Bell potter downgraded the stock to hold today, target of 60c.
Excerpt:
Demerger of gold assets still leaves plenty of long term upside
MLX is now a base metals company with current tin and copper operations and tin, copper and nickel-cobalt development projects that make it a base metals company to be reckoned with. In the absence of a proforma profit and loss statement or balance sheet for the company in its new format, we have estimated that MLX has net cash of about $40m currently and that although tin and copper prices are currently at a level that would see it operating comfortably in the black, we estimate that it is likely to report a small net loss for the first half of FY17. We are forecasting that MLX will make a small profit overall in FY17 but that it will make significant profits and generate strong operating cash flows in the following years that could enable it to resume dividend payments in FY18, depending upon the status of its attractive development projects, which give the company significant longer term upside.
Early post gold demerger trading starts surprisingly strongly
Early trading in MLX post the gold demerger was very strong, indicating investors liked the company’s new mix of assets, even though those assets did not seem to get much recognition when held by the pre-demerger company. This trading has important cost base implications. With tin and copper prices having recently risen to their highest levels in about two years, investors are clearly more willing to recognise the leverage this gives MLX as it is not only a significant producer of both metals, but has attractive development projects for them, along with the Wingellina nickel-cobalt deposit.
Investment thesis – Hold, TP $0.60/sh (Prev. Buy, $2.10)
MLX is now a base metal company with a good mix of current tin and copper operations and several potential development projects that could provide strong earnings and cash flow growth over the next few years when they have progressed to become meaningful operations. Our earnings forecasts and valuations have been updated for our estimates of the impact of the gold demerger and for the higher tin and copper prices of late and the expectation of stronger copper production at Nifty. This has resulted in significantly changed earnings and valuations after adjusting for the absence of the gold business. Our 12-month forward NPV-based target price is $0.60/share and we downgrade to a Hold recommendation on price consideration.
(20min delay)