Ord Minnett broker report on A1M, via ASX (my bolds).
We recently attended a site trip to Eloise with A1M Management and investors. This follows-on from a similar trip we did a year ago. Since our last trip, A1M has acquired DRM (and Jericho) which provides the Company with the mineral inventory scale (now ~137kt Cu) and exploration potential to justify an expansion (OMLe: +20kt Cu by FY27) in our view. Furthermore, A1M have simultaneously made significant organic improvements at Eloise (e.g. fleet upgrades, Macy North development, Lens 6 discovery) which gives us confidence that the operation is trending in the right direction. Despite these improvements, A1M is cheaper today (OMLe: 0.7x P/NAV) than it was when we initiated 10 months ago (OMLe 1.1x P/NAV). This suggests to us that current trading levels provides a good entry point for investors seeking leveraged copper exposure with the inherent discount to unwind as the Company delivers to guidance.
In our view, A1M remains well-positioned for outperformance, based on several factors. Firstly, we believe there will be catalysts over the next 3-6 months (mainly quarterly delivery) that will give investors greater conviction around mine life and the future production profile. Secondly, the Company retains an extensive exploration package which sits largely outside our base case valuation. As these are drilled, we anticipate the Company can improve their production profile. Lastly, we believe the pull-back over the last year does not correspond with the improved outlook. The stock is trading at a discount to its intrinsic valuation, at a time when many of the larger cap names in the space could be considered expensive. A1M is not a ‘household name’, and while we accept there is greater risk ownership of small-cap stocks such as this, the balance sheet (~A$40m cash by June 30, 2023) and dearth of alternative copper options help to cap the downside, while the upside, we believe, is significant. On our estimates, current trading reflects a ~25% discount of the outlook of Eloise, or ~US$3.40/Ib Cu prices into perpetuity (vs spot ~US$3.70/Ib)
Retain Spec. Buy Recommendation with a A$0.70/sh Target Price (~79% TSR).
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