15.08.14 - 11:27 Uhr
Centamin (Price: 69.9p | Target: 70.0p | Rec: Hold)

Centamin’s 1H14A results were nothing special, below our expectations across most measures other than the dividend. That said, operations are now gaining momentum and we expect improving performance quarter by quarter through the remainder of FY14E and into FY15E. The company is still maintaining FY14 guidance for 420koz at cash costs of $700/oz putting itself under pressure to deliver 264koz in 2H, but is confident of increasing volumes and underground grades. We maintain our Hold rating.

* Centamin delivered EBITDA of $66.9m (Investec $72.4m) and EPS of 2.85cps (3.60cps) with a maiden dividend of 0.87cps (Investec 0.50cps). Cash and saleable assets at the end of period totalled $133m (vs. $139m at end-March), which should now form the base of the net cash position. On the weaker 1H14A and higher-than-expected D&A rates going ahead, our FY14-16E EPS has come down by an average of 12%; PER multiples remain comfortable.
* We are slightly more cautious than Centamin, in expecting FY14E production of 405koz at $712/oz, but then increasing to 460koz in FY15E, assuming the company receives permission to use more explosives, with government approval reportedly in the final stages.
* Centamin sits firmly in that desirable investor space of having a good balance sheet, low operating costs, no major capital requirements and growing free cash generation, i.e. it is resilient, self-funding and capable of paying returns to shareholders. Therefore, while we believe the company to be fully priced at the current gold price trading range (c.1,300/oz), we are reluctant to move away from our Hold recommendation given escalating global political tensions (Ukraine, Middle East) and the potential for a run in the gold price. Our TP (based on NPV at $1,300/oz and a blend of three-year earnings multiples) has increased on the roll forward of our NPV-based model.

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Analyst: Hunter Hillcoat +44 (0)20 7597 5182

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