vk.com/id446425943
Exxaro – BUY
Renaissance Capital
14 January 2019
Metals & Mining
Figure 95: Exxaro, ZARmn (unless otherwise stated)
|
|
|
|
Exxaro |
EXXJ.J |
Target price, ZAR: |
150 |
Market capitalisation, ZARmn: |
47,701 |
Last price, ZAR: |
134 |
Enterprise value, ZARmn: |
48,544 |
Potential 12-month return: |
22.0% |
Dec-YE |
2016 |
2017 |
2018E |
2019E |
2020E |
Income statement |
|
|
|
|
|
Revenue |
20,897 |
22,813 |
24,963 |
27,194 |
29,114 |
Underlying EBITDA |
6,139 |
7,207 |
8,238 |
8,608 |
7,922 |
Underlying EBIT |
4,941 |
5,814 |
6,763 |
7,118 |
6,236 |
Net operating profit |
4,623 |
975 |
6,679 |
7,118 |
6,236 |
Net interest |
-628 |
-609 |
-512 |
-770 |
-930 |
Equity accounted income |
2,764 |
3,952 |
2,935 |
2,902 |
2,404 |
Taxation |
-1,179 |
-1,542 |
-1,710 |
-1,778 |
-1,486 |
Minority interest in profit |
-12 |
-50 |
-96 |
-129 |
-120 |
Net profit for the year |
5,679 |
5,982 |
7,326 |
7,344 |
6,103 |
Headline earnings |
4,621 |
1,560 |
7,211 |
7,344 |
6,103 |
Diluted HEPS, ZAR |
15.91 |
4.50 |
22.14 |
22.35 |
18.57 |
Thomson Reuters consensus, ZAR |
|
|
27.47 |
27.23 |
24.22 |
DPS declared, ZAR |
5.00 |
19.55 |
11.30 |
13.40 |
9.80 |
Underlying EBIT |
|
|
|
|
|
Eskom coal |
3,427 |
4,133 |
3,732 |
3,802 |
4,154 |
EBIT margin |
28% |
35% |
28% |
28% |
28% |
Export and other coal |
1,491 |
1,947 |
3,218 |
3,585 |
2,365 |
EBIT margin |
18% |
18% |
28% |
26% |
17% |
Ferrous |
-13 |
46 |
13 |
12 |
12 |
Corporate and other |
36 |
-312 |
-201 |
-281 |
-296 |
Underlying EBIT |
4,941 |
5,814 |
6,763 |
7,118 |
6,236 |
Group EBIT margin |
24% |
25% |
27% |
26% |
21% |
Pigment and mineral sands |
413 |
1,534 |
658 |
486 |
417 |
EBIT margin |
28% |
35% |
28% |
28% |
28% |
Iron ore |
3,093 |
3,334 |
2,913 |
2,793 |
2,261 |
EBIT margin |
28% |
35% |
28% |
28% |
28% |
Other equity accounted |
860 |
1,060 |
339 |
380 |
365 |
Proportionately consolidated EBIT |
9,307 |
11,742 |
10,672 |
10,777 |
9,278 |
Income statement ratios |
|
|
|
|
|
EBITDA margin |
29% |
32% |
33% |
32% |
27% |
EBIT margin |
24% |
25% |
27% |
26% |
21% |
HEPS growth |
185% |
-61% |
472% |
2% |
-17% |
Dividend payout ratio on headline earnings |
39% |
327% |
48% |
66% |
58% |
Input assumptions |
|
|
|
|
|
ZAR/$ |
14.70 |
13.31 |
13.24 |
14.31 |
14.14 |
Iron ore fines (62% Fe, CIF China), $/t |
58 |
71 |
66 |
62 |
62 |
Thermal coal benchmark, $/t |
64 |
85 |
98 |
93 |
86 |
Export realisations, $/t |
51 |
69 |
81 |
81 |
79 |
Pigment equivalent units, $/t |
2,211 |
2,745 |
2,970 |
3,064 |
3,199 |
Required breakeven price |
|
|
|
|
|
Export coal breakeven price, $/t |
59 |
77 |
80 |
78 |
77 |
Kumba Iron Ore breakeven price, $/t |
29 |
40 |
38 |
39 |
42 |
Sales volumes, kt |
|
|
|
|
|
Eskom coal - commercial |
15,229 |
15,151 |
13,974 |
12,622 |
15,826 |
GMEP Eskom |
6,800 |
8,500 |
12,000 |
12,500 |
12,500 |
Other domestic coal |
5,466 |
5,325 |
4,297 |
6,914 |
9,321 |
Export coal |
7,858 |
7,612 |
7,586 |
8,023 |
8,015 |
Iron ore - Sishen Iron Ore Company |
8,497 |
8,979 |
8,583 |
8,975 |
8,900 |
Copper equivalent volumes, kt |
574 |
564 |
484 |
524 |
574 |
Volume growth |
8.0% |
-1.7% |
-14.2% |
8.3% |
9.6% |
Contribution to proportionately consolidated FY18E attributable underlying EBITDA
Pigment & Sands |
Other |
7% |
3% |
Iron ore 27%
Coal 63%
Dec-YE |
|
|
|
|
2018E |
2019E |
2020E |
|
2016 |
2017 |
|
||||
Balance sheet |
|
|
|
|
|
|
|
Net operating assets |
|
13,458 |
21,820 |
|
23,726 |
26,777 |
28,508 |
Investment in associates |
|
22,776 |
17,289 |
|
18,426 |
18,241 |
18,649 |
Investments |
|
193 |
186 |
|
1,551 |
1,551 |
1,551 |
Equity |
|
35,875 |
40,103 |
|
42,192 |
44,729 |
46,886 |
Minority interest |
|
-788 |
-738 |
|
-690 |
-664 |
-640 |
Net debt |
|
1,340 |
-70 |
|
2,201 |
2,505 |
2,461 |
Balance sheet ratios |
|
|
|
|
|
|
|
Gearing (net debt/(net debt+equity)) |
|
3.6% |
-0.2% |
|
5.0% |
5.3% |
5.0% |
Net debt to EBITDA (<1.5x) |
|
0.2x |
0.0x |
|
0.2x |
0.2x |
0.2x |
RoCE |
|
21.8% |
25.8% |
|
21.6% |
19.9% |
15.9% |
RoIC |
|
14.6% |
17.8% |
|
19.3% |
17.4% |
13.5% |
RoE |
|
13.0% |
4.1% |
|
17.5% |
16.9% |
13.3% |
Cash flow statement |
|
|
|
|
|
|
|
Operating cash flow |
|
4,703 |
7,093 |
|
10,161 |
11,058 |
9,129 |
Capex (net of disposals) |
|
-2,780 |
-3,921 |
|
-6,070 |
-6,246 |
-4,826 |
Other cash flows |
|
-3,161 |
2,089 |
|
624 |
0 |
0 |
FCF |
|
-1,238 |
5,261 |
|
4,715 |
4,812 |
4,303 |
Equity shareholders' cash |
|
2,318 |
5,125 |
|
3,212 |
4,504 |
3,989 |
Dividends and share buy-backs |
|
-625 |
-3,715 |
|
-5,483 |
-4,807 |
-3,946 |
Excess cash |
|
1,693 |
1,410 |
|
-2,271 |
-304 |
44 |
Cash flow ratios |
|
|
|
|
|
|
|
Working capital days |
|
19 |
16 |
|
22 |
21 |
20 |
Capex/EBITDA |
|
45.3% |
54.4% |
|
73.7% |
72.6% |
60.9% |
FCF yield |
|
-4.4% |
18.2% |
|
13.3% |
13.6% |
12.1% |
Cash conversion |
|
0.5x |
3.3x |
|
0.4x |
0.6x |
0.7x |
Equity shareholders' yield |
|
8.4% |
17.3% |
|
9.4% |
13.4% |
11.9% |
Valuation ratios |
|
|
|
|
|
|
|
P/E multiple |
|
4.9x |
26.2x |
|
6.1x |
6.0x |
7.2x |
Dividend yield |
|
6.4% |
16.6% |
|
8.3% |
10.0% |
7.3% |
EV/EBITDA |
|
4.1x |
3.3x |
|
3.3x |
3.0x |
3.6x |
P/B |
|
0.8x |
1.0x |
|
1.0x |
1.0x |
0.9x |
NAV per share, ZAR |
|
100 |
121 |
|
130 |
136 |
143 |
Valuation |
|
|
|
|
|
|
|
Calculation of target price |
|
|
|
|
ZARmn |
ZAR/sh |
|
Coal at DCF fair value |
|
|
|
|
25,394 |
75 |
|
Sishen Iron Ore Company at DCF fair value |
|
|
|
|
16,446 |
49 |
|
Tronox at market value |
|
|
|
|
6,509 |
19 |
|
50% interest in Moranbah South at $100mn |
|
|
|
|
1,386 |
4 |
|
Other at DCF fair value |
|
|
|
|
1,268 |
4 |
|
Attributable enterprise value |
|
|
|
|
51,004 |
151 |
|
Investments as at 31 December 2017 |
|
|
|
|
186 |
1 |
|
Net debt as at 31 December 2017 |
|
|
|
|
70 |
0 |
|
Share issues (buy-backs) during 2018E |
|
|
|
|
0 |
0 |
|
Other |
|
|
|
|
996 |
3 |
|
Equity value |
|
|
|
|
52,256 |
155 |
|
Plus: one-year forward equity shareholders' cash |
|
|
|
|
13 |
||
Less: dividends paid |
|
|
|
|
|
-13 |
|
One-year forward equity value |
|
|
|
|
|
155 |
|
TP, rounded to |
|
|
|
|
|
150 |
|
Share price on 7/1/2019 |
|
|
|
|
|
134 |
|
Expected share price return |
|
|
|
|
|
12.0% |
|
Plus: expected dividend yield |
|
|
|
|
|
10.0% |
|
Total implied one-year return |
|
|
|
|
|
22.0% |
|
Share price range, ZAR: |
|
|
|
|
|
|
|
12-month high on 2/11/2018 |
162 |
12-month low on 13/3/2018 |
102 |
||||
Price move since high |
-17.2% |
Price move since low |
|
31.3% |
|||
Calculation of discount rate |
|
|
|
|
|
|
|
WACC |
14.7% |
Cost of debt |
|
|
10.0% |
||
Risk-free rate |
9.0% |
Tax rate |
|
|
28% |
||
Equity risk premium |
5.0% |
After-tax cost of debt |
|
7.2% |
|||
Beta |
1.30 |
Debt weighting |
|
10% |
|||
Cost of equity |
15.5% |
Terminal growth rate |
|
3% |
|||
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates
60
vk.com/id446425943
Fortescue Metals Group – BUY
Renaissance Capital
14 January 2019
Metals & Mining
Figure 96: Fortescue Metals Group, $mn (unless otherwise stated)
|
|
|
|
Fortescue Metals Group |
FMG.AX |
Target price, AUD: |
5.40 |
Market capitalisation, $mn: |
9,794 |
Share price, AUD: |
4.53 |
Enterprise value, $mn: |
12,906 |
Potential 12-month return: |
26.2% |
Jun-YE |
2017 |
2018 |
2019E |
2020E |
2021E |
Income statement |
|
|
|
|
|
Revenue |
8,447 |
6,887 |
7,328 |
7,473 |
7,894 |
Underlying EBITDA |
4,728 |
3,182 |
3,313 |
3,288 |
3,364 |
EBIT |
3,450 |
1,873 |
1,920 |
1,656 |
1,499 |
Net interest |
-483 |
-628 |
-290 |
-294 |
-272 |
Taxation |
-874 |
-367 |
-473 |
-395 |
-356 |
Minority interest in profit |
0 |
1 |
0 |
0 |
0 |
Net profit for the year |
2,093 |
879 |
1,157 |
967 |
871 |
Basic EPS, USc |
67.30 |
28.20 |
37.59 |
32.27 |
29.16 |
Thomson Reuters consensus EPS, USc |
|
|
31.16 |
26.02 |
29.04 |
DPS declared, USc |
33.93 |
17.82 |
21.00 |
23.00 |
25.00 |
Income statement ratios |
|
|
|
|
|
EBITDA margin |
56% |
46% |
45% |
44% |
43% |
EBIT margin |
41% |
27% |
26% |
22% |
19% |
EPS growth |
112% |
-58% |
33% |
-14% |
-10% |
Dividend payout ratio |
50% |
63% |
56% |
71% |
86% |
Input assumptions |
|
|
|
|
|
Iron ore (62%Fe, CIF China), $/t |
69.5 |
67.4 |
64.8 |
61.0 |
62.4 |
FMG average realisations, $/t |
53.5 |
43.6 |
46.2 |
46.5 |
49.2 |
Price realisation vs benchmark, % |
77% |
65% |
71% |
76% |
79% |
C1 cash costs, $/t |
12.8 |
12.4 |
13.0 |
14.3 |
16.0 |
Freight - Australia to China, $/t |
5.5 |
7.2 |
7.7 |
6.9 |
7.1 |
Breakeven 62% benchmark price, $/t |
43.8 |
51.6 |
48.7 |
45.7 |
47.8 |
$/AUD |
0.75 |
0.78 |
0.72 |
0.75 |
0.80 |
Sales volumes, mnt |
|
|
|
|
|
FMG mine ore shipped |
170.3 |
169.7 |
167.7 |
170.0 |
170.0 |
Equity share of the JV |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Third party ore |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Total volumes |
170.3 |
169.7 |
167.7 |
170.0 |
170.0 |
Attributable Cu eq volumes, kt |
1,622 |
1,616 |
1,597 |
1,619 |
1,619 |
Volume growth |
0.9% |
-0.4% |
-1.2% |
1.4% |
0.0% |
Balance sheet |
|
|
|
|
|
Net operating assets |
12,367 |
12,844 |
12,709 |
12,560 |
12,077 |
Investments |
0 |
0 |
0 |
0 |
0 |
Equity |
9,720 |
9,719 |
9,599 |
9,756 |
9,880 |
Minority interest |
14 |
13 |
13 |
13 |
13 |
Net debt |
2,633 |
3,112 |
3,097 |
2,791 |
2,184 |
Balance sheet ratios |
|
|
|
|
|
Gearing* |
21.3% |
24.3% |
24.4% |
22.2% |
18.1% |
Net debt to EBITDA |
0.6x |
1.0x |
0.9x |
0.8x |
0.6x |
RoCE |
21.1% |
11.7% |
11.9% |
10.4% |
9.6% |
RoIC (after tax) |
19.1% |
3.1% |
9.5% |
6.7% |
5.8% |
RoE |
23.1% |
9.0% |
12.0% |
10.0% |
8.9% |
Jun-YE |
|
|
|
2019E |
2020E |
2021E |
2017 |
2018 |
|
||||
Cash flow statement |
|
|
|
|
|
|
Operating cash flow |
4,482 |
1,807 |
|
2,695 |
2,602 |
2,719 |
Growth capex |
-362 |
-383 |
|
-620 |
-600 |
-300 |
Maintenance capex |
-354 |
-507 |
|
-580 |
-680 |
-876 |
Other movements |
-111 |
-72 |
|
0 |
0 |
0 |
FCF |
3,655 |
845 |
|
1,495 |
1,322 |
1,544 |
Equity shareholders' cash |
3,317 |
406 |
|
1,292 |
1,117 |
1,353 |
Dividends and share buy-backs |
-762 |
-885 |
|
-1,277 |
-810 |
-747 |
Surplus (deficit) cash |
2,555 |
-479 |
|
15 |
307 |
607 |
Cash flow ratios |
|
|
|
|
|
|
Working capital days** |
0.5 |
0.9 |
|
8.6 |
11.2 |
10.6 |
Capex/EBITDA |
15.1% |
28.0% |
|
36.2% |
38.9% |
34.9% |
FCF yield |
23.6% |
5.6% |
|
11.6% |
10.6% |
13.0% |
Cash conversion |
1.6x |
0.5x |
|
1.1x |
1.2x |
1.6x |
Equity shareholders' yield |
25.8% |
3.4% |
|
13.2% |
11.5% |
14.0% |
Valuation |
|
|
|
|
|
|
Calculation of target price |
|
|
|
|
|
AUD |
Net present value @ discount rate of 10% |
|
|
|
|
|
5.41 |
Rounded to |
|
|
|
|
|
5.40 |
Share price on 7/1/2019 |
|
|
|
|
|
4.53 |
Expected share price return |
|
|
|
|
|
19.2% |
Plus: expected dividend yield |
|
|
|
|
|
7.0% |
Total implied one-year return |
|
|
|
|
|
26.2% |
Share price range, AUD: |
|
|
|
|
|
|
12-month high on 16/2/2018 |
5.46 12-month low on 12/9/2018 |
3.52 |
||||
Price move since high |
-17.0% Price move since low |
|
28.9% |
|||
Calculation of discount rate |
|
|
|
|
|
|
WACC |
9.9% |
Cost of debt |
|
|
7.0% |
|
Risk-free rate |
4.0% |
Tax rate |
|
|
30% |
|
Equity risk premium |
5.0% |
After-tax cost of debt |
|
4.9% |
||
Beta |
1.30 |
Debt weighting |
|
10% |
||
Cost of equity |
10.5% |
Terminal growth rate |
|
0.0% |
||
Valuation ratios |
|
|
|
|
|
|
Jun-YE |
2017 |
2018 |
|
2019E |
2020E |
2021E |
P/E multiple |
6.1x |
13.8x |
|
8.6x |
10.0x |
11.1x |
Dividend yield |
8.2% |
4.6% |
|
6.5% |
7.1% |
7.7% |
EV/EBITDA |
3.3x |
4.8x |
|
3.9x |
3.8x |
3.5x |
P/B |
1.3x |
1.2x |
|
1.0x |
1.0x |
1.0x |
NAV per share, $ |
3.1 |
3.1 |
|
3.2 |
3.3 |
3.3 |
*Gearing is defined as net debt/(net debt +equity)
**Working capital days is defined as (working capital/revenue)*365
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates
61
vk.com/id446425943
Glencore – HOLD
Renaissance Capital
14 January 2019
Metals & Mining
Figure 97: Glencore, $mn (unless otherwise stated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Glencore |
|
|
GLEN.L |
|
|
|
|
|
Target price, ZAR: |
|
|
55 |
|
||
Market capitalisation, $mn: |
|
|
51,214 |
|
|
|
|
|
Share price, ZAR: |
|
|
51 |
|
||
Enterprise value, $mn: |
|
|
89,780 |
|
|
|
|
|
Potential 12-month return: |
|
16.9% |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec-YE |
|
2016 |
2017 |
2018E |
2019E |
2020E |
Dec-YE |
2016 |
2017 |
|
2018E |
2019E |
2020E |
||
Income statement |
|
|
|
|
|
|
|
Balance sheet |
|
|
|
|
|
|
|
Revenue |
|
156,466 |
208,768 |
226,957 |
223,644 |
223,827 |
|
Net operating assets |
77,305 |
81,031 |
|
82,002 |
81,086 |
79,861 |
|
Adjusted EBITDA |
|
10,268 |
14,762 |
17,100 |
15,954 |
16,143 |
|
Investments |
-905 |
1,322 |
|
1,630 |
1,687 |
1,745 |
|
Adjusted EBIT |
|
3,930 |
8,552 |
10,592 |
9,055 |
9,318 |
|
Equity |
44,243 |
49,755 |
|
47,432 |
48,721 |
50,249 |
|
Net interest |
|
-1,549 |
-1,525 |
-1,497 |
-1,618 |
-1,470 |
|
Minority interest |
-462 |
-300 |
|
399 |
444 |
490 |
|
Taxation |
|
-886 |
-2,276 |
-2,524 |
-1,698 |
-1,757 |
|
Net funding <$36bn |
32,619 |
32,898 |
|
35,801 |
33,608 |
30,866 |
|
Minority interest in profit |
|
443 |
615 |
15 |
-301 |
-308 |
|
Net debt ($10-16bn)* |
15,526 |
10,673 |
|
12,565 |
12,476 |
11,361 |
|
Attributable profit |
|
1,510 |
5,777 |
6,232 |
5,437 |
5,784 |
|
|
|
|
|
|
|
|
|
Net income pre significant items |
|
1,992 |
5,508 |
6,749 |
5,437 |
5,784 |
|
Balance sheet ratios |
|
|
|
|
|
|
|
EPS (pre significant items), USc |
|
14.0 |
38.0 |
48.0 |
40.0 |
42.0 |
|
Gearing (Net debt : (Net debt + equity)) |
42.4% |
39.8% |
|
43.0% |
40.8% |
38.1% |
|
|
|
Net debt/EBITDA (<2x) |
1.8x |
0.9x |
|
0.9x |
0.9x |
0.8x |
|||||||
Thomson Reuters consensus EPS, USc |
|
|
48.3 |
45.4 |
44.8 |
|
RoCE |
4.4% |
9.4% |
|
11.2% |
9.6% |
9.9% |
|
|
DPS declared, USc |
|
7.0 |
20.0 |
30.0 |
30.8 |
38.1 |
|
RoIC (after tax) |
3.1% |
10.3% |
|
9.3% |
7.7% |
8.3% |
|
Adjusted EBIT |
|
|
|
|
|
|
|
RoE |
4.7% |
11.7% |
|
13.9% |
11.3% |
11.7% |
|
|
2,182 |
4,496 |
4,825 |
3,692 |
5,259 |
|
Cash flow statement |
|
|
|
|
|
|
|
|
Metals and minerals |
|
|
|
|
|
|
12,650 |
13,095 |
|
||||||
EBIT margin |
|
9% |
15% |
16% |
12% |
16% |
|
Operating cash flow |
7,527 |
11,921 |
|
14,550 |
|
||
Energy products |
|
-842 |
1,424 |
3,416 |
3,050 |
1,553 |
|
Capex less disposals |
-3,215 |
-3,623 |
|
-7,471 |
-4,735 |
-4,633 |
|
EBIT margin |
|
-12% |
14% |
26% |
22% |
12% |
|
Other cash flows |
5,040 |
-3,987 |
|
-3,221 |
0 |
0 |
|
Agricultural products |
|
104 |
0 |
0 |
0 |
0 |
|
FCF |
9,352 |
4,311 |
|
3,858 |
7,915 |
8,462 |
|
EBIT margin |
|
3% |
- |
- |
- |
- |
|
Equity shareholders' cash |
8,626 |
725 |
|
1,969 |
6,341 |
6,997 |
|
Corporate and other |
|
-329 |
-380 |
-444 |
-455 |
-475 |
|
Dividends and share buy-backs |
0 |
-1,004 |
|
-4,872 |
-4,148 |
-4,255 |
|
Industrial EBIT |
|
1,115 |
5,540 |
7,797 |
6,287 |
6,337 |
|
Surplus (deficit) cash |
8,626 |
-279 |
|
-2,903 |
2,193 |
2,742 |
|
EBIT margin |
|
3.2% |
14.0% |
17.8% |
14.5% |
14.0% |
|
Cash flow ratios |
|
|
|
|
|
|
|
Metals and minerals – marketing |
|
1,562 |
2,005 |
2,164 |
1,850 |
2,003 |
|
|
|
|
|
|
|
|
|
Energy products – marketing |
|
909 |
990 |
738 |
932 |
870 |
|
Working capital days |
24 |
21 |
|
21 |
21 |
21 |
|
Other |
|
344 |
17 |
-108 |
-14 |
108 |
|
Capex/EBITDA |
36.4% |
29.4% |
|
51.1% |
35.0% |
34.0% |
|
Marketing EBIT |
|
2,815 |
3,012 |
2,795 |
2,768 |
2,981 |
|
FCF yield |
14.3% |
4.6% |
|
3.9% |
9.3% |
10.3% |
|
EBIT margin |
|
2.0% |
1.7% |
1.5% |
1.5% |
1.7% |
|
Cash conversion |
4.3x |
0.1x |
|
0.3x |
1.2x |
1.2x |
|
Adjusted EBIT - Group production |
3,930 |
8,552 |
10,592 |
9,055 |
9,318 |
|
Equity shareholders' yield |
26.0% |
1.2% |
|
3.1% |
12.5% |
13.8% |
|
|
Income statement ratios |
|
|
|
|
|
|
|
Valuation |
|
|
|
|
|
|
|
EBITDA margin |
|
6.6% |
7.1% |
7.5% |
7.1% |
7.2% |
|
Calculation of target price |
|
|
|
|
$mn |
ZAR/sh |
|
EBIT margin |
|
2.5% |
4.1% |
4.7% |
4.0% |
4.2% |
|
Industrial |
|
|
|
|
|
|
|
EPS growth |
|
38% |
171% |
26% |
-17% |
5% |
|
Metals and minerals |
|
|
|
|
47,080 |
48.3 |
|
Dividend payout ratio |
|
50% |
53% |
64% |
79% |
93% |
|
Energy products |
|
|
|
|
20,736 |
21.3 |
|
Input assumptions |
|
|
|
|
|
|
|
Marketing |
|
|
|
|
|
|
|
ZAR/$ |
|
14.70 |
13.31 |
13.24 |
14.31 |
14.14 |
|
Metals & minerals |
|
|
|
|
22,581 |
23.2 |
|
$/AUD |
|
0.74 |
0.77 |
0.75 |
0.72 |
0.78 |
|
Energy |
|
|
|
|
7,106 |
7.3 |
|
Copper, USc/lb |
|
221 |
280 |
296 |
272 |
289 |
|
Agricultural |
|
|
|
|
1,177 |
1.2 |
|
Nickel, USc/lb |
|
435 |
472 |
596 |
523 |
648 |
|
Corporate and other |
|
|
|
|
-14,577 |
-15.0 |
|
Thermal coal, $/t |
|
64 |
85 |
98 |
93 |
86 |
|
Total enterprise value |
|
|
|
|
84,103 |
86.3 |
|
|
|
|
|
|
|
|
|
Net debt, financial instruments |
|
|
|
|
-30,503 |
-31.3 |
|
Required breakeven price |
|
|
|
|
|
|
|
Equity value as at 9/1/2019 |
|
|
|
|
53,600 |
55.0 |
|
Copper, $/t |
|
3,590 |
4,003 |
4,007 |
4,336 |
4,528 |
|
|
|
|
|
|
|
|
|
|
Rounded to |
|
|
|
|
|
55.0 |
|
|||||||
Zinc, $/t |
|
872 |
953 |
1,285 |
1,268 |
1,102 |
|
Share price on 8/1/2019 |
|
|
|
|
|
50.7 |
|
Nickel, $/t |
|
7,616 |
6,881 |
8,726 |
9,202 |
9,434 |
|
Expected share price return |
|
|
|
|
|
8.4% |
|
Coking coal, $/t |
|
101 |
123 |
115 |
98 |
101 |
|
Plus: expected dividend yield |
|
|
|
|
|
8.5% |
|
Thermal coal, $/t |
|
46 |
54 |
59 |
60 |
64 |
|
Total implied one-year return |
|
|
|
|
|
16.9% |
|
Sales volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper, kt |
|
1,426 |
1,310 |
1,443 |
1,552 |
1,538 |
|
Share price range, ZAR: |
|
|
|
|
|
|
|
Zinc, kt |
|
1,094 |
1,090 |
1,081 |
1,185 |
1,315 |
|
12-month high on 15/6/2018 |
72 |
12-month low on 6/12/2018 |
48 |
|
|||
Nickel, kt |
|
115 |
109 |
124 |
130 |
141 |
|
Price move since high |
-28.4% Price move since low |
|
7.1% |
|
|||
Coal, mnt |
|
125 |
121 |
133 |
148 |
149 |
|
|
|
|
|
|
|
|
|
Attributable Cu eq volumes, kt |
|
4,880 |
4,635 |
5,068 |
5,564 |
5,724 |
|
Calculation of discount rate |
|
|
|
|
|
|
|
Volume growth |
|
-3.4% |
-5.0% |
9.3% |
9.8% |
2.9% |
|
WACC |
9.7% |
Cost of debt |
|
|
4.5% |
|
|
Contribution to FY18E adjusted EBITDA |
|
|
|
|
|
|
Risk-free rate |
4.0% |
Tax rate |
|
|
20% |
|
||
|
|
|
|
|
|
Equity risk premium |
6.4% After-tax cost of debt |
|
3.6% |
|
|||||
Marketing: |
Marketing: |
Marketing: Agri |
|
|
|
|
Beta |
1.30 |
Debt weighting |
|
30% |
|
|||
Metals |
Energy |
1% |
|
|
Copper |
|
|
Cost of equity |
12.3% |
Terminal growth rate |
|
2.0% |
|
||
13% |
4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
|
|
|
|
31% |
|
|
Valuation ratios |
|
|
|
|
|
|
|
1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec-YE |
2016 |
2017 |
|
2018E |
2019E |
2020E |
||
Coking coal |
|
|
|
|
|
|
|
P/E multiple |
16.7x |
11.2x |
|
9.6x |
9.2x |
8.7x |
|
4% |
|
|
|
|
|
|
|
Dividend yield |
3.0% |
4.7% |
|
6.5% |
8.4% |
10.4% |
|
|
|
|
|
|
|
|
|
EV/EBITDA |
6.4x |
6.3x |
|
5.8x |
5.3x |
5.1x |
|
|
|
|
|
|
|
|
|
P/B |
0.8x |
1.2x |
|
1.3x |
1.0x |
1.0x |
|
Thermal coal |
|
|
|
|
|
|
|
NAV per share, $ |
3.1 |
3.5 |
|
3.4 |
3.5 |
3.6 |
|
|
|
|
|
Zinc |
|
|
NAV per share, ZAR |
46 |
46 |
|
45 |
50 |
51 |
|
|
27% |
|
Nickel |
|
14% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5% |
|
|
|
|
|
|
|
|
|
|
|
|
* Net funding less readily marketable inventories (RMI)
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates
62
vk.com/id446425943
Kumba Iron Ore – SELL
Renaissance Capital
14 January 2019
Metals & Mining
Figure 98: Kumba Iron Ore, ZARmn (unless otherwise stated)
|
|
|
|
Kumba Iron Ore |
KIOJ.J |
Target price, ZAR: |
220 |
Market capitalisation, ZARmn: |
87,832 |
Last price, ZAR: |
275 |
Enterprise value, ZARmn: |
104,817 |
Potential 12-month return: |
-10.9% |
Dec-YE |
2016 |
2017 |
2018E |
2019E |
2020E |
Income statement |
|
|
|
|
|
Revenue |
40,767 |
46,379 |
44,184 |
45,219 |
42,780 |
Underlying EBITDA |
18,557 |
19,691 |
18,233 |
17,613 |
14,995 |
Underlying EBIT |
15,466 |
16,664 |
14,565 |
13,964 |
11,306 |
Net interest |
-201 |
298 |
481 |
565 |
437 |
Taxation |
-3,934 |
-5,481 |
-3,981 |
-3,850 |
-3,112 |
Minority interest in profit |
-2,523 |
-3,798 |
-2,615 |
-2,714 |
-2,244 |
Attributable profit |
8,621 |
12,335 |
8,341 |
7,965 |
6,387 |
Headline earnings |
8,724 |
9,728 |
8,375 |
7,965 |
6,387 |
HEPS, ZAR |
27.30 |
30.47 |
26.07 |
24.73 |
19.83 |
Thomson Reuters consensus, ZAR |
|
|
25.52 |
24.74 |
21.19 |
DPS declared, ZAR |
0.00 |
30.97 |
32.91 |
24.80 |
19.90 |
Income statement ratios |
|
|
|
|
|
EBITDA margin |
46% |
42% |
41% |
39% |
35% |
EBIT margin |
38% |
36% |
33% |
31% |
26% |
HEPS growth |
131% |
12% |
-14% |
-5% |
-20% |
Dividend payout ratio |
0% |
80% |
127% |
100% |
100% |
Input assumptions |
|
|
|
|
|
Iron ore - (62.5%, CIF China), $/t |
58 |
71 |
66 |
62 |
62 |
Lump premium, $/t |
10 |
15 |
20 |
17 |
13 |
Freight charges - S. Africa to China, $/t |
6.8 |
11.2 |
13.8 |
12.4 |
12.6 |
ZAR/$ |
14.7 |
13.3 |
13.2 |
14.3 |
14.1 |
Required breakeven price, $/t |
28.8 |
39.6 |
38.4 |
38.8 |
41.9 |
Sales volumes, kt |
|
|
|
|
|
Export iron ore |
39,061 |
41,615 |
39,556 |
41,125 |
40,750 |
Domestic iron ore |
3,423 |
3,277 |
3,360 |
3,750 |
3,750 |
Total sales |
42,484 |
44,892 |
42,915 |
44,875 |
44,500 |
Attributable Cu eq volumes, kt |
338 |
358 |
342 |
357 |
354 |
Volume growth |
-11.0% |
5.8% |
-4.5% |
4.4% |
-0.9% |
Balance sheet |
|
|
|
|
|
Net operating assets |
29,728 |
30,834 |
31,605 |
30,732 |
31,396 |
Investments |
643 |
838 |
840 |
840 |
840 |
Equity |
27,850 |
34,769 |
33,969 |
31,305 |
31,154 |
Minority interest |
8,686 |
10,777 |
10,350 |
9,329 |
9,276 |
Net debt |
-6,165 |
-13,874 |
-11,874 |
-9,062 |
-8,195 |
Balance sheet ratios |
|
|
|
|
|
Gearing* |
-28.4% |
-66.4% |
-53.7% |
-40.7% |
-35.7% |
Net debt to EBITDA |
-0.3x |
-0.7x |
-0.7x |
-0.5x |
-0.5x |
RoCE |
16.6% |
17.0% |
14.6% |
13.6% |
10.7% |
RoIC (after tax) |
12.0% |
10.9% |
11.8% |
10.6% |
7.6% |
RoE |
36.6% |
39.4% |
24.3% |
24.4% |
20.5% |
RoE at replacement cost |
11.4% |
13.4% |
8.6% |
8.4% |
6.8% |
Dec-YE |
|
|
|
2018E |
2019E |
2020E |
2016 |
2017 |
|
||||
Cash flow statement |
|
|
|
|
|
|
Operating cash flow |
12,664 |
18,074 |
|
13,736 |
15,510 |
11,429 |
Growth capex |
-856 |
-575 |
|
-155 |
0 |
0 |
Maintenance capex |
-1,664 |
-2,499 |
|
-3,645 |
-4,365 |
-3,775 |
Other |
454 |
-655 |
|
264 |
0 |
0 |
FCF |
10,598 |
14,345 |
|
10,200 |
11,144 |
7,653 |
Equity shareholders' cash |
10,769 |
12,853 |
|
7,504 |
7,817 |
5,671 |
Dividends and share buy backs |
0 |
-5,144 |
|
-9,504 |
-10,629 |
-6,538 |
Movement in net debt |
10,769 |
7,709 |
|
-2,000 |
-2,812 |
-867 |
Cash flow ratios |
|
|
|
|
|
|
Working capital days |
81 |
37 |
|
52 |
43 |
48 |
Cash conversion |
1.2x |
1.3x |
|
0.9x |
1.0x |
0.9x |
FCF yield |
28.6% |
21.7% |
|
10.7% |
12.6% |
8.6% |
Equity shareholders' yield |
31.2% |
18.5% |
|
7.7% |
8.8% |
6.4% |
Capex/EBITDA |
13.6% |
15.6% |
|
20.8% |
24.8% |
25.2% |
Valuation |
|
|
|
|
|
|
Calculation of target price |
|
|
|
|
|
ZAR |
DCF fair value |
|
|
|
|
|
224 |
Plus: equity shareholders' cash/share |
|
|
|
|
|
24 |
Less: DPS paid |
|
|
|
|
|
-33 |
TP, rounded to |
|
|
|
|
|
220 |
Share price on 7/1/2019 |
|
|
|
|
|
275 |
Expected share price return |
|
|
|
|
|
-19.9% |
Plus: expected dividend yield |
|
|
|
|
|
9.0% |
Total implied one-year return |
|
|
|
|
|
-10.9% |
Share price range, ZAR: |
|
|
|
|
|
|
12-month high on 9/1/2018 |
415 |
12-month low on 30/11/2018 |
244 |
|||
Price move since high |
-33.8% Price move since low |
|
12.4% |
|||
Calculation of discount rate |
|
|
|
|
|
|
WACC |
12.5% |
Cost of debt |
|
|
10.0% |
|
Risk-free rate |
9.0% |
Tax rate |
|
|
28% |
|
Equity risk premium |
3.0% |
After-tax cost of debt |
|
7.2% |
||
Beta |
1.15 |
Debt weighting |
|
0% |
||
Cost of equity |
12.5% |
Terminal growth rate |
|
0.0% |
||
Valuation ratios |
|
|
|
|
|
|
Dec-YE |
2016 |
2017 |
|
2018E |
2019E |
2020E |
P/E multiple |
3.9x |
7.1x |
|
11.6x |
11.1x |
13.8x |
Dividend yield |
0.0% |
14.4% |
|
10.9% |
9.0% |
7.2% |
EV/EBITDA |
2.2x |
4.1x |
|
6.5x |
6.3x |
7.4x |
P/B |
1.2x |
2.0x |
|
2.9x |
2.8x |
2.8x |
NAV per share, ZAR |
86.5 |
107.9 |
|
105.5 |
97.2 |
96.7 |
* Gearing defined as net debt/(net debt +equity)
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates
63
vk.com/id446425943
Norilsk Nickel – BUY
Renaissance Capital
14 January 2019
Metals & Mining
Figure 99: Norilsk Nickel, $mn (unless otherwise stated)
|
|
|
|
NorNickel |
GMKN.MM |
Target price, $: |
24.0 |
Market capitalisation, $mn: |
30,109 |
Share price, $: |
19.5 |
Enterprise value, $mn: |
38,641 |
Potential 12-month return: |
33.9% |
Dec-YE |
2016 |
2017 |
2018E |
2019E |
2020E |
Income statement |
|
|
|
|
|
Revenue |
8,259 |
9,146 |
11,196 |
10,849 |
11,695 |
EBITDA |
3,898 |
3,995 |
5,861 |
5,644 |
6,161 |
EBIT |
3,280 |
3,123 |
5,131 |
4,847 |
5,289 |
Net interest |
-339 |
-458 |
-375 |
-373 |
-462 |
Taxation |
-745 |
-721 |
-942 |
-1,074 |
-1,158 |
Minority interest in profit |
5 |
6 |
-7 |
-100 |
-152 |
Net profit for the year |
2,535 |
2,129 |
3,355 |
3,300 |
3,516 |
Underlying earnings |
2,535 |
2,129 |
3,355 |
3,300 |
3,516 |
Underlying EPS, $ |
1.62 |
1.35 |
2.12 |
2.09 |
2.22 |
Thomson Reuters consensus EPS, $ |
|
|
2.38 |
2.49 |
2.56 |
DPS declared, $ |
1.08 |
1.17 |
2.16 |
2.11 |
2.24 |
Thomson Reuters consensus DPS, $ |
|
####### |
1.88 |
2.11 |
2.37 |
EBIT by division |
|
|
|
|
|
|
|
|
|
|
|
Russia (GMK & KGMK) |
3,524 |
4,299 |
5,831 |
5,452 |
5,707 |
EBIT margin |
55% |
58% |
67% |
65% |
66% |
NN Harjavalta |
17 |
59 |
31 |
-47 |
73 |
EBIT margin |
2% |
7% |
3% |
-5% |
7% |
Other metallurgical |
-11 |
-126 |
70 |
251 |
380 |
EBIT margin |
-157% |
-371% |
25% |
40% |
45% |
Other non-metallurgical |
96 |
91 |
-13 |
5 |
5 |
EBIT margin |
9% |
11% |
-1% |
1% |
1% |
Other |
-285 |
-973 |
-782 |
-814 |
-877 |
Income statement ratios |
|
|
|
|
|
EBITDA margin |
47% |
44% |
52% |
52% |
53% |
EBIT margin |
40% |
34% |
46% |
45% |
45% |
EPS growth |
47% |
-17% |
58% |
-2% |
7% |
Dividend payout ratio |
67% |
87% |
102% |
101% |
101% |
Dividend as % of EBITDA |
44% |
46% |
58% |
59% |
58% |
Input assumptions |
|
|
|
|
|
Nickel, $/t |
9,599 |
10,404 |
13,130 |
11,530 |
14,285 |
Copper, $/t |
4,867 |
6,170 |
6,532 |
6,000 |
6,367 |
Palladium, $/oz |
614 |
871 |
1,030 |
1,216 |
1,088 |
Platinum, $/oz |
988 |
950 |
880 |
870 |
1,070 |
RUB/$ |
67 |
58 |
63 |
67 |
68 |
Unit costs per nickel eq tonne, $ |
6,109 |
8,163 |
7,542 |
7,243 |
7,609 |
Sustaining capex per nickel eq tonne, $ |
814 |
1,187 |
915 |
2,365 |
2,397 |
Production volumes* |
236 |
217 |
211 |
214 |
214 |
Nickel, kt |
|||||
Copper, kt |
360 |
401 |
461 |
481 |
494 |
Palladium, koz |
2,618 |
2,780 |
2,757 |
2,684 |
2,684 |
Platinum, koz |
644 |
670 |
670 |
648 |
648 |
Attributable Cu eq volumes, kt |
1,412 |
1,442 |
1,484 |
1,496 |
1,509 |
Volume growth |
-6% |
2% |
3% |
1% |
1% |
Contribution to 2018E revenue per commodity
Dec-YE |
|
|
|
2018E |
2019E |
2020E |
2016 |
2017 |
|
||||
Balance sheet |
|
|
|
|
|
|
Net operating assets |
10,299 |
13,581 |
|
12,304 |
13,836 |
15,433 |
Financial instruments |
198 |
267 |
|
259 |
259 |
259 |
Equity |
4,986 |
4,333 |
|
3,828 |
3,783 |
3,749 |
Minority interest |
74 |
331 |
|
310 |
410 |
562 |
Net debt |
4,530 |
8,201 |
|
7,479 |
8,909 |
10,338 |
Balance sheet ratios |
|
|
|
|
|
|
Gearing (net debt/(net debt+equity)) |
47.6% |
65.4% |
|
66.1% |
70.2% |
73.4% |
Net debt to EBITDA |
1.2x |
2.1x |
|
1.3x |
1.6x |
1.7x |
RoCE |
37.0% |
28.1% |
|
39.7% |
37.1% |
36.1% |
RoIC (after tax) |
31.1% |
21.5% |
|
31.5% |
28.7% |
27.9% |
RoE |
64.0% |
45.7% |
|
82.2% |
86.7% |
93.4% |
Cash flow statement |
|
|
|
|
|
|
Operating cash flow |
3,737 |
1,339 |
|
6,047 |
4,514 |
4,890 |
Capex |
-1,714 |
-2,002 |
|
-1,650 |
-2,300 |
-2,400 |
Other FCF |
-930 |
431 |
|
29 |
0 |
0 |
FCF |
1,093 |
-232 |
|
4,426 |
2,214 |
2,490 |
Equity shareholders' cash |
770 |
-667 |
|
4,134 |
1,916 |
2,121 |
Dividends and share buy backs |
-1,088 |
-3,004 |
|
-3,448 |
-3,345 |
-3,551 |
Surplus (deficit) cash |
-318 |
-3,671 |
|
686 |
-1,429 |
-1,430 |
Cash flow ratios |
|
|
|
|
|
|
Working capital days |
24 |
96 |
|
38 |
40 |
40 |
Cash Conversion |
0.3x |
-0.3x |
|
1.2x |
0.6x |
0.6x |
FCF yield |
4.0% |
-0.7% |
|
12.2% |
5.5% |
6.0% |
Equity shareholders' yield |
3.4% |
-2.6% |
|
14.5% |
6.2% |
6.9% |
Capex/EBITDA |
44.0% |
50.1% |
|
28.2% |
40.8% |
39.0% |
Valuation |
|
|
|
|
|
|
SoTP DCF valuation and calculation of target price |
|
$mn |
$/sh |
|||
Russia (GMK & KGMK) |
|
|
|
|
51,570 |
32.6 |
Finland |
|
|
|
|
825 |
0.5 |
Other metallurgical |
|
|
|
|
4,636 |
2.9 |
Other non-metallurgical |
|
|
|
|
30 |
0.0 |
Other |
|
|
|
|
-11,046 |
-7.0 |
Total enterprise value |
|
|
|
|
46,015 |
29.1 |
Net debt as at 31 December 2017 |
|
|
|
|
-8,201 |
-5.2 |
Cash used in share buy-backs |
|
|
|
|
- |
- |
Other investments |
|
|
|
|
267 |
0.2 |
Minority interest |
|
|
|
|
-331 |
-0.2 |
Equity value as at 8/1/2019 |
|
|
|
|
37,750 |
23.9 |
Rounded to |
|
|
|
|
|
24.0 |
Share price on 7/1/2019 |
|
|
|
|
|
19.5 |
Expected share price return |
|
|
|
|
|
23.1% |
Plus: expected dividend yield |
|
|
|
|
|
10.9% |
Total implied one-year return |
|
|
|
|
|
33.9% |
Share price range, $: |
|
|
|
|
|
|
12-month high on 26/2/2018 |
21.3 |
12-month low on 10/4/2018 |
14.6 |
|||
Price move since high |
-8.6% Price move since low |
|
33.8% |
|||
Calculation of discount rate |
|
|
|
|
|
|
WACC |
9.4% |
Cost of debt |
|
|
5.0% |
|
Risk-free rate |
4.0% |
Tax rate |
|
|
24% |
|
Equity risk premium |
6.0% After-tax cost of debt |
|
3.8% |
|||
Beta |
1.30 |
Debt weighting |
|
30% |
||
Cost of equity |
11.8% |
Terminal growth rate |
|
2.5% |
||
Valuation ratios |
|
|
|
|
|
|
Dec-YE |
2016 |
2017 |
|
2018E |
2019E |
2020E |
P/E multiple |
8.8x |
12.0x |
|
8.5x |
9.4x |
8.8x |
Dividend yield |
7.6% |
7.2% |
|
12.0% |
10.8% |
11.5% |
EV/EBITDA |
6.9x |
8.6x |
|
6.2x |
7.1x |
6.8x |
P/B |
4.5x |
5.9x |
|
7.5x |
8.2x |
8.2x |
NAV per share, $ |
3.2 |
2.7 |
|
2.4 |
2.4 |
2.4 |
* From Russian own feed |
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates |
64