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POG at USD1200. What is MML IV?, page-7

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DSD

15,975 Posts.

69

08/02/16

19:03

Post #: 16970005
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Originally posted by CPDLC ↑

DSD,

There are all manner of measures that can be used to try and place a valuation. However, I will just use a sub-set below that inform my own view.

Earnings:
We will get the first half financials later in the month. In the meantime here is my personal assessment.

On the assumption that D&A will be at c. 50% of FY2015 levels due to the impairment and that tax will be at the full 30% rate, I estimate 1H16 EPS at c. 14.5c (trailing 12 months 29c). At US$1,200 gold I estimate 2H16 EPS at c. 19c, so full year FY16 will come in at c. 33c (all other things being equal). At the current SP of 47c that puts MML on a current market multiple (P/E) of 1.6x and at a 5 month forward P/E of 1.4x. Given that this is a profitable gold producer in a growth phase, these market multiples are way too low compared to many of it's global peers (note: see the Matlock table for small-cap goldies on **promotion blocked**. Current average P/E is 18.6x !).

Cash:
Current MktCap (MC) = US$69.1m
Cash at 31/12/15 = US$16m (ie. cash makes up 23% of MC)
Estimated cash on 30/6/16 c. US$26.5m (ie 38% of current MC).
Probable projection to 30/6/17 c. 80-90% of current MC at current production levels and US$1200 gold.

So the producing Co-O mine is being valued (by the market) at a steadily diminishing rate!!
Worth noting that 1.14m oz of resources at Bananghilig, 15.7k oz at Saugon, plus Guinhalinan and the other prospects in the license portfolio are in for free! How many exploration projects with a JORC of over 1m oz are valued by the market at zero?

Sentiment:
I thought it worth comparing the FY15 numbers with MML's FY10 numbers, given that the average PoG was US$1,100 over FY10. So here are a few comparisons (the FY10 figures are in brackets).

FY15 ... (FY10)
MC = US$123.4m (US$662.6m) and note that current MC is even less, ie US$69.1m
Ev/OPCF = 1.8x (16x)
OPCF = US$64.5m (US$38.7m)
Gold sold = 97.2k (64k)
OP profit/oz = US$664 (US$605)
FCF = US$4.3m (US$4.1m)
P/E = 3x (10x)
Prod growth = 47% (29%)
Ev/Sales = 1x (8.9x)
Price/Book = 0.64x ((3.78x)

There are lots of other ratios I could use, but that is probably enough. The point I am trying to make is that the same company was valued so much higher in a gold bull market (ie 2010) whereas, at this point of the cycle for gold, the company is plainly given a really lowly market multiple even though it's FY15 figures are so much better than they were in 2010. ....... Madness of crowds perhaps ?

Just my personal views of course.
CPDLC

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As we've grown used to, an outstanding assessment from CPDLC. many thanks. His entire post is a must read for readers seeking a gold producer well below IV. But I'll repeat just one line:
"At the current SP of 47c that puts MML on a current market multiple (P/E) of 1.6x and at a 5 month forward P/E of 1.4x."

MML Price at posting: 51.0¢ Sentiment: Buy Disclosure: Held
4 Upvote

0 Great analysis

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POG at USD1200. What is MML IV?, page-7

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