- •Contents
- •Revisions to our forecasts, TPs and ratings
- •Investment stance
- •Capital cycle favours rising returns
- •Comfortable balance sheets and supportive dividend potential
- •Value relative to other stocks
- •Yield potential through the cycle
- •Mid-cycle cash generation offers supportive yields
- •Where to hide if you are bearish
- •What to buy if you are bullish
- •Limited lives weighing down IRR
- •Yields should compensate for limited lives
- •Positive earnings momentum continues to support share prices
- •Commodity price revisions
- •Commodity section
- •Commodity section
- •Preference for base metals over steelmaking materials
- •Earnings revisions
- •Risks and catalysts
- •Peer comp charts
- •Commodity price and exchange rate forecasts
- •Important publications
- •African Rainbow Minerals
- •Alrosa
- •Anglo American
- •Assore
- •Exxaro
- •Glencore
- •Kumba Iron ore
- •NorNickel
- •Rio Tinto
- •Rusal
- •Vale
- •Gold Fields
- •Harmony
- •Polymetal
- •Anglo American Platinum
- •Lonmin
- •Northam
- •Royal Bafokeng Platinum
- •Sasol
- •Disclosures appendix
vk.com/id446425943
Anglo American – HOLD
Renaissance Capital
1 April 2019
Metals & Mining
Figure 112: Anglo American, $mn (unless otherwise noted) |
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Anglo American |
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AGLJ.J |
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Target price, ZAR: |
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400 |
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Market capitalisation, $mn: |
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36,991 |
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Share price, ZAR: |
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378 |
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Enterprise value, $mn: |
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53,034 |
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Potential 12-month return: |
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11.9% |
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Dec-YE |
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2017 |
2018 |
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2019E |
2020E |
2021E |
Dec-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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28,650 |
30,196 |
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31,143 |
32,616 |
33,046 |
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Net operating assets |
33,172 |
32,521 |
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32,966 |
33,970 |
34,797 |
Underlying EBITDA |
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8,823 |
9,161 |
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11,313 |
10,878 |
10,753 |
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Financial instruments |
211 |
159 |
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189 |
210 |
227 |
Underlying EBIT |
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6,247 |
6,377 |
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8,404 |
7,877 |
7,694 |
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Equity |
22,972 |
23,598 |
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25,898 |
27,606 |
28,905 |
Net interest |
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-631 |
-529 |
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-361 |
-240 |
-247 |
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Minority interest |
5,910 |
6,234 |
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6,459 |
6,665 |
6,861 |
Taxation |
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-1,774 |
-2,196 |
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-2,556 |
-2,429 |
-2,369 |
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Net debt |
4,501 |
2,848 |
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797 |
-90 |
-742 |
Minority interest in profit |
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-891 |
-812 |
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-1,501 |
-1,371 |
-1,311 |
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Net profit for the year |
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3,166 |
3,549 |
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3,986 |
3,838 |
3,767 |
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Balance sheet ratios |
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Underlying earnings |
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3,272 |
3,237 |
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3,986 |
3,838 |
3,767 |
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Gearing* |
16.4% |
10.8% |
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3.0% |
-0.3% |
-2.6% |
Underlying EPS, USc |
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257 |
255 |
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314 |
302 |
297 |
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Net debt to EBITDA |
0.5x |
0.3x |
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0.1x |
0.0x |
-0.1x |
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RoCE |
17.8% |
18.4% |
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23.5% |
21.7% |
20.8% |
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Thomson Reuters consensus EPS, USc |
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296 |
262 |
241 |
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RoIC (after tax) |
15.1% |
11.9% |
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17.5% |
14.7% |
13.9% |
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DPS declared, USc |
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102 |
100 |
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157 |
181 |
208 |
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RoE |
15.6% |
13.9% |
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16.1% |
14.3% |
13.3% |
Underlying EBIT |
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Cash flow statement |
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Platinum |
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512 |
705 |
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1,377 |
2,042 |
2,088 |
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Operating cash flow |
8,101 |
7,325 |
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9,184 |
8,274 |
8,262 |
EBIT margin |
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10% |
12% |
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24% |
30% |
31% |
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Capex (net of disposals) |
-2,150 |
-2,818 |
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-4,000 |
-4,015 |
-3,956 |
Diamonds |
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873 |
694 |
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554 |
705 |
779 |
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Other cash flows |
-691 |
-494 |
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0 |
0 |
0 |
EBIT margin |
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15% |
11% |
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9% |
11% |
11% |
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FCF |
5,260 |
4,013 |
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5,184 |
4,258 |
4,306 |
Copper |
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923 |
1,234 |
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1,458 |
1,176 |
1,388 |
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Equity shareholders' cash |
4,604 |
2,944 |
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3,736 |
3,017 |
3,120 |
EBIT margin |
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22% |
24% |
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30% |
26% |
29% |
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Dividends and share buy-backs |
-618 |
-1,291 |
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-1,686 |
-2,130 |
-2,468 |
Nickel |
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0 |
75 |
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87 |
146 |
168 |
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Surplus (deficit) cash |
3,986 |
1,653 |
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2,051 |
887 |
652 |
EBIT margin |
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0% |
13% |
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15% |
22% |
24% |
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Cash flow ratios |
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Iron ore and manganese |
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1,978 |
1,357 |
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3,299 |
2,721 |
2,380 |
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EBIT margin |
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57% |
39% |
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71% |
63% |
61% |
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Working capital days |
33 |
21 |
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15 |
16 |
16 |
Coal |
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2,274 |
2,538 |
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1,926 |
1,399 |
1,207 |
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Capex/EBITDA |
28.0% |
35.9% |
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39.2% |
40.6% |
40.4% |
EBIT margin |
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32% |
33% |
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29% |
21% |
18% |
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FCF yield |
16.8% |
10.6% |
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12.8% |
10.7% |
10.9% |
Other |
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-313 |
-226 |
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-298 |
-312 |
-316 |
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Equity shareholders' yield |
22.1% |
10.3% |
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11.2% |
9.1% |
9.4% |
Underlying EBIT |
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6,247 |
6,377 |
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8,404 |
7,877 |
7,694 |
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Cash conversion |
1.4x |
0.9x |
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0.9x |
0.8x |
0.8x |
Income statement ratios |
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Valuation |
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EBITDA margin |
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31% |
30% |
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36% |
33% |
33% |
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SoTP DCF fair value and calculation of target price |
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$mn |
ZAR/sh |
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EBIT margin |
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22% |
21% |
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27% |
24% |
23% |
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Platinum |
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9,948 |
110.6 |
EPS Growth |
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49% |
-1% |
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23% |
-4% |
-2% |
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Diamonds |
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6,327 |
70.4 |
Dividend payout ratio |
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40% |
39% |
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50% |
60% |
70% |
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Coal |
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6,418 |
71.4 |
Input assumptions |
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Copper |
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8,017 |
89.2 |
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Nickel |
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1,524 |
17.0 |
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ZAR/$ |
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13.31 |
13.24 |
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14.28 |
14.40 |
14.49 |
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Kumba Iron Ore |
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5,782 |
64.3 |
Platinum, $/oz |
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950 |
880 |
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843 |
900 |
966 |
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Samancor manganese |
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2,811 |
31.3 |
Diamond realisations, $/ct |
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162 |
171 |
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168 |
181 |
187 |
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Anglo Ferrous Brazil |
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3,393 |
37.7 |
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Copper, USc/lb |
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280 |
296 |
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290 |
295 |
319 |
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Corporate & other |
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-3,642 |
-40.5 |
Hard coking coal, $/t |
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188 |
206 |
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187 |
170 |
165 |
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Total enterprise value excluding minority interests |
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40,578 |
451.3 |
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Iron ore fines (62%Fe, CIF China), $/t |
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71 |
66 |
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88 |
85 |
78 |
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Attributable net debt as at 31 December 2018 |
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-5,188 |
-57.7 |
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Investments as at 31 December 2018 |
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159 |
1.8 |
Required breakeven price |
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Equity value as at 27/3/2019 |
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35,549 |
395.4 |
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Breakeven price - 3PGM, $/oz |
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774 |
791 |
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851 |
877 |
824 |
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Rounded to |
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400.0 |
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Breakeven price - copper, USc/lb |
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216 |
201 |
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198 |
225 |
230 |
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Share price on 26/3/2019 |
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378.1 |
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Breakeven price - coking coal, $/t |
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107 |
125 |
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119 |
122 |
125 |
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Expected share price return |
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5.8% |
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Breakeven price - Export thermal coal, $/t |
59 |
67 |
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66 |
72 |
75 |
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Plus: expected dividend yield |
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6.2% |
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Sales volumes |
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Total implied one-year return |
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11.9% |
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Platinum, koz |
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2,505 |
2,424 |
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2,100 |
2,200 |
2,200 |
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Share price range, ZAR: |
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Diamonds (consolidated sales), mn ct |
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33.1 |
31.7 |
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30.3 |
32.1 |
33.3 |
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12-month high on 19/3/2019 |
385 |
12-month low on 4/4/2018 |
262 |
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Total iron ore, mnt |
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61 |
46 |
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62 |
66 |
68 |
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Price move since high |
-1.7% |
Price move since low |
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44.6% |
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Total copper segment, kt |
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579 |
668 |
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663 |
653 |
634 |
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Metallurgical coal, mnt |
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19.8 |
22.0 |
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22.0 |
24.0 |
26.0 |
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Calculation of discount rate |
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Export thermal coal, mnt |
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31.0 |
30.0 |
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28.3 |
30.1 |
30.1 |
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Attributable Cu eq volumes, kt |
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2,803 |
2,614 |
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2,705 |
2,839 |
2,904 |
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WACC |
9.5% |
Cost of debt |
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5.0% |
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Volume growth |
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-1.7% |
-6.7% |
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3.5% |
5.0% |
2.3% |
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Risk-free rate |
4.0% |
Tax rate |
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30% |
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Contribution to FY19E attributable underlying EBITDA |
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Equity risk premium |
5.0% |
After-tax cost of debt |
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3.5% |
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Beta |
1.30 |
Debt weighting |
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15% |
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Cost of equity |
10.5% |
Terminal growth rate |
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3.0% |
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Platinum (80% of |
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Coal |
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AMS) |
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28% |
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15% |
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Diamonds (85% of |
Valuation ratios |
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De Beers) |
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Dec-YE |
2017 |
2018 |
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2019E |
2020E |
2021E |
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11% |
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P/E multiple |
6.4x |
8.9x |
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8.4x |
8.7x |
8.8x |
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Samancor |
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Dividend yield |
6.2% |
4.4% |
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6.0% |
6.9% |
7.9% |
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Copper |
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EV/EBITDA |
4.1x |
4.8x |
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4.0x |
4.0x |
4.0x |
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Manganese |
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P/B |
0.9x |
1.2x |
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1.3x |
1.2x |
1.2x |
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6% |
Minas Rio |
Kumba Iron Ore |
Nickel |
16% |
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NAV per share, $ |
18.0 |
18.6 |
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20.4 |
21.8 |
22.8 |
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8% |
2% |
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NAV per share, ZAR |
240 |
246 |
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292 |
313 |
330 |
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(51%) |
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14% |
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* Gearing defined as net debt/(net debt +equity)
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates
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