VSA Capital Market Movers – Central Asian Metals


The company’s free cash flow measure of US $ 48.9 million in the first half of 2021, from which the dividend is calculated, increased 131% year-on-year, resulting in an increase of 42% from interim dividend from last year at 8p / sh. With such a large cash generation, the company has also chosen to repay an additional $ 10 million in debt this year, which means the Traxys facility will be repaid earlier in 2022F.

Central Asia Metals #: H1 2021 half-year results

Commodity prices are strong in the first half of the year

Central Asia Metals () reported strong interim results, as copper, lead and zinc prices increased their gains by 21%, 11% and 12% year-to-date. In the first half of 2021, revenue of US $ 101 million increased 42% year-on-year, EBITDA of US $ 64 million increased 52% year-on-year and EBITDA margin increased from 5 pp to 61%. Without other significant charges, net income increased 69% year-over-year to $ 42 million. After bringing our raw material price assumptions to market, our estimates are broadly unchanged meaning CAML remains on track for a record year of earnings supported by consistently high prices and stronger metals production in the second. semester in Kounrad and Sasa following the reiteration of forecasts.

Generating cash flow prepares the business for the next phase

The company’s free cash flow measure of US $ 48.9 million in the first half of 2021, from which the dividend is calculated, increased 131% year-on-year, resulting in an increase of 42% from interim dividend from last year at 8p / sh. With such a large cash generation, the company has also chosen to repay an additional $ 10 million in debt this year, which means the Traxys facility will be repaid earlier in 2022F.

We therefore expect net cash of US $ 90 million by the end of 2022F. The company has demonstrated progress in its business development activities and with such a strong balance sheet, we see great flexibility for the company as it seeks to execute its growth strategy. With the mining cycle at the start of a recovery, we expect the number of opportunities to increase.

In addition, CAML has also advanced renewable energy potential on both assets with an agreement reached in Sasa and progress in Kounrad for the use of solar energy. This has the potential to have both economic benefits and to strengthen the company’s credentials as a sustainable producer of metals.

Recommendation and target price

The dividend and results sparked a strong initial positive reaction with the stock price rising 7% on the day, however, the market volatility that followed erased the gains and the stock is deeply undervalued. and is trading at 3.9x EV / EBITDA, in our opinion, especially with a record earnings in sight.

We reiterate our buy recommendation and our price target of 325p, which implies a 41% hike and a total return of 47%.

Oliver O’Donnell, CFA, Natural Resources Analyst | T: +44 (0) 20 3617 5180 | E: [email protected]

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