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

To: Moominoid who wrote (14810)	2/10/2002 8:11:49 PM
From: Moominoid	Respond to of 74559

Newcrest (NCM.AX): Market Review: NCM has posted a strong performance over the past quarter, recording a 54.8% price movement for the period, against the All Resources Index return of 23.0%. Within NCM's industry grouping, Gold, the performance was again strong, with the industry sector recording a lower 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: NCM's last recorded result, for the full year period to 30 June, was an adjusted Net Profit After Tax of $38.2m. This was down 36.3% on last year's result, with $59.9m earned for FY00. Important aspects of the result included a 16.7% decrease in sales to $581.1m, a 1142.7% increase to $55.3m in other revenues, a 33.5% decrease in net interest costs of $-14.5m, a 21.0% decrease in depreciation and amortisation cost of $111.7m and a tax rate of 23.3%. Other important points included a fall in the EBLITDA margin, at 30.7% against last year's 36.5%. Total assets increased by 7.5% to $1,216.7m, with net debt to equity of 107.4% against the previous corresponding period's 119.1%. Free cash-flow was weaker at $163.7m against $232.4m in FY00. View Point: In August Newcrest disclosed that it would report an $44.3 million profit and at the same time announced that 40 institutional investors around the world will open up their wallets and invest another $138 million through a placement. In our opinion this injection of capital will go a long way to strengthening NCM's cash position and releasing some of its debt burden. InvestorWeb also believe that NCM's Telfer mine will also benefit from this cash injection. Newcrest has just finished spending $35 million on drilling and underground sampling at its wholly owned Telfer gold project in the north-west of Western Australia. Now Telfer would have to be the oldest and longest-surviving of the "new generation" of gold mines in Australia (that is, built in the last 30 years or so).This old warhorse mine depleted its then known gold reserves last year, having already produced 6 million ounces. As a result, the project was put into hibernation. The mine was closed (temporarily) while Newcrest’s exploration team got stuck into a drilling program totalling some 130,000 metres of holes. On the 15th August 2001, Newcrest announced that this massive drilling campaign had outlined a gold resource of 18 million ounces at Telfer. Through our reckoning, this is the third biggest gold resource in Australia. The only bigger gold deposits we can think of are the Super Pit at Kalgoorlie, with 30 million ounces, and the as-yet undeveloped Wandoo project with 20 million ounces. Despite some senior management changes and concerns regarding hedging exposure, InvestorWeb remain bullish on Newcrests long term prospects because of its large-scale, long-life mines at Cadia, Ridgeway and potentially Telfer and Wandoo. NCM is profitable, with other growth options at Cracow (Queensland), Gosowong (Indonesia) and Cadia Far East (New South Wales) and above all it is independently owned, so a possible takeover play as the world’s gold industry continues to rationalise. Most of all, we believe that Newcrest’s long-life operations will probably still be around when that long-awaited gold price rally finally does occur. In fact, Newcrest’s exploration program has been so successful, it is almost overflowing with long-life development options. Following the most recent result we have upgrade our recommendation from Hold to Buy at current levels. ------------------------------------------------------------------------ Key Points: * Above Average Forecast Yield of 0.9% in FY02 * Relatively High EPS Growth at 42.2%pa * Relatively Low Return on Equity at 8.7% * Relatively Poor Return on Assets at 5.7% * Expensive on Relative Forecast PER Multiples * Relatively Expensive when measured by EBITDA Multiple Activities: The company is primarily a gold and mineral sand-mining organisation, operating throughout Australia and Indonesia.