vk.com/id446425943
Lonmin – SELL
Renaissance Capital
6 February 2019
Metals & Mining
Figure 99: Lonmin, $mn (unless otherwise noted) |
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Lonmin |
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LONJ.J |
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Target Price, ZAR: |
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7.0 |
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Market capitalisation, $mn: |
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201 |
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Last Price, ZAR: |
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9.6 |
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Enterprise value, $mn: |
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87 |
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Potential 12-month return: |
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-26.8% |
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Sep-YE |
2017 |
2018 |
2019E |
2020E |
2021E |
Sep-YE |
2017 |
2018 |
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2019E |
2020E |
2021E |
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Income statement |
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Cash flow statement |
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Revenue |
1,166 |
1,345 |
1,340 |
1,155 |
1,123 |
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Operating cash flow |
79 |
140 |
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117 |
115 |
51 |
Underlying EBITDA |
38 |
115 |
231 |
144 |
73 |
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Capex (net of disposals) |
-100 |
-73 |
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-110 |
-110 |
-102 |
Underlying EBIT |
-28 |
101 |
212 |
121 |
47 |
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Other |
20 |
-34 |
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4 |
4 |
0 |
Net interest |
-88 |
-30 |
-13 |
-5 |
-6 |
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FCF |
-1 |
33 |
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12 |
8 |
-52 |
Taxation |
18 |
-6 |
-56 |
-32 |
-11 |
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Equity shareholders' cash |
-70 |
11 |
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3 |
4 |
-56 |
Minority interest profit |
156 |
-20 |
-20 |
-11 |
-4 |
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Dividends and share buy backs |
0 |
0 |
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0 |
0 |
0 |
Attributable profit |
-998 |
42 |
124 |
72 |
25 |
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Movement in net debt |
-70 |
11 |
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3 |
4 |
-56 |
Underlying earnings |
-103 |
63 |
124 |
72 |
25 |
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Cash flow ratios |
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Underlying EPS, USc |
-37 |
22 |
44 |
25 |
9 |
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31 |
21 |
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36 |
41 |
45 |
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Working capital turnover, days |
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- ZAR |
-4.87 |
3.06 |
6.30 |
3.60 |
1.30 |
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FCF yield |
0% |
28% |
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13% |
10% |
-38% |
Thomson Reuters consensus HEPS, ZAR |
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1.98 |
2.60 |
1.61 |
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Equity shareholders' yield |
-17% |
5% |
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1% |
2% |
-28% |
DPS declared, USc |
0 |
0 |
0 |
0 |
0 |
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Capex/EBITDA |
263% |
63% |
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47% |
77% |
141% |
Income statement ratios |
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Cash conversion |
0.7x |
0.2x |
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0.0x |
0.1x |
-2.2x |
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Valuation |
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EBITDA margin |
3% |
9% |
17% |
12% |
6% |
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EBIT margin |
-2% |
8% |
16% |
10% |
4% |
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Calculation of target price |
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ZAR/sh |
EPS growth |
-3% |
161% |
97% |
-42% |
-64% |
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DCF fair value per share |
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-0.3 |
Dividend payout ratio |
0% |
0% |
0% |
0% |
0% |
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Smelting and refining value per share |
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7.0 |
Input assumptions |
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Total value per share |
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6.7 |
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Rounded to |
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7.0 |
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Platinum, $/oz |
955 |
905 |
840 |
1,020 |
1,149 |
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Current share price on 1/2/2019 |
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9.6 |
Palladium, $/oz |
794 |
990 |
1,212 |
1,120 |
1,045 |
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Expected share price return |
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-26.8% |
Rhodium, $/oz |
927 |
1,957 |
2,435 |
2,217 |
2,089 |
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Plus: expected dividend yield |
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0.0% |
USD/ZAR |
13.38 |
13.07 |
14.31 |
14.20 |
14.11 |
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Total implied one-year return |
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-26.8% |
Breakeven price, $/3PGMoz |
927 |
992 |
967 |
1,096 |
1,207 |
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Implied Lonmin share price based on Sibanye's proposed offer |
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ZAR/sh |
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Platinum volumes, koz |
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At share exchange ratio of 0.967 and assuming market values on 3/2/2019 |
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11.5 |
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Metal in concentrate |
644 |
629 |
640 |
520 |
500 |
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Gross refined |
688 |
666 |
658 |
538 |
518 |
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Share price range, ZAR: |
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Sales |
706 |
676 |
658 |
538 |
518 |
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12-month high |
13 |
12-month low |
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7 |
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Volume growth |
-4.0% |
-4.3% |
-2.7% |
-18.2% |
-3.7% |
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Price move since high |
-25.3% |
Price move since low |
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47.1% |
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Balance sheet |
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Calculation of WACC |
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Net operating assets |
363 |
440 |
581 |
660 |
745 |
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WACC |
11.0% |
Cost of debt |
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5.0% |
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Investments less rehab provision |
-100 |
-97 |
-97 |
-97 |
-97 |
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Risk-free rate |
4.0% |
Tax rate |
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28% |
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Equity |
685 |
757 |
881 |
952 |
978 |
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Equity risk premium |
6.0% After-tax cost of debt |
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3.6% |
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Minority interest |
-323 |
-300 |
-280 |
-269 |
-265 |
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Beta |
1.30 |
Debt weighting |
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10% |
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Net debt |
-99 |
-114 |
-117 |
-121 |
-65 |
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Cost of equity |
11.8% |
Terminal growth rate |
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0.0% |
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Balance sheet ratios |
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Valuation ratios |
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Gearing (net debt/(net debt+equity)) |
-16.9% |
-17.7% |
-15.2% |
-14.6% |
-7.1% |
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Sep-YE |
2017 |
2018 |
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2019E |
2020E |
2021E |
Net debt to EBITDA |
-2.6x |
-1.0x |
-0.5x |
-0.8x |
-0.9x |
P/E multiple |
-4.1x |
3.7x |
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1.6x |
2.8x |
8.0x |
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RoCE |
-2.1% |
12.0% |
41.5% |
19.5% |
6.6% |
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Dividend yield |
0.0% |
0.0% |
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0.0% |
0.0% |
0.0% |
RoIC (after tax) |
-4.6% |
9.9% |
29.9% |
14.0% |
4.8% |
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EV/EBITDA |
0.0x |
-1.6x |
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-0.8x |
-1.3x |
-1.7x |
RoE |
-8.8% |
8.7% |
15.1% |
7.8% |
2.6% |
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P/B |
0.6x |
0.3x |
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0.2x |
0.2x |
0.2x |
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NAV per share, ZAR |
32 |
35 |
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45 |
48 |
49 |
Source: Bloomberg, Thomson Reuters, Renaissance Capital estimates
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