B2Gold Corp. (TSX: BTO) is a gold mining company, which operates in mines and numerous exploration projects and have a presence across four continents in various countries, like Nicaragua, the Philippines, Namibia, Mali, and Burkina Faso. 

Key Updates:

• Fall in cash from operations: In Q1FY22, the company reported a lower cash from operations of USD 107.3 million, compared to USD 145.8 million in pcp. This is primarily due to a lower net income reported during the quarter. This might dampen the overall liquidity position of the company.
  

• Lengthy Cash cycle days: In Q1FY22, the company reported its cash conversion period of 128.9 days, significantly higher than the industry median of 54.2 days. This indicates that the company takes higher time to convert its investments to cash flows, which remains a key concern for the group.
  

• Lower profitability margins on Q-O-Q basis: In Q1FY22, the company reported gross margin and EBITDA margin of 38.2% and 53.4%, respectively, lowered from 47.1% and 64.9%, respectively, in Q4FY21. This indicates weak cost management and poor operational efficiency. Net margin also fell to 24.8% in Q1FY22 from 29.1% in Q4FY21.

  Valuation Methodology (Illustrative): Price to CF based

Analysis by Kalkine Group 

Stock Recommendation:

Despite an improved revenue of USD 365.5 million in Q1FY22 v/s USD 362.3 million in pcp, the company failed to retain the momentum and posted a lower net income of USD 90.8 million in Q1FY22, v/s USD 98.8 million in pcp. This is primarily due to a surge in the production costs and higher general & administrative costs during the period. Continuation of the above trend might weigh high on the company’s profitability and cash flow.

We have valued the stock using the Price to CF-based relative valuation approach and arrived at a target price offering double-digit downside potential (in % terms). We have considered peers like Dundee Precious Metals Inc, Kinross Gold Corp etc. Hence considering the aforesaid facts, we recommend a ‘Sell’ rating on the stock at the last closing price of CAD 5.01 on June 09, 2022.

One-Year Technical Price Chart (as of June 09, 2022). Analysis by Kalkine Group

The reference data has been partly sourced from REFINITV

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