |
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270 |
2 |
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Chrome ore, $/t |
278 |
207 |
181 |
189 |
202 |
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Net cash (debt) as at 30 June 2018 |
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7,865 |
56 |
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ZAR/$ |
13.60 |
12.85 |
14.25 |
14.25 |
14.09 |
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Dividends retained against BEE vendor loans |
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3,500 |
25 |
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Required breakeven price |
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DCF fair value for equity |
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40,685 |
291 |
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Plus: equity shareholders' cash/share |
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51 |
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Iron ore, $/t |
42 |
44 |
49 |
53 |
54 |
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Less: DPS |
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-27 |
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Manganese ore, $/mtu |
4.37 |
5.16 |
4.60 |
4.38 |
4.56 |
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Rounded to |
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320 |
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Chrome ore, $/t |
208 |
153 |
153 |
160 |
168 |
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Share price on 1/2/2019 |
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347 |
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Assmang sales volumes (100%) |
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Expected share price return |
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-7.7% |
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Plus: expected dividend yield |
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8.6% |
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Iron ore, mnt |
17.3 |
17.9 |
17.4 |
17.4 |
17.4 |
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Total implied one-year return |
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0.9% |
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Manganese ore, mnt |
3.0 |
3.2 |
3.1 |
3.1 |
3.7 |
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Manganese alloys, kt |
303 |
378 |
400 |
400 |
400 |
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Chrome ore, kt |
1,279 |
1,557 |
1,400 |
1,500 |
1,500 |
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Share price range, ZAR: |
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Attributable Cu eq volumes, kt |
217 |
227 |
223 |
223 |
233 |
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12-month high on 25/9/2018 |
381 |
12-month low on 20/7/2018 |
252 |
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Volume growth |
5.7% |
4.5% |
-1.8% |
0.0% |
4.4% |
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Price move since high |
-9.1% Price move since low |
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37.4% |
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Contribution to FY19E attributable underlying EBITDA |
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Calculation of discount rate |
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Other mining, |
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WACC |
15.1% |
Cost of debt |
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9.5% |
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trading and shipping |
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Risk-free rate |
9.0% |
Tax rate |
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28% |
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activities |
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Equity risk premium |
5.0% After-tax cost of debt |
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6.8% |
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20% |
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Iron ore |
Beta |
1.30 |
Debt weighting |
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0% |
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44% |
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Cost of equity |
15.5% |
Terminal growth rate |
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3.0% |
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Valuation ratios |
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Jun-YE |
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2017 |
2018 |
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2019E |
2020E |
2021E |
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P/E multiple |
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4.7x |
7.0x |
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7.5x |
9.5x |
10.5x |
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Dividend yield |
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6.7% |
7.5% |
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8.2% |
7.4% |
7.6% |
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Average enterprise value, ZARmn |
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24,246 |
33,217 |
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37,475 |
37,000 |
36,510 |
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EV/(EBITDA + equity income) |
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4.4x |
6.2x |
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6.5x |
8.3x |
9.4x |
Manganese |
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P/B |
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1.3x |
1.6x |
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1.7x |
1.7x |
1.7x |
36% |
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NAV per share, ZAR |
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164 |
187 |
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202 |
206 |
209 |
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Net cash (debt) per share, ZAR |
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36 |
56 |
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78 |
81 |
85 |
* proportionately consolidated
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates
47
vk.com/id446425943
BHP – HOLD
Renaissance Capital
6 February 2019
Metals & Mining
Figure 81: BHP, $mn (unless otherwise noted) |
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BHP |
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BILJ.J |
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Target Price, ZAR: |
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315 |
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Market capitalisation, $mn: |
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114,776 |
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Share price, ZAR: |
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297 |
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Enterprise value, $mn: |
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135,858 |
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Potential 12-month return: |
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15.2% |
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Jun-YE |
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2017 |
2018 |
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2019E |
2020E |
2021E |
Jun-YE |
2017 |
2018 |
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2019E |
2020E |
2021E |
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Income statement |
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Balance sheet |
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Revenue |
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38,285 |
43,650 |
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43,168 |
43,553 |
42,316 |
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Net operating assets |
79,194 |
71,636 |
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62,483 |
63,779 |
64,271 |
Underlying EBITDA |
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20,296 |
23,183 |
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23,403 |
22,560 |
20,802 |
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Investments |
-147 |
-32 |
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39 |
39 |
39 |
Underlying EBIT |
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12,391 |
16,564 |
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16,550 |
15,926 |
14,149 |
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Equity |
57,258 |
55,592 |
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47,952 |
48,508 |
48,477 |
Net interest |
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-1,431 |
-1,245 |
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-1,100 |
-994 |
-977 |
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Minority interest |
5,468 |
5,078 |
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4,969 |
5,149 |
5,344 |
Taxation |
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-4,100 |
-7,007 |
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-5,276 |
-4,985 |
-4,414 |
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Net debt |
16,321 |
10,934 |
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9,602 |
10,161 |
10,489 |
Minority interest in profit |
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-332 |
-1,118 |
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-847 |
-903 |
-975 |
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Attributable profit |
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5,890 |
4,823 |
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9,027 |
9,043 |
7,784 |
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Balance sheet ratios |
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Underlying attributable profit |
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6,732 |
8,933 |
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9,027 |
9,043 |
7,784 |
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Gearing* |
22.2% |
16.4% |
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16.7% |
17.3% |
17.8% |
Underlying EPS, USc |
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127 |
168 |
|
177 |
179 |
154 |
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Net debt to EBITDA |
0.8x |
0.5x |
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0.4x |
0.5x |
0.5x |
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RoCE |
13.6% |
19.5% |
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21.4% |
21.7% |
18.9% |
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Thomson Reuters consensus EPS, USc |
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183 |
183 |
173 |
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RoIC |
11.0% |
14.6% |
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13.5% |
14.4% |
12.6% |
DPS declared, USc |
|
83 |
118 |
|
244 |
161 |
154 |
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RoE |
12.1% |
15.8% |
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17.4% |
18.7% |
16.1% |
Underlying EBIT |
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Cash flow statement |
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Petroleum - US onshore |
|
-777 |
467 |
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0 |
0 |
0 |
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Operating cash flow |
17,837 |
19,610 |
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16,985 |
17,043 |
16,026 |
EBIT margin |
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-36% |
47% |
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- |
- |
- |
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Capex (net of disposals) |
-4,252 |
-4,979 |
|
2,800 |
-8,000 |
-7,391 |
Petroleum - Conventional |
|
1,349 |
1,082 |
|
1,773 |
1,348 |
1,200 |
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Other |
-841 |
1,159 |
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0 |
0 |
0 |
EBIT margin |
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29% |
25% |
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32% |
28% |
26% |
|
FCF |
12,744 |
15,790 |
|
19,785 |
9,043 |
8,635 |
Copper |
|
1,985 |
4,330 |
|
2,332 |
3,323 |
3,740 |
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Equity shareholders' cash |
12,659 |
10,607 |
|
17,999 |
7,928 |
7,487 |
EBIT margin |
|
27% |
37% |
|
23% |
28% |
30% |
|
Dividends and share buy backs |
-2,878 |
-5,220 |
|
-16,667 |
-8,487 |
-7,815 |
Iron ore |
|
7,174 |
7,194 |
|
8,665 |
8,647 |
7,454 |
|
Excess cash |
9,781 |
5,387 |
|
1,332 |
-559 |
-328 |
EBIT margin |
|
49% |
49% |
|
54% |
53% |
50% |
|
Cash flow ratios |
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|
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Coal |
|
3,050 |
3,683 |
|
4,021 |
2,853 |
2,001 |
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|
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EBIT margin |
|
40% |
41% |
|
44% |
34% |
25% |
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Working capital days** |
28 |
20 |
|
22 |
23 |
24 |
Other |
|
-390 |
-192 |
|
-241 |
-244 |
-245 |
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Capex/EBITDA |
21% |
21% |
|
-12% |
35% |
36% |
Underlying EBIT |
|
12,391 |
16,564 |
|
16,550 |
15,926 |
14,149 |
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FCF yield |
12.3% |
13.0% |
|
15.5% |
7.0% |
6.7% |
Income statement ratios |
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|
|
|
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|
|
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Equity shareholders' yield |
15.5% |
10.0% |
|
15.9% |
7.0% |
6.6% |
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|
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Cash conversion |
1.9x |
1.2x |
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2.0x |
0.9x |
1.0x |
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EBITDA margin |
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55% |
55% |
|
56% |
53% |
51% |
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Valuation |
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EBIT margin |
|
32% |
38% |
|
38% |
37% |
33% |
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$mn |
|
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EPS growth |
|
455% |
33% |
|
5% |
1% |
-14% |
|
SoTP valuation and calculation of target price |
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ZAR/sh |
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Dividend payout ratio |
|
66% |
70% |
|
138% |
90% |
100% |
|
US onshore petroleum at estimated sales value |
|
|
|
10,434 |
29 |
|
Input assumptions |
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Conventional petroleum |
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|
|
|
5,949 |
16 |
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Copper |
|
|
|
|
19,651 |
54 |
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Brent crude oil, $/bbl |
|
51 |
64 |
|
69 |
63 |
61 |
|
Iron ore |
|
|
|
|
76,883 |
213 |
Iron ore fines (62%Fe, CIF China), $/t |
|
69 |
67 |
|
71 |
71 |
65 |
|
Coal |
|
|
|
|
18,125 |
50 |
Copper, USc/lb |
|
245 |
306 |
|
275 |
278 |
296 |
|
Other |
|
|
|
|
-3,170 |
-9 |
Hard coking coal, $/t |
|
190 |
200 |
|
196 |
166 |
157 |
|
Enterprise value as at 4/2/2019 |
|
|
|
|
127,873 |
355 |
$/AUD |
|
0.75 |
0.78 |
|
0.72 |
0.75 |
0.80 |
|
Net debt, investments and buy-backs |
|
|
|
|
-16,166 |
-45 |
Oil breakeven price - conventional, $/boe |
|
29 |
37 |
|
47 |
46 |
44 |
|
Equity value as at 4/2/2019 |
|
|
|
|
111,707 |
310 |
Copper breakeven price, $/t |
|
3,752 |
4,001 |
|
4,156 |
3,960 |
4,116 |
|
Plus: One year forward FCF/share |
|
|
|
|
|
33 |
Iron ore breakeven price, $/t |
|
34 |
34 |
|
36 |
41 |
37 |
|
Less: DPS |
|
|
|
|
|
-27 |
Coking coal breakeven price, $/t |
|
81 |
92 |
|
85 |
92 |
102 |
|
|
|
|
|
|
|
|
TP, rounded to |
|
|
|
|
|
315 |
|||||||||
Sales volumes (BHP's share) |
|
|
|
|
|
|
|
|
Share price on 1/2/2019 |
|
|
|
|
|
297 |
|
|
|
|
|
|
|
|
Expected share price return |
|
|
|
|
|
6.0% |
|
Petroleum products, MMboe* |
|
209 |
193 |
|
120 |
112 |
109 |
|
Plus: expected dividend yield |
|
|
|
|
|
9.2% |
Iron ore, mnt |
|
231 |
237 |
|
241 |
253 |
256 |
|
Total implied one-year return |
|
|
|
|
|
15.2% |
Copper, kt |
|
991 |
1,238 |
|
1,200 |
1,310 |
1,334 |
|
|
|
|
|
|
|
|
Metallurgical coal, mnt |
|
38 |
41 |
|
43 |
45 |
45 |
|
Share price range, ZAR: |
|
|
|
|
|
|
Export thermal coal, mnt |
|
28 |
28 |
|
28 |
29 |
29 |
|
12-month high |
311 |
12-month low |
|
215 |
||
Attributable Cu eq volumes, kt |
|
6,063 |
6,376 |
|
6,000 |
6,217 |
6,105 |
|
Price move since high |
-4.4% |
Price move since low |
|
38.3% |
||
Volume growth |
|
-6.8% |
5.2% |
|
-5.9% |
3.6% |
-1.8% |
|
Calculation of discount rate |
|
|
|
|
|
|
Contribution to FY19E underlying EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
WACC |
9.0% |
Cost of debt |
|
|
4.5% |
|||
|
|
|
Conventional |
|
|
|
Risk-free rate |
4.0% |
Tax rate |
|
|
30% |
|||
Coal |
|
petroleum |
|
|
|
Equity risk premium |
5.0% After-tax cost of debt |
|
3.2% |
||||||
21% |
|
|
16% |
|
|
|
|
Beta |
1.30 |
Debt weighting |
|
20.0% |
|||
|
|
|
|
|
|
|
|
|
Cost of equity |
10.5% |
Terminal growth rate |
|
3.0% |
||
|
|
|
|
|
|
Copper |
Valuation ratios |
|
|
|
|
|
|
||
|
|
|
|
|
|
19% |
|
|
Jun-YE |
2017 |
2018 |
|
2019E |
2020E |
2021E |
|
|
|
|
|
|
|
|
|
P/E multiple |
12.1x |
11.8x |
|
12.6x |
12.5x |
14.5x |
|
|
|
|
|
|
|
|
|
Dividend yield |
5.4% |
5.9% |
|
10.9% |
7.2% |
6.9% |
|
|
|
|
|
|
|
|
|
EV/EBITDA |
5.1x |
5.2x |
|
5.5x |
5.7x |
6.2x |
Iron ore |
|
|
|
|
|
|
|
P/B |
1.4x |
1.9x |
|
2.4x |
2.3x |
2.3x |
|
44% |
|
|
|
|
|
|
|
|
NAV per share, $ |
10.8 |
10.4 |
|
9.5 |
9.6 |
9.6 |
|
|
|
|
|
|
|
|
|
NAV per share, ZAR |
146 |
134 |
|
135 |
137 |
135 |
*net debt/(net debt+equity)
** Working capital/revenue*365
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates
48