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MarketScreener Homepage  >  Equities  >  Australian Stock Exchange  >  Regis Resources Limited    RRL   AU000000RRL8

REGIS RESOURCES LIMITED

(RRL)
  Report
End-of-day quote. End-of-day quote Australian Stock Exchange - 04/09
3.97 AUD   +1.53%
03/23REGIS RESOURCES LIMITED : A trend reversal can be anticipated
03/12REGIS RESOURCES LIMITED : - Director Appointment
AQ
03/02REGIS RESOURCES LIMITED : Ex-dividend day for interim dividend
FA
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Regis Resources Limited : Not a typical gold company

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03/12/2020 | 09:22am EDT

Australia-based Regis Resources stands out as a rare bird among gold miners.

The company already distributes a 4% yield and the latter should increase as expansion plans materialize.

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Naturally, a bet on a commodity producer should be approached as a leveraged bet on the price of the underlying commodity. For the record, metals extraction, like oil drilling, has always been a difficult business: capital intensive, barely (if ever) profitable over the long cycle, and subject to the vagaries of volatile economic and political conjunctures.

Readers will recall how, in the wake of the financial crisis, gold — at the time subject to a short-lived but feverish speculative bubble — was seen as a safe heaven, as well as a fitting hedge against the vicissitudes of the "accommodative" — i.e inflationary — monetary policies of central banks.

Yet, despite successive rate cuts and quantitative easings, inflation has remained desperately anemic. As a result, the price of gold languished, while repeated frauds among junior producers, dubious acquisitions and outrageous compensation schemes have — until recently — kept investors at bay.

Things have started to change, however, with solid tailwinds — fiscal indiscipline in the U.S., overheated capital markets, etc. — supporting gold price. As a result, the once climbed to a new 8-years record, hitting $1,600. That trend could last.

In this context, mid-sized producer Regis Resources sports a AUD $2bn market capitalization and distinguishes itself by three distinctive features: a spectacular but self-funded track record of growth; a fortress balance sheet, carrying excess cash of AUD $100mil; and finally, the ability to extract gold for a lower cost than most competitors.

It is odd to find a commodity producer that shuns capital market and funds its own endeavors — but Regis comes across as such kind of rare bird. Profitable over the full cycle in spite of a depressed gold price, the company generated sizable cash earnings which enabled it to expand its reserves without tapping lenders, as well as distributing generous dividends to shareholders as production grew.

With 4 million onces in proven and economic reserves, plus 4 other million onces as probable resources, Regis maintains a tight focus on the Duketon Belt, where bountiful deposits were found a decade ago. The four mines it operates — Rosemont, Moolart Well, Garden Well and Dogbolter — collectively produced 360,000 onces last year.

All-in sustaining cost — extraction cash cost plus maintenance capex to sustain reserves — amounts to AUD $1,230, or USD $800, a top tier performance not many peers are able to match. This is because 90% of Regis' production takes place in open pit mines, where extraction costs remain lower than in underground mines.

With the price of an ounce at USD $1,660, Regis realizes a cash netback before taxes, corporate costs and growth capex of USD $860 per ounce, or AUD $1,320. Since management anticipates production to reach 340,000 to 370,000 ounces in 2020, Regis would — using the lower estimate — earn AUD $450 million this year, i.e a fifth of its current enterprise value.

Should the price of gold decline by 25% to reach USD $1,245 per ounce, Regis' netback would come out at USD $445 per ounce, for consolidated earnings before taxes, corporate costs and growth capex of about AUD 230 million, i.e a ninth of its current enterprise value.

All these hypotheses remain adjustable at will, for everyone to stress-test their own models as they please.

In New South Wales, the company develops the McPhillamys deposit and expects a yearly production comprised between 150,000 and 200,000 ounces. Using the same hypotheses as those laid out above, the latter would amount to consolidated earnings of about AUD $100 million per year.

There's every reason to believe in this call option, for Regis already doubled its reserves following exploration of the site.

In terms of valuation, the company trades for a very affordable multiple of its consolidated profits — provided that gold price climbs or stays at current level — in particular if production begins at McPhillamys. Using net asset value and counting all probable resources for zero, the 4 million ounces in "proven and economic" reserves should be worth at least $ 5.3 billions (ounces x cash netback per ounce), with all liabilities covered by cash and equivalents.

These positive developments have led analysts — whose consensus is surveyed in real time by MarketScreener — to raise their ratings and expectations. It is in order to ride such momentum that we've added the stock to our Asian portfolio.

Stocks mentioned in the article
ChangeLast1st jan.
GOLD 2.11% 1681.8 Delayed Quote.8.66%
REGIS RESOURCES LIMITED 1.53% 3.97 End-of-day quote.2.58%

The editorial team
© MarketScreener.com 2020
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Latest news on REGIS RESOURCES LIMITED
03/12REGIS RESOURCES LIMITED : - Director Appointment
AQ
03/02REGIS RESOURCES LIMITED : Ex-dividend day for interim dividend
FA
02/26ALERT : New purchases in the MarketScreener's Portfolios
02/17REGIS RESOURCES LIMITED : - Financial Results and Interim Dividend Declaration f..
AQ
02/14REGIS RESOURCES LIMITED : - Half Year Results Conference Call
AQ
2019REGIS RESOURCES LIMITED : - Appointment of Chief Operating Officer
AQ
2019REGIS RESOURCES LIMITED : - Results of Annual General Meeting
AQ
2019REGIS RESOURCES LIMITED : - Director Appointment
AQ
2019REGIS RESOURCES LIMITED : Ex-dividend day for final dividend
FA
2019DUKETON MINING LIMITED : - Sale of Gold Tenement Package to Regis for A$25M
AQ
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Size 2020e 2021e
Capitalization 2 017 M AUD -
Entreprise Value (EV) 1 793 M AUD 1 698 M AUD
Valuation 2020e 2021e
P/E ratio (Price / EPS) 8,86x 7,91x
Capitalization / Revenue 2,53x 2,28x
EV / Revenue 2,25x 2,03x
EV / EBITDA 4,37x 3,83x
Yield (DPS / Price) 4,53% 5,07%
Price to book (Price / BVPS) 2,34x 1,96x
Profitability 2020e 2021e
Operating Margin (EBIT / Sales) 39,6% 41,1%
Operating Leverage (Delta EBIT / Delta Sales) 1,59x 1,38x
Net Margin (Net Profit / Revenue) 28,0% 29,1%
ROA (Net Profit / Asset) 20,3% 20,3%
ROE (Net Profit / Equities) 28,9% 27,2%
Rate of Dividend 40,2% 40,1%
Balance Sheet Analysis 2020e 2021e
CAPEX / Sales   22,3% 14,3%
Cash Flow / Sales 41,3% 39,7%
Capital Intensity (Assets / Sales) 1,38x 1,43x
Financial Leverage (Net Debt / EBITDA) - -
Income Statement Evolution
EPS & Dividend
EPS Revisions
Revenue Revisions
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 13
Average target price 4,78  AUD
Last Close Price 3,97  AUD
Spread / Highest target 49,9%
Spread / Average Target 20,5%
Spread / Lowest Target -9,32%
Consensus revision (last 18 months)