2 Names under spotlight - WSA, LYC

  • Sep 13, 2018 AEST
  • Team Kalkine
2 Names under spotlight - WSA, LYC

Western Areas Limited

Western Areas Limited (ASX: WSA) is an Australian-based nickel sulphide explorer and producer. The stock price of WSA has been increased by 3.879% on 13 September 2018, despite having a dividend ex-date today. The company is having a PE Ratio of 53.46x and an annual dividend yield of 0.86%. The stock price of WSA has declined from A$3.64 to A$2.320 in the past three months. The company is having A$ 0.043 earnings per share.

As at 30 June 2018, the group had a cash reserve of A$151.6 million with zero Debt. EBITDA margin of WSA has been increased by 960 bps from 24.2% in 2017 to 33.8% in 2018. A fully franked final dividend of 2.0 cents per share has been declared. In the second half of 2018, the company was having a free cash flow of A$ 19.1 million. The prices of nickel also increased which resulted in an increase in the EBITDA and NPAT. There were deferrals implemented in 2017 due to which the capital expenditure of 2018 has been increased. The underlying NPA has also improved by A$ 23.4 million. Due to movement in working capital, the Cash flow from operations is increased by A$ 10.8 million. As the company has generated strong cash flow, the group is in well position to fund and complete several organic growth projects. Although, the company is planning to increase the expenditure on exploration in FY 2019, it will be focusing on ramping up of production volumes. MREP volume is forecasted to contribute 300-400 nickel tonnes. 

The stock traded at $2.410 with the market capitalization of circa $634.49 Mn as of September 13, 2018.

Lynas Corporation Limited

Lynas Corporation Limited (LYC) explores, manufactures, processes and mines earth’s rare minerals. It is an integrated source of rare earth minerals from mine to customer. Mt Weld rare earth deposits are the main asset of LYC. On the financial front, the earnings before interest and tax (EBIT) have been increased to $81 million in FY18 compared to an FY17 loss of 14.5 million. EBITDA also increased to $121.9m from $29.4 million. Revenue has gone up to $374.1m in 2018 from $257 million in 2017. There has been a positive cash flow of $118.5 million from operating activities. Lynas has reduced debt and increased EV by five times. In the year 2018, there was a significant improvement in the balance sheet as the company received its first statutory profit of $ 53.1m and first positive EBIT of $81.0m.

Due to the conversion of convertible bonds and repayment of JARE senior loans the total debt of the Lynas has been reduced from $425 million to $165.2 million. This year Lynas launched NEXT project a $ 35 million capacity building project and made a significant improvement in it. The company is expected to complete this project by the end of the year. In the year 2018, the company has increased its production and also strengthend its portfolio of customers in the market and recorded very high sales. Lynas’s high-grade Mt Weld mine in Western Australia is having a substantial increase in tonnage which has increased the company’s reputation as the world’s second-largest supplier of NdPr – used in electric vehicle magnetic motors. Outside China, Lynas is the only miner and processor of rare earth materials.

Meanwhile, the stock price has fallen 28.97 percent in the last three months as on 12 September 2018 and traded at reasonable PE of 20.25x. The stock traded at $1.835 with the market capitalization of circa $1.19 Bn as of September 13, 2018.

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