Blue Ocean notes strong first-quarter production from Regis
Published 17-JAN-2017 12:22 P.M.
2 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
Stuart McIntyre from Blue Ocean Equities was impressed with Regis Resources’ (ASX: RRL) December quarter production of circa 80,000 ounces, highlighting it was the strongest quarter in approximately two years, and with All in Sustaining Costs (AISC) margins for the quarter being a healthy $786 per ounce or 46% of the company’s sale price of $1719 per ounce the company represented good value.
In fact, even after yesterday’s rally from the previous day’s close of $3.07 to a high of $3.21, before closing at $3.14, the company represents compelling value relative to Blue Ocean’s projections.
The broker has a buy recommendation on the stock with a price target of $4.50. Based on McIntyre’s projections for the coming two years, net profit is forecast to increase from $115 million in fiscal 2017 to $177 million in 2018 with the latter implying earnings per share of 34.7 cents.
It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.
This places Regis on a fiscal 2018 PE multiple of approximately 9. However, it is the company’s superior growth profile that makes the company’s PE multiple look surprisingly cheap relative to its peers.
Paying nine times fiscal 2018 earnings for a company that is forecast to generate compound annual earnings per share growth of more than 30% between fiscal 2017 and 2020 makes Regis one of the most compelling stocks in the sector on a price-earnings to growth basis (PEG).
Combine this with the fact that it is one of few mining stocks to pay robust dividends and it is easy to understand McIntyre’s attraction towards the stock. He is forecasting a fiscal 2017 dividend of 14 cents, increasing to 21 cents in fiscal 2018, implying yields of 4.5% and 6.7% respectively.
Regis Resources’ dividends are fully franked, and McIntyre highlighted that the group had paid out $170 million in dividends since 2013. As at December 31 the company had circa $130 million in cash and bullion, leaving it well-placed to fund exploration activities while maintaining dividends.
On the score of exploration, McIntyre viewed exploration results achieved at Rosemont as particularly promising and he is of the view that there is the prospect for the establishment of an underground operation with near-term drilling results possibly confirming a high grade underground resource.
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.