🕐20.05.13 - 10:27 Uhr

INVESTEC: CENTAMIN - CAPACITY TO DELIVER A CLASS-LEADING DIVIDEND YIELD - BUY




Centamin (Price: 39.6p | Target: Under review | Rec: Buy) CEY’s recent first quarter financial report indicates that the company has its operations and expansion program well under control, while it has at the same time been able to maintain a robust balance sheet, with no debt and $189m in liquid assets.

As its growth plans near completion, it can now look towards making some form of return to shareholders.

We believe that it should be able to comfortably deliver a 5% dividend yield, while still maintaining a “war chest” for corporate opportunities that present themselves in the current challenging gold price environment. * Gold equities have in recent times received a great deal of criticism for not delivering adequate shareholder returns in a time of (previously) elevated gold bullion prices.

Much of this criticism was underlined by an inability to meet production guidance and deliver on cost expectations.

While CEY was historically as guilty as the rest of its peer group, it has in the past 18 months been much more reliable, with its lacklustre share price performance related more to issues beyond its control, and lately to the fall in the bullion price. * With the market focussed on shareholder returns, we think CEY, which is well capitalised, with a long-life and low cost project, has the capacity to differentiate itself by offering a sector-leading dividend yield of 5%, while still retaining ample funds (+$100m) for M&A opportunities. * Our target price has been based on an equal blend of NPV and forward earnings multiples.

Readers should note that this TP and our forward earnings assumptions are under review, as we reassess our gold price assumptions in light of the recent highly volatile gold price environment.

This note, however, includes cash flow sensitivities at various gold prices that support the call for a relatively attractive dividend policy, which we believe could still be maintained at gold prices well below current spot of c.$1,400/oz..
To access the full note please click here Analyst: Hunter Hillcoat
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