Dundee Precious Metals Inc.

Dundee Precious Metals Inc. is a Canada based mining company, which operates in the exploration of minerals like gold, copper etc. The Company has three mining properties at Chelopech, Ada Tepe and Tsumeb.

The Board of Directors announced a quarterly dividend of US$ 0.02 per common share, payable on June 30, 2020.

Q1FY20 Financial Highlights: DPM impresses with its first-quarter results and recorded the highest quarterly gold production reflecting a robust operating performance at Chelopech, Ada Tepe and Tsumeb mines. Revenue grew to US$ 151.70 million from US$ 85.34 million in Q1FY19. Gold sales stood at 68,254 ounces versus 39,559 ounces in the previous corresponding quarter at an average realized price of US$ 1,547 per ounce versus US$ 1,307 per ounce in Q1FY19. The Company reported a significant growth in free cash flow of US$ 49.17 million, as compared to US$ 10.02 million in the previous corresponding period. Earnings before income taxes stood at US$ 48.06 million, versus a loss of US$ 0.99 million in pcp. Net earnings stood at US$ 42.43 million, as compared to a net loss of US$ 1.80 million in Q1FY19.

Q1FY20 Income Statement Highlight (Source: Company Reports)

Guidance: The Company reaffirms its FY20 production guidance and expect total production within the range of 257,000 ounces to 299, 000 ounces of gold at all-in sustaining cost within US$ 700 per ounce to US$ 780 per ounce. Total capital expenditure is expected within the range of US$43 million to US$ 54 million. 

Valuation Methodology (Illustrative):  Price/ CF based Relative Valuation

Note: All forecasted figures and peers have been taken from Refinitiv (Thomson Reuters), NTM-Next Twelve Months

Stock Recommendation: The stock stood resilient and generated a return of ~60% in last one year, amidst a stiff correction across the broader market. The Company reported a minimal impact from COVID-19 reaffirmed its FY20 production guidance, which is encouraging. The Management provided its three-year guidance, wherein it expects a higher production level with the corresponding decline in all-in sustaining cost, which indicates a margin improvement and ensures decent cash flow growth in coming years. The Company derives a significant portion of its revenue from the sale of gold. We expect the gold price to remain elevated in the near term owing to the volatility in the other investment options. As a result, the group is expected to generate higher revenue in the near to medium term. Notably, the stock of DPM is quoting above its 200-days simple moving average (SMA) of CAD 5.29, indicates a long-term bullish trend. We have valued the stock using Price to Cash-flow based relative valuation approach and taken peers like Torex Gold Resources Inc (TSX: TXG), Alacer Gold Corp (TSX: ASR), Eldorado Gold Corp (TSX: ELD) etc. and arrived at a target price offering a lower double-digit upside potential (in % terms). Hence, we recommend a ‘Buy’ rating on the stock at the closing price of CAD 6.49 as on May 13, 2020.

DPM  One-Year Daily Price Chart, Source: Refinitiv (Thomson Reuters)

Calian Group Ltd

Calian Group Ltd (TSX: CGY) provides business and technology services to diversified industries such as space, communications, defence etc., in the public and private sector. The group operates through four segments viz Advanced Technologies, Health, Learning and Information Technology. The Company derives the majority of its revenue from Advanced Technologies and Health segments.

The group declared a quarterly dividend of CAD 0.28 per share, payable on May 26, 2020.

Q2FY20 Financial Highlights: CGY reported a stellar set of numbers, wherein the Company posted a 25% y-o-y growth in its top-line of CAD 104.49 million. The increment was primarily underpinned by a 60% organic growth from advanced technologies segment, positive effects from acquisitions and an improved performance from Information Technology, while a slight decline in Learning segment remained a drag. Gross profit soared to CAD 23.50 million from CAD 18.13 million in pcp, thanks to higher revenue. Adjusted EBITDA stood higher at CAD 10.19 million, as compared to CAD 6.56 million in pcp. Profit before income tax expense stood higher at CAD 7.42 million, as compared to CAD 5.36 million in Q2FY19, partially offset by higher selling and marketing along with an increase in general & administration and amortization expenses. The Company reported a net profit of CAD 5.27 million as compared to CAD 3.86 million in Q2FY19.

Q2FY20 Income Statement Highlights (Source: Company Reports)

Valuation Methodology (Illustrative):  Price/Earnings based Relative Valuation

Note: All forecasted figures and peers have been taken from Refinitiv (Thomson Reuters), NTM-Next Twelve Months

Stock Recommendation: The stock of CGY surged ~32% in last one year, amidst the volatility persists across the broader market due to COVID 19 pandemic. The performance of the Group remained resilient and witnessed the least impact from the ongoing disruption. Notably, the stock has created a long-term bullish trend and currently trading above its 200 days simple moving average (SMA) of CAD 38.64. The group has reaffirmed its guidance and expects FY20 revenue to be in the range of CAD 380 to CAD 410 million with the adjusted net profit in the range of CAD 20 million to CAD 22 million. The group has made two acquisitions during the quarter and expect to benefit from the synergies going forward. At the current market price, the stock offers a decent dividend yield of 2.5%. We have valued the stock using Price/Earnings based relative valuation approach and taken Industry (professional & Commercial Services) Average multiple on NTM basis and arrived at a target price offering a low double-digit upside potential (in % terms). Hence, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of CAD 44.91 as on May 13, 2020.

CGY One-Year Daily Price Chart, Source: Refinitiv (Thomson Reuters)

Disclaimer

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