Teranga Gold Corp

Teranga Gold Corp (TSX: TGZ) is a Canada-based gold mining company, which is in the business of exploring, producing, and selling of gold. The company carries its exploration activities in West Africa. 

Key highlights

Amalgamation with Endeavour Mining Corporation: Teranga Gold Corporation (TSX: TGZ) and Endeavour Mining Corporation (TSX: EDV) have entered into a definitive agreement in which Endeavour will acquire all of the issued and outstanding securities of Teranga by way of a Plan of Arrangement under the Canada Business Corporations Act. Existing Teranga and Endeavour shareholders will own approximately 34% and 66%, respectively, of the combined company. The combination creates a new top ten senior gold producer with an average annual production of more than1.5Moz per year with industry-low production costs.

There can be no assurance that the Proposal will ultimately result in a completed transaction. Teranga intends to provide updates if and when necessary in accordance with applicable securities laws.

Source: Company

Increasing production: The company has maintained one of the lowest cost profiles in the industry and the way they are pumping their output to the next levels, portraits that the group will be making healthy operating margins in upcoming quarters. The company shared guidance on the consolidated production of 533,000 (oz Au) per year from FY21 at the AISC of USD785/oz. 

Source: Company Filing

Financial overview of Q3 2020 (in U.S. dollars)

Source: Company Filing 

• In Q3 2020, the company reported revenue of USD192.6 million, increased by 169%, compared to USD71.4 million in the previous corresponding period due to a 105% increase in ounces sold and 33% increase in average realized prices of gold.

• The company posted a gross profit of USD77.0 million, increased by 348 %, compared to USD17.2 million in Q3 2019, mainly due to USD34.8 million contribution from Wahgnion, as well as initial mining and processing of high-grade Massawa material.

• In Q3 2020, the group reported complete turnaround as its consolidated net profit attributable to shareholders was USD9.2 million (USD0.05 earnings per share), compared to a net loss of USD9.7 million (USD0.09 loss per share) in Q3 2019. The increase was mainly due to higher gross profit of USD59.8 million.

Risks associated with investment

The Company’s financial performance is mostly dependent on gold prices, which directly affects their profitability and cash flow. The price of gold is subject to volatile price movements. It is affected by numerous factors, such as the strength of the US dollar, supply and demand, interest rates, and inflation rates, all of which are beyond the Company’s control.

Valuation Methodology (Illustrative): EV to EBITDA

(Note: All forecasted figures and peers have been taken from Thomson Reuters) 

Stock recommendation

The Company reported solid performance in the third quarter of FY20. The gold production was a record high at 104,773 ounces, increased 69% as compared to the same quarter of the previous financial year, with a strong cash position of USD57.3 million, free cash flows increased to USD37.2 million, all these factors give a glimpse of strong foundations led by the Company. Further, the recent amalgamation announcement would benefit the group in many ways in the coming years. Therefore, based on the above rationale and valuation, we have given a ‘Hold’ rating at the closing price of CAD 14.43 on November 17, 2020, with a single-digit upside potential. We have considered New Gold Inc, Iamgold Corp, Torex Gold Resources Inc etc. as the peer group for the comparison.

1-Year Price Chart (as on November 17, 2020). Source: Refinitiv (Thomson Reuters)

Docebo Inc.

Docebo Inc. (TSX: DCBO) offers cloud-based learning platform for both internal and external enterprise learning with real-time tracking of training results, optimizing time, and reducing costs associated with traditional learning methods.

Key Highlights:

• The company has successfully increased its subscription revenue over the period, which is a key positive. During Q3FY20, the company derived ~94% of its income from subscription revenue.                   

• The company’s revenue is not concentrated within the North American region, DCBO is making its mark across the EMEA region too. We believe, with the growing acceptability of cloud-based products, demand from the other regions are likely to increase, which would further support the company’s sales volume and global customer base.                                    

Segment Breakup (Source: Company Reports)

• The company caters to Customer relationship management (CRM) and Learning Management System (LMS) segments, which has tremendous prospects in the coming days.

Source: Company Reports

Q3FY20 Operational Highlights:

• DCBO reported solid revenue growth in Q3FY20. Revenue stood at USD 16.096 million, as compared to USD 10.586 million in the previous corresponding period. The growth was driven by new customers, as well as up-selling to existing customers. Average contract value per customer increased to ~USD 32, from ~USD 26, a year ago.
• Operating loss stood significantly lower at USD 0.654 million, from USD 3.083 million in the previous corresponding period. Research and development expense stood higher at USD 3.265 million, against USD 2.175 million in the previous corresponding period (pcp), primarily attributable to higher costs related to an increase in employees due to higher salaries and wages.

Quarterly Metrics (Source: Company Presentations)

• Net loss for the year Stood lower at USD 1.158 million, as compared to USD 3.742 million in pcp.
• The company ended the quarter with cash and cash equivalent of USD 60.835 million, while total assets stood at USD 88.738 million.

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks:  A significant portion of the group's revenue comes from subscription revenue. If the customers decide to discontinue their subscription, it might affect the group's performance.

Stock Recommendation: The stock of DCBO soared ~234% so far this year, as investors were leaning towards specialized IT names on account of growing demands for artificial intelligence, cloud infrastructure etc., as most of the businesses are adopting toward digitization and machine-learning-based products. The quarter witnessed a positive Adjusted EBITDA amounting CAD 0.6 million and nearly breakeven Free Cash Flow, which is impressive. During the quarter, the company posted the highest new logo sales and upsell performance in the company's history. The stock of DCBO appreciated ~155% in the last six-months and closed above its 50-days, 100-days and 200-days simple moving average (SMA). Hence, considering the current price movement, and higher demand for IT products, we recommend a 'Hold' rating on the stock at the closing market price of CAD 56.83 on November 17, 2020.

DCBO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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.