UBS Global Research 27 July 2018 OceanaGold Corporation Solid Q2...

UBS Global Research
27 July 2018
OceanaGold Corporation
Solid Q2 Result; rerating continues

12-month rating: Buy
12m price target: A$4.20
Price: A$3.91

UBS View: Buy – but recent re-rating to continue
Oceanagold has had a succession of positive updates which we think has driven a
rerating closer to peers. Despite this positive rerating – we think there may be further to
go. At ~1.2x P/NPV, we believe OGC still has good value vs the sector on 1.4x.
Permitting for Haile to access the high grade underground is a key catalyst which
should commence in 2018H2. We continue to watch this process closely, a delay could
risk long term upside expectations. OGC reiterated that permitting was to begin in mid
2018 – so is imminent. We think OGC's asset diversification, mine life, low costs,
improving balance sheet & potential rerating closer to peers demands attention.

The 2018H1 result was inline; but only after recent upgrades
The 2018H1 earnings, cashflow & net debt position was inline with our expectations.
While the result appears in line with our forecasts today, recall this is after the past
month where OGC has provided 1) a positive production update with production
ahead of our estimates and 2) upgraded 2018 production guidance.

Changes to our earnings estimates
These are pretty minor. We cut our D&A for FY18e which drives a 7% upgrade to
NPAT. Our FY19-20e earnings have some minor adjustments to costs. Our FY18e
earnings are based on production of 531koz vs guidance of 520-540koz. OGC have
been incrementally improving production against guidance/expectations. Their Q2
production continued that trend. They upgraded guidance on 19-Jun-18 from to 500-
540koz (was 480-530koz) & that now appears a tad conservative.

Valuation: $3.35ps (10% d.r.)
Our price target of A$4.20ps is set at 1.25x P/NPV to reflect the potential for a rerating
closer to ASX listed peers on 1.4x.