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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (14809)	2/10/2002 8:10:56 PM
From: Moominoid	Read Replies (1) \| Respond to of 74559

Sons of Gwalia (SGW): Market Review: SGW has posted a poor performance over the past quarter, recording a 16.8% price movement for the period, against the All Resources Index return of 23.0%. Within SGW's industry grouping, Gold, the performance was again poor, with the industry sector recording a better 43.1% return. As a matter of interest, Climax Mining Ltd was the best performer within the sector over the last quarter, recording a 131.4% price rise in share price terms. Financial Results: SGW's last recorded result, for the full year period to 30 June, was an adjusted Net Profit After Tax of $63.7m. This was down 10.7% on last year's result, with $71.3m earned for FY00. Important aspects of the result included a 16.6% increase in sales to $428.9m, a 36.0% decrease to $7.0m in other revenues, a 64.7% increase in net interest costs of $-14.1m, an 11.6% increase in depreciation and amortisation cost of $47.8m and a tax rate of 26.4%. Other important points included a fall in the EBLITDA margin, at 34.6% against last year's 36.7%. Total assets increased by 34.5% to $732.9m, with net debt to equity of 51.9% against the previous corresponding period's 52.3%. Free cash-flow was stronger at $134.4m against $126.4m in FY00. View Point: InvestorWeb first featured gold and industrial minerals producer Sons of Gwalia as its Pick of the Day on March 1, 2000, recommending investors buy the stock under $4.60. Our contention back then was that "If investors need a technology angle to invest in a stock, SGW could possibly qualify by virtue of its status as the world’s largest producer of tantalum, a heavy metal used mainly in electronic components for mobile phones and laptop computers." Since then SGW has gone from strength to strength over the last twelve months touching a record high of $9.97 in May this year. More recently we have seen a shift in sentiment in SGW with the share price sinking as low as $7.28 (14/8/2001). The global economic downturn has seen spot tantalum price in Europe fall from US$60/lb to US$40l/b. The potential for ceramic and niobium substitutions have also placed further pressure on the SGW share price. Despite CEO Peter Lalor's bullish comment this morning regarding 6-8% growth in tantalum and long term contracts continuing to underwrite earnings InvestorWeb believe that the time has come to downgrade SGW from a buy to a Hold. Today's (15/8/2001) ninth consecutive increase in operating was impressive but going forward we are not as confident about SGW growth prospects and accordingly we have downgraded our Buy recommendation to Hold at current levels. ------------------------------------------------------------------------ Key Points: * Relatively High Forecast Yield of 3.1% in FY03 * Relatively High EPS Growth at 17.5%pa * Relatively Strong Return on Equity at 19.8% * Relatively High Return on Assets at 15.3% * Relatively Low Forecast PER Multiple * Lowly Geared, when measured by Debt to Equity Activities: SGW is primarily involved in gold mining and mineral exploration. Operations are conducted throughout Australia and Indonesia.