vk.com/id446425943

Polymetal – HOLD

Renaissance Capital

6 February 2019

Metals & Mining

Figure 94: Polymetal, $mn (unless otherwise noted)

Polymetal							POLYP.L							Target price, GBP:					8.60
Market capitalisation, $mn:							5,287							Share price, GBP:					8.61
Enterprise value, $mn:							6,707							Potential 12-month return:					6.5%
Dec-YE						2016	2017		2018E	2019E	2020E		Dec-YE	2016	2017		2018E	2019E	2020E
Income statement													Balance sheet
Revenue						1,583	1,815		1,920	2,148	2,181		Net operating assets	2,424	2,828		3,080	3,217	3,448
EBITDA						759	745		808	1,094	1,105		Investments, net of rehab provision	-113	-101		-99	-99	-99
EBIT						604	531		624	920	925		Equity	981	1,307		1,563	1,965	2,280
Net interest						-17	-67		-60	-59	-51		Minority interest	0	0		0	0	0
Taxation						-169	-89		-107	-172	-175		Net debt	1,330	1,420		1,418	1,153	1,070
Minority interest in profit						0	0		0	0	0
Net profit for the year						395	354		464	688	699		Balance sheet ratios
Underlying earnings						382	376		444	688	699		Gearing (net debt/(net debt+equity))	57.6%	52.1%		47.6%	37.0%	31.9%
Underlying EPS, USc						90	88		98	147	149		Net debt to EBITDA	1.8x	1.9x		1.8x	1.1x	1.0x
													RoCE	28.1%	20.0%		20.9%	28.7%	27.3%
Consensus EPS, USc									88	108	121		RoIC (after tax)	21.2%	15.9%		18.1%	23.0%	22.0%
DPS declared, USc						42	44		49	74	75		RoE	52.1%	32.9%		30.9%	39.0%	33.0%
Consensus DPS, USc									43	52	61		Cash flow statement
Adjusted EBIT													Operating cash flow	490	574		711	919	929
Voro						113	99		87	71	70		Capex (net of disposals)	-288	-432		-365	-380	-420
EBIT margin						72%	63%		65%	66%	65%		Other cash flows	-116	-29		-87	60	0
Okhotsk operations						89	159		181	134	130		Free cash flow	86	114		259	599	509
EBIT margin						50%	57%		63%	65%	64%		Equity shareholders' cash	126	48		208	552	468
Dukat						283	179		144	181	199		Dividends and share buy-backs	-158	-138		-206	-286	-385
EBIT margin						57%	44%		40%	47%	49%		Surplus (deficit) cash	-32	-90		2	265	83
Omolon						116	121		104	134	132		Cash flow ratios
EBIT margin						56%	45%		45%	51%	51%
Varvara						36	67		79	103	94		Working capital turnover, days	115	109		106	94	92
EBIT margin						36%	44%		43%	49%	45%		FCF yield	1.4%	1.7%		4.4%	9.3%	8.0%
Amursk-Albazino						167	157		192	196	188		Equity shareholders' yield	2.6%	0.9%		4.6%	10.4%	8.9%
EBIT margin						57%	45%		47%	52%	51%		Capex/EBITDA	37.9%	58.0%		45.2%	34.7%	38.0%
Other						-200	-251		-162	101	113		Cash conversion	0.3x	0.1x		0.5x	0.8x	0.7x
Adjusted EBIT						604	531		624	920	925		Valuation
																		$mn
Income statement ratios													SoTP DCF fair value and calculation of target price						GBP/sh
EBITDA margin						72%	63%		65%	66%	65%		Voro					335	0.55
EBIT margin						38%	29%		33%	43%	42%		Okhotsk operations					619	1.03
Underlying EPS Growth						28%	-2%		11%	50%	1%		Dukat					1,005	1.66
Dividend payout ratio						47%	50%		50%	50%	50%		Omolon					635	1.05
Input assumptions													Varvara					905	1.50
													Amursk-Albazino					707	1.17
Gold, $/oz						1,248	1,258		1,269	1,350	1,338		Armenia					-4	-0.01
Silver, $/oz						17.1	17.1		15.7	16.7	17.8		Mayskoye					237	0.39
$/RUB						67.0	58.3		62.8	67.0	68.0		Kyzyl					2,123	3.52
$/KZT						342	326		345	363	353		Nezhda					833	1.38
Gold breakeven price, $/oz						748	861		851	780	762		Corporate and other					-780	-1.29
Gold equivalent production volumes, koz													Operating value					6,614	10.95
													Financial instruments and rehab provision as at 31 December 2017					-101	-0.17
Voro	lumes					129	120		107	80	80		Enterprise value					6,513	10.78
Okhotsk operations			lumes			131	186		237	152	152		Net debt as at 31 December 2017					-1,420	-2.45
Dukat	lumes					369	322		307	304	304		Minority interest					0	0.00
Omolon		lumes				170	202		194	195	195		Prognoz valued at 70% of acquisition price					151	0.25
Varvara		lumes				85	130		142	157	157		Cash raised in rights issue during 2018E					0	0.00
Amursk-Albazino			lumes			244	268		308	278	278		Equity value					5,244	8.58
Armenia lumes						26	50		51	8	0
													Rounded to						8.60
Mayskoye		lumes				116	124		117	135	135		Share price on 1/2/2019						8.61
Kyzyl lumes						0	0		96	300	330		Expected share price return						-0.1%
Total volumes						1,268	1,401		1,560	1,610	1,631		Plus: expected dividend yield						6.6%
Volume growth						0%	11%		11%	3%	1%		Total implied one-year return						6.5%
Contribution to FY18E adjusted EBITDA													Share price range, GBP:
													12-month high on 4-1-2019	8.77 12-month low on 10-4-2018					5.78
							Voro						Price move since high	-1.9%	Price move since low				49.0%
			Mayskoye			Kyzyl
		Armenia		5%	4%		10%						Calculation of WACC
		2%											WACC	8.2%	Cost of debt				5.0%
Amursk-Albazino											Okhotsk		Risk-free rate	4.0%	Tax rate				20%
22%													Equity risk premium	6.0% After-tax cost of debt					1.2%
											20%		Beta	1.00	Debt weighting				30%
													Cost of equity	10.0%	Terminal growth rate				2.0%
													Valuation ratios
													Dec-YE, $mn	2016	2017		2018E	2019E	2020E
		Varvara								Dukat			P/E multiple	12.5x	13.6x		9.8x	7.7x	7.6x
													Dividend yield	3.7%	3.7%		5.1%	6.6%	6.7%
		9%			Omolon					16%
					12%								EV/EBITDA	8.1x	8.8x		7.4x	5.9x	5.8x
													P/B	4.9x	3.9x		2.9x	2.7x	2.3x
													NAV per share, $	2.3	3.0		3.3	4.2	4.9

Source: Bloomberg, Thomson Reuters, Renaissance Capital estimates

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vk.com/id446425943

PJSC Polyus – BUY

Renaissance Capital

6 February 2019

Metals & Mining

Figure 95: Polyus Gold, $mn (unless otherwise noted)
PJSC Polyus (MOEX)				PLZL.MM						Target price, RUB:				6,300
Market capitalisation, $mn:				11,287						Share price, RUB:				5,522
Enterprise value, $mn:				14,456						Potential 12-month return:				20.1%
Dec-YE			2016	2017	2018E	2019E	2020E		Dec-YE	2016	2017	2018E	2019E	2020E
Income statement									Balance sheet
Revenue			2,458	2,721	2,867	3,748	3,706		Net operating assets	3,254	4,406	4,547	4,843	5,085
Adjusted EBITDA			1,536	1,702	1,855	2,513	2,457		Investments, net of rehab provision	-427	-673	-767	-767	-767
Adjusted EBIT			1,363	1,485	1,527	2,188	2,123		Equity	-508	564	420	1,349	2,144
Net interest			410	76	-676	-194	-177		Minority interest	94	92	86	86	86
Taxation			-326	-290	-105	-399	-389		Net debt	3,241	3,077	3,275	2,641	2,088
Minority interest in profit			-25	-1	-10	0	0
Net profit for the year			1,420	1,240	773	1,593	1,557		Balance sheet ratios
Adjusted earnings			952	1,015	1,314	1,596	1,557		Gearing (net debt/(net debt+equity))	118.6%	84.5%	88.6%	66.2%	49.3%
Adjusted EPS, USc			676	789	994	1,206	1,176		Net debt to EBITDA	2.1x	1.8x	1.8x	1.1x	0.9x
									RoCE	47.1%	37.5%	33.2%	45.8%	42.0%
Consensus EPS, USc					964	1,040	1,120		RoIC (after tax)	40.6%	31.0%	25.1%	36.7%	33.7%
DPS declared, USc			0	405	425	501	576		RoE	129.7%	3625.0%	267.3%	180.4%	89.1%
Consensus DPS, USc					428	502	553		Cash flow statement
Adjusted EBITDA									Operating cash flow	1,386	1,483	1,447	2,050	2,020
Olimpiada			753	953	1,119	1,275	1,286		Capex (net of disposals)	-466	-804	-815	-595	-565
EBITDA margin			63%	66%	71%	73%	72%		Other cash flows	-1,036	-245	192	-3	0
Blagodatnoye			417	414	361	440	459		Free cash flow	-116	434	825	1,452	1,456
EBITDA margin			72%	71%	67%	71%	69%		Equity shareholders' cash	714	738	377	1,297	1,315
Verninskoye			146	149	187	184	179		Dividends and share buy-backs	-3,591	-574	-575	-663	-762
EBITDA margin			62%	57%	63%	65%	64%		Surplus (deficit) cash	-2,877	164	-198	634	552
Alluvials			90	54	40	55	49		Cash flow ratios
EBITDA margin			40%	28%	24%	31%	29%
Kuranakh			107	109	130	139	134		Working capital turnover, days	23	20	31	26	28
EBITDA margin			53%	50%	52%	56%	54%		FCF yield	-1.0%	3.3%	5.7%	10.4%	10.9%
Natalka			0	0	9	419	351		Equity shareholders' yield	8.7%	7.3%	3.4%	11.6%	11.8%
EBITDA margin			-	-	32%	62%	61%		Capex/EBITDA	30.3%	47.2%	43.9%	23.7%	23.0%
Other			-150	-194	-319	-325	-334		Cash conversion	0.8x	0.7x	0.3x	0.8x	0.8x
Adjusted EBITDA			1,363	1,485	1,527	2,188	2,123		Valuation				LSE	MOEX
Income statement ratios									SoTP DCF fair value and calculation of target price			$mn	$/share	RUB/sh
EBITDA margin			62%	63%	65%	67%	66%		Olimpiada			9,380	35.4	4,749
EBIT margin			55%	55%	53%	58%	57%		Blagodatnoye			3,159	11.9	1,599
Adjusted EPS Growth			38%	17%	26%	21%	-2%		Verninskoye			1,308	4.9	662
Dividend payout ratio			0%	51%	43%	42%	49%		Alluvials			112	0.4	57
Input assumptions									Kuranakh			882	3.3	446
									Natalka			3,007	11.4	1,522
Gold, $/oz			1,248	1,258	1,269	1,350	1,338		Sukhoi Log			-40	-0.2	-20
$/RUB			67.0	58.3	62.8	67.0	68.0		Other			-1,292	-4.9	-655
Gold breakeven price, $/oz			715	830	908	931	1,021		Operating value			16,516	62.4	8,360
									Financial instruments and rehab provision as at 31 December 201			-673	-2.5	-351
Gold production volumes, koz									Enterprise value			15,843	59.9	8,010
Olimpiada lumes			984	1,177	1,322	1,313	1,354		Net debt as at 31 December 2017			-3,077	-11.6	-1,571
Blagodatnoye		lumes	457	457	409	462	493		Minority interest			-92	-0.3	-50
Verninskoye lumes			186	206	232	210	210		Convertible debt cost at conversion price			-58	-0.2	-40
Alluvials	lumes		169	146	135	131	127		Cash raised in rights issue during 2018E			0	0.0	0
Kuranakh	lumes		160	171	199	185	185		Equity value			12,616	47.7	6,349
Natalka	lumes		6	3	133	498	429
									Rounded to				48.0	6,300
Sukhoi Log		lumes	0	0	0	0	0		Share price on 1/2/2019				42.5	5,522
Total volumes			1,960	2,160	2,429	2,800	2,799		Expected share price return				12.9%	14.1%
Volume growth			11%	10%	12%	15%	0%		Plus: expected dividend yield				6.0%	6.0%
									Total implied one-year return				19.0%	20.1%

Contribution to FY18E adjusted EBITDA

		Kuranakh	NatalkaOther
	Alluvials	7%	1% 1%
Verninskoye	2%		Olimpiada
10%			60%
Blagodatnoye
19%

Share price range, RUB
12-month high on 31-1-2019	5,678	12-month low on 9-4-2018				3,208
Price move since high	-2.8%	Price move since low				72.1%
Calculation of WACC
WACC	8.7%	Cost of debt				7.0%
Risk-free rate	4.0%	Tax rate				20%
Equity risk premium	6.0%	After-tax cost of debt				1.7%
Beta	1.00	Debt weighting				30%
Cost of equity	10.0%	Terminal growth rate				2.0%
Valuation ratios
Dec-YE, $mn	2016	2017		2018E	2019E	2020E
P/E multiple	9.4x	9.7x		8.5x	7.0x	7.2x
Dividend yield	0.0%	5.3%		5.0%	5.9%	6.8%
EV/EBITDA	7.5x	7.8x		7.8x	5.5x	5.4x
P/B	-16.2x	17.9x		26.6x	8.3x	5.2x
NAV per share, $	-3.9	4.3		3.2	10.2	16.2

Source: Bloomberg, Thomson Reuters, Renaissance Capital estimates

62

vk.com/id446425943

Sibanye-Stillwater – HOLD

Renaissance Capital

6 February 2019

Metals & Mining

Figure 96: Sibanye-Stillwater, $mn (unless otherwise noted)
Sibanye-Stillwater						SGLJ.J							Target price, ZAR:					11.1
Market capitalisation, $mn:						2,070							Share price, ZAR:					12.1
Enterprise value, $mn:						4,104							Potential 12-month return:					-8.1%
Dec-YE					2016	2017		2018E	2019E	2020E		Dec-YE	2016	2017		2018E	2019E	2020E
Income statement												Balance sheet
Revenue					2,128	3,449		3,745	4,342	4,465		Net operating assets	1,938	4,316		3,716	3,882	3,969
EBITDA					717	680		705	1,190	1,152		Investments, net of rehab provision	-134	-466		-390	-390	-390
EBIT					442	251		233	703	635		Equity	1,220	1,942		1,901	2,248	2,554
Other items					-79	-47		-54	-88	-105		Minority interest	0	0		1	4	6
Net interest					-94	-254		-100	-149	-126		Net debt	585	1,908		1,424	1,239	1,018
Taxation					-77	221		-23	-130	-113		Balance sheet ratios
Minority interest in profit					29	-0		-6	-14	-12
Net profit for the year					263	-333		49	348	306		Gearing (net debt/(net debt+equity))	32.4%	49.6%		42.8%	35.5%	28.5%
Headline earnings					171	-17		51	348	306		Net debt to EBITDA	0.8x	2.8x		2.0x	1.0x	0.9x
Headline EPS, ZAR					1.62	-0.12		0.29	2.02	1.74		RoCE	23.7%	6.8%		4.9%	15.4%	13.5%
												RoIC (after tax)	23.3%	22.2%		3.3%	11.8%	10.6%
Consensus HEPS, ZAR								0.30	1.23	1.55		RoE	15.7%	-1.1%		2.6%	16.8%	12.7%
DPS declared, ZAR					1.45	0.00		0.00	0.00	0.24		Cash flow statement
Underlying EBIT												Operating cash flow	573	1,120		1,134	941	1,010
Driefontein					192	54		-59	73	77		Capex (net of disposals)	-283	-458		-528	-548	-584
EBIT margin					30%	9%		-14%	14%	14%		Other cash flows	-633	-3,074		31	-88	-105
Kloof					181	123		76	177	124		Free cash flow	-342	-2,412		637	304	321
EBIT margin					30%	19%		12%	25%	20%		Equity shareholders' cash	-276	-2,262		484	185	221
Beatrix					89	16		14	51	31		Dividends and share buy-backs	-110	939		0	0	0
EBIT margin					22%	4%		4%	14%	9%		Surplus (deficit) cash	-386	-1,324		484	185	221
Rustenburg		T			1	45		83	106	99		Cash flow ratios
EBIT margin					1%	6%		10%	11%	9%
Stillwater					0	54		133	249	258		Working capital turnover, days	15	27		-23	-11	-8
EBIT margin					-	8%		11%	18%	17%		FCF yield	-13.6%	-50.6%		20.0%	9.2%	10.4%
Other					-22	-40		-13	47	46		Equity shareholders' yield	-14.3%	-79.2%		27.6%	9.0%	10.7%
Adjusted EBIT					442	251		233	703	635		Capex/EBITDA	39.4%	67.4%		74.8%	46.1%	50.7%
Income statement ratios												Cash conversion	-1.6x	134.7x		9.6x	0.5x	0.7x
												Valuation
EBITDA margin					34%	20%		19%	27%	26%							$mn
EBIT margin					21%	7%		6%	16%	14%		SoTP DCF fair value						ZAR/sh
HEPS Growth					119%	-107%		342%	597%	-14%		Driefontein					304	1.9
Dividend payout ratio					57%	0%		-	0%	14%		Kloof					761	4.8
Input assumptions												Beatrix					109	0.7
												Cooke					-292	-1.8
Gold, $/oz					1,248	1,258		1,269	1,350	1,338		Burnstone					107	0.7
Platinum, $/oz					988	950		880	870	1,070		Rustenburg					931	5.9
Palladium, $/oz					614	871		1,030	1,216	1,088		Kroondal					202	1.3
ZAR/$					14.70	13.31		13.24	14.31	14.14		Stillwater					2,931	18.5
Gold breakeven price, $/oz					976	1,161		1,288	1,177	1,231		Equity accounted income					263	1.7
PGM breakeven price, $/oz					776	1,049		1,189	1,226	1,250		Corporate and other					-1,026	-6.5
Mined volumes, koz												Operating value					4,290	27.1
												Financial instruments and rehab provision as at 31 December 2017					-466	-2.9
Driefontein lumes					516	485		331	400	420		Enterprise value					3,823	24.1
Kloof	lumes				488	529		514	523	460		Net debt as at 31 December 2017					-1,908	-12.0
Beatrix	lumes				323	292		274	266	266		Minority interest					-126	-1.1
Cooke	lumes				181	100		31	28	0		19.9% stake in Aldebaran					8	0.1
Gold	lumes				1,508	1,407		1,174	1,324	1,293		Cash raised in rights issue during 2018E					0	0.0
Rustenburg		lumes			138	810		769	785	810		Equity value					1,798	11.1
Kroondal lumes					178	241		245	240	220
												Rounded to						11.1
Mimosa	lumes				91	124		122	120	120		Share price on 3/2/2019						12.1
Stillwater lumes					0	355		587	700	800		Expected share price return						-8.3%
PGM's 4E		lumes			421	1,550		1,741	1,863	1,968		Plus: expected dividend yield						0.2%
Attributable Cu eq volume growth					24%	50%		-2%	9%	2%		Total implied one-year return						-8.1%
Contribution to FY18E proportionately consolidated underlying EBITDA												Share price range, ZAR:
												12-month high on 2-2-2018	14	12-month low on 19-7-2018				7
												Price move since high	-10.7% Price move since low					77.4%
					Driefontein							Calculation of WACC
	Stillwater				3%				Kloof
												WACC	9.6%	Cost of debt				5.0%
									21%
		37%										Risk-free rate	4.0%	Tax rate				28%
												Equity risk premium	5.5% After-tax cost of debt					0.7%
												Beta	1.30	Debt weighting				20%
												Cost of equity	11.2%	Terminal growth rate				2.0%
										Beatrix		Valuation ratios
										7%
												Dec-YE, $mn	2016	2017		2018E	2019E	2020E
	Plat Mile									Cooke
	0%		Mimosa			Rustenburg			DRD Gold	-4%		P/E multiple	26.1x	-131.8x		35.8x	5.9x	6.7x
												Dividend yield	4.7%	0.0%		0.0%	0.0%	1.9%
			6%	Kroondal
						16%			0%			EV/EBITDA	3.5x	7.0x		4.5x	2.8x	2.7x
				6%
												P/B	1.6x	1.5x		0.9x	0.9x	0.8x
												NAV per share, $	1.3	0.9		0.8	1.0	1.1
												NAV per share, ZAR	19	12		11	14	16

Source: Bloomberg, Thomson Reuters, Renaissance Capital estimates

63