Barrick Gold Corporation

GOLD Details

Barrick Gold Corporation (NYSE: GOLD) is a Canadian gold mining company focused on producing and selling gold and copper and other related activities, including exploration and mine development. GOLD has mining operations in Argentina, Australia, Canada, Chile, Dominican Republic, Papua New Guinea, Peru, Saudi Arabia, the United States, and Zambia.

Deriving Value Gain From Consolidation: On September 07, 2021, Nevada Gold Mines (NGM), a joint venture between GOLD (61.5%) and Newmont Corporation (38.5%), signed an exchange agreement with i-80 Gold Corp. to acquire an additional 40% stake in the South Arturo joint venture and Rodeo Creek exploration property, in exchange for its Lone Tree and Buffalo Mountain properties. Under the agreement, NGM will also receive a consideration of up to USD 50 million contingent on mineral resources from the Lone Tree property. In connection with the agreement, NGM will also subscribe for a 9.9% stake in i-80 Gold (or up to USD 50 million worth of subscription proceeds, whichever is less) and become one of i-80 Gold's most prominent investors.

Distribution of Return on Capital and Quarterly Dividend: On September 02, 2021, GOLD announced the distribution of the second USD 250 million tranche of a return on capital distribution, which represents a return of ~USD 0.1405 per share (based on outstanding shares as of August 31, 2021). The proposed distribution will be made on September 15, 2021, along with the Q2FY21 dividend of USD 0.09 per share, payable to shareholders of record on August 31, 2021.

Q2FY21 Results: The company reported a YoY decline of 5.30% in total revenues to USD 2.89 billion in Q2FY21 (ended June 30, 2021) compared to USD 3.06 billion in Q2FY20, attributable to a decline in sales volume. Net income for Q2FY21 increased to USD 694 million from USD 622 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 5.14 billion and total debt of USD 5.15 billion.

Key Risks: Prices of gold and copper on the global market, which are highly volatile and uncontrollable, significantly impact GOLD's business. Hence, any unfavorable movement in their prices could negatively impact its financials. In addition, GOLD operates as a gold mining company, which is subject to several federal and state regulations. Therefore, the issuance of stricter regulations or non-compliance with required laws could adversely affect the company's profitability.

Outlook:

10-Year Production Outlook (Source: Results Presentation, August 09, 2021)

Valuation Methodology: Price/Cash Flow Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

GOLD Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: GOLD's stock price decreased 15.58% in the past three months and is currently close to the lower end of its 52-week range of USD 18.41 to USD 30.48. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 41.91. We have valued the stock using the Price/Cash Flow multiple-based relative valuation methodology and arrived at a target price of USD 23.40. Considering the correction in the stock price, decent balance sheet, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 19.48, down 1.09% as of September 10, 2021, 2:05 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

M.D.C. Holdings, Inc.

MDC Details

M.D.C. Holdings, Inc. (NYSE: MDC) is a holding company whose business is categorized into two segments 1) Homebuilding, under which it purchases finished lots or develops lots necessary for the construction and sale of single-family detached homes to first-time and first-time move-up homeowners under the brand Richmond American Homes, and 2) Financial Services, providing mortgage financing and insurance services for homebuyers. As of September 10, 2021, the company's market capitalization stood at USD 3.58 billion.

Redemption of 5.500% Senior Notes: On September 02, 2021, MDC initiated a cash tender offer to buy back its USD 100 million aggregate principal amount of 5.500% senior notes due 2024 through available cash resources. Noteholders, who validly tender their notes (and which tenders are accepted by the company) as of September 16, 2021, will be entitled to receive a cash consideration of USD 1,093.75 (including an early tender premium of USD 30.00) per USD 1,000 principal amount. The offer is due to expire on September 30, 2021.

Notes Offering:  On August 03, 2021, MDC priced a public offering of USD 350 million aggregate principal amount of 3.966% senior notes due 2061 at par. The proceeds of the offering will be used for general corporate purposes and repayment of debt.

Q2FY21 Results: The company reported a YoY surge of 54.24% in homebuilding revenues to USD 1.37 billion in Q2FY21 (ended June 30, 2021) compared to USD 886.76 million in Q2FY20, attributable to higher sales volumes and favorable pricing. MDC's homebuilding pre-tax income increased to USD 187.51 million in Q2FY21 vs. USD 84.92 million in Q2FY20. The Financial Services revenue increased to USD 33.32 million in Q2FY21 from USD 32.96 million in Q2FY20, and the related pre-tax income reduced to USD 18.03 million from USD 26.72 million in Q2FY20. MDC's net income expanded by 82.89% and amounted to USD 154.35 million for Q2FY21. 

Key Risks: The ability of MDC's subsidiaries to acquire land for developing residential communities is crucial to the company's operations. Accordingly, any change in the general availability of land, land sellers' willingness to sell land at reasonable rates, financing, zoning, or other restrictions could impact MDC's ability to buy land and, therefore, its financial performance.

Outlook: In Q3FY21, MDC expects its home deliveries to range between 2,500 – 2,700 units, at an average selling price (ASP) of USD 510,000 – 520,000. It also forecasts its home sales gross margin to be ~23.5%, excluding impairments and warranty adjustments. For FY21, the home deliveries are estimated to be in the range of 10,000 – 11,000 units.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MDC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: MDC's share price fell 3.85% in the past month and is currently at the lower-band of the 52-week range of USD 38.14 to USD 63.86. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 44.44. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 56.85. Considering the slight correction in the stock price, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 50.74, up 0.02% as of September 10, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.