Stock: SBM AU Name: St Barbara Price: A$1.31 (At 05:10, 20...

Stock:
SBM AU

Name:
St Barbara

Price:
A$1.31 (At 05:10, 20 October 2015 GMT)

Recommendation:
Outperform

12mth price target:
A$1.80

12-month TSR:
37.4%

Market Cap (m):
A$649

Market Cap (m):
US$471

Current valuation (DCF):
A$1.83
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Event
· Having reported preliminary gold production earlier in the month, SBM’s September quarter was in line with our expectation.
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Impact
· Another strong quarter from Leonora. SBM’s Leonora operations performed strongly, producing 81,500oz of gold. Gwalia produced 72,388oz at a cash cost of $518/oz and an AISC of $692/oz, 17% and 9% better than we forecast. King of the Hill contributed 9,112oz from remnant stockpiles at an all–in cost of $964/oz. KOTH and the Kailis deposits were divested during the quarter for $3m.
· Simberi backs up its strong June quarter. Simberi delivered its second consecutive quarter above its planned run rate. The mine delivered 29,539oz at a cash cost of $1,072/oz and AISC of $1,252/oz, in line with our forecasts. We note that there was a major shutdown during the quarter to allow further work on the ore delivery system and plant resulting in higher levels of trucking.
· FY16 guidance upgraded. SBM has upgraded the lower end of its guidance range at Gwalia by 10,000oz to 230koz. The upper range of guidance is unchanged at 250koz. Group guidance is now 329koz to 369koz at an AISC of $995/oz to $1,070/oz. In our view there is a strong likelihood that Gwalia will exceed its guidance.
· Exploration continues to deliver at Gwalia. The Gwalia Deep drilling programme continues to define the mine sequence below the 1,800 level. Drill hole GWDD13H intersected all three target lodes; interestingly the best intersect came from the West Lode with 5.9m at 8.5g/t at 1,927mbs. Underground drilling targeting the West Lode in the current reserve area also returned encouraging results, including 10.6m at 5.1g/ and 1.9m at 41.5g/t.
· Strong financial performance. Gwalia generated $68m in operating cash flow with Simberi also delivering positive cash. SBM repurchased a further US$13m of notes and made its first $9m repayment of the Red Kite facility. Cash balance increased $38m to $115m.
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Action and recommendation
· Outperform. A strong quarterly production performance that delivered a strong financial result. We expect Gwalia to continue to be the engine room of the company with improvements to Simberi offering potential upside.
June

2015A
2016E
2017E
2018E

Revenue
m
548.2
610.5
646.1
647.6

EBIT
m
95.2
215.1
272.6
261.4

Adjusted profit
m
52.4
136.2
183.5
187.2

Gross cashflow
m
145.2
205.3
246.6
250.7

Capex
m
47.4
45.5
38.4
164.3

CFPS
¢
29.0
41.0
49.3
50.1

CFPS growth
%
220.8
41.4
20.1
1.6

PGCFPS
x
4.5
3.2
2.7
2.6

EPS adj
¢
10.5
27.2
36.6
37.4

EPS adj growth
%
159.8
34.7
2.1

PER adj
x
12.5
4.8
3.6
3.5

Total DPS
¢
0.0
0.0
0.0
0.0

Total div yield
%
0.0
0.0
0.0
0.0

Franking
%

ROA
%
15.8
32.6
32.7
27.6

ROE
%
38.5
65.3
49.8
33.8

EV/EBIT
x
9.6
4.3
3.4
3.5

EV/EBITA
x
8.9
4.1
3.2
3.4

EV/EBITDA
x
4.9
3.2
2.7
2.8

Net debt/equity
%
192.3
8.2
-54.0
-51.8

ND/ND & equity
%
65.8
7.6
-117.2
-107.3

P/BV
x
4.7
2.4
1.4
1.0

*All values are in AUD unless otherwise stated.

Source: Company data, Macquarie Research, Oct 2015.

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