fy2014 forecasts fundamantals

Ok, so I could build a really complicated model but for a mere mortal basic numbers for the FY2014 are basically all I need to look at NCM. I'm not interested in reserves (other than knowing they have heaps of them and a long mine life, which they do).

Like any business its all about profit and balance sheet, are they growing profits and if I buy what is the expected DIV return or expected capital growth

Basic background
NCM is an unhedged miner, so its a PRICE TAKER, so if the prices expand in a way that profits expand, in theory great for share price,,, inversely , if the prices contract, then even with the best people and assets, the share price will fall as EPS fall.
Approx 766M shares on issue

FY 2013
Massive write offs in done
Production lower than year before
5 year plan out window...no 3M or 3.5 M produced as once dreamed about
Costs ways higher than forecast last year and over the last 5 years
All in sustaining costs 1283AUD/OZ for the group
Credit ratings downgrades, not far off junk
Took on Billions in USD debt and increased gearing significantly despite thinking they wouldn't need
Production downgrades through the year, like the previous
EPS fell significantly as did the share price
Underlying earnings after write downs $451M
Final Div cancelled

Moving Forward

FY 2014
Guidance 2M-2.3M OZ , targeting reliable , consistent production after missing its own plans for years

Targeting all in sustaining costs $1200AUD , IE a reduction of 83/OZ AUD by firing people, better technology, better grades, firing workers, pay freezes for executives

Group Cash flow positive at $1450AUD POG , this is important, IMO , with its poor credit rating, high debt, if it isn't free cash flow positive it isn't going to reinstate dividend, the banks are not operating in a 2007 environment

FY2014 Base Case Company Numbers
Production 2-2.3M OZ
All in Sustaining Costs (AIC)targeting 1200/ AUD/OZ
Forecasts based on $1400USD GOLD PRICE
Copper 3.3/ USD/ P
Silver price 22/USD/OZ
FX rate 96 cents to USD
OIL PRICE WTI 95 USD/BOO

So those numbers needs to be the averages for the year for NCM to make its own forecasts, but as its unhedged and a price taker, fluctuations in those base numbers can affect its EBIT.......

NCM FY 2014 price sensitivities table below, if you punch todays prices in there, you can see that if the prices remained the same there would be a big impact on EBIT earnings on its own forecasts of -$164,120,000AUD......

todays numbers, sensitivity example of potential changes to EBIT

that is caused by GOLD 1400USd being below its forecasts, copper being the same, silver being a bit lower than forecasts, FX AUD being good 1.5cents below forecasts, Oil being way above......

So one can see, its not simply about the change in Gold price, other things like FX or changes in oil can really affect potential profits

FY 2014 Targets
We know from their announcements
Group free cashflow positive at 1450AUD is their budget
All in costs,,,last year 1283AUD ,but targeting $1200AUD/OZ
Production 2-2.3M OZ
FY 2013 profit to beat - underlying 451M AUD

So a simple EBIT AUD model based on the following assumptions

1 They achieve their production forecasts
2 They achieve a reduction in all in costs to produce across the group at $1200 AUD/OZ

(before any application of some of price sensitivities) based on todays GOLD price in AUD)

so before any sensitivities are deducted, before interest on its pile of debt, assuming it reaches the top end of guidance for the first time in years, EBIT is forecasts at 460M, so underlying in reality would be less than the 451M FY 2013 in the current environment..........

Add a few sensitivities in their for oil price, copper, silver and NCM isn't looking like its going to do better than last year......

Most importantly, its not cashflow positive in the current environment, so reinstatement of the DIV not on the agenda imo.

In relation to debt, that is in USD, done above parity so as the AUD falls , the cost of servicing the debt increases and the negative affects on cashflow are obvious...

EPS - PE ratio
Ok below is another super basic back of envelope look at EPS forecast based on todays numbers, and before interest etc,,,so in reality PE would actually be higher if these numbers pan out, but lets take a look anyway

Conclusion, at $12 ,it appears to be priced for big growth when the basic numbers (based on current prices) don't actually reconcile to a PE of 20-23 (which are mins)

Good luck, just another way of looking at it, rather than waking up and saying buy or sell based on a simple change in the Gold price