A lens over 2 Resource Sector stocks – IFN, MLD

Infigen Energy (ASX: IFN)

Clean Energy supplier, Infigen declared a final distribution of 1 cent per stapled security for the second half of Fiscal 2019 ending 30 June 2019. The distribution is scheduled to be paid on 27 September 2019 to the shareholders present on IFN’s registry as on the record date of 28 June 2019.

The company also decided to offer a Distribution Reinvestment Plan (DRP), the pricing for which will reportedly be determined by the volume weighted average price. The last date for elections under DRP has been selected to 1 July 2019.

May 2019 Production: For May 2019, Infigen reported monthly production of 148 GWh, taking year-to-date production to 1,606 GWh from owned assets that include Infigen’s 7 operating wind farms. However, production at Lake Bonney 2 and 3 was reportedly curtailed by the network operator in order to allow unscheduled maintenance to be performed at South East Transformer Number 2, located near these wind farms. This maintenance has now been completed, told Infigen.

Infigen May 2019 monthly production (Source: Company Announcement)

Industry Overview: Infigen eyes a lot of dynamics in the energy market; however, it expects electricity spot markets continue to be volatile, with fundamentals remaining strong.

Given the scenario, the company plans to map out such a strategy for the future that is capable of adapting to emerging market dynamics and conditions. It further continues to pursue a capital allocation strategy to achieve its strategic objectives, which include preserving sufficient liquidity in the business, accessing new sources of energy to supply to the company’s growing customer base and obtaining the firming capacity to manage the risks, among others.

Future Outlook: The company focused on supplying clean energy solution from a combination of renewable energy generation and firming alternatives has been positive for both Fiscal 2019 and future. Infigen believes that energy market fundamentals will continue to evolve as Australia is shifting to a future of lower emissions where substantial amount of new electricity generation is required.

Infigen is positioned as Australia’s largest listed owner of wind power generation, which owns wind generation assets in New South Wales, South Australia and Western Australia. The company confirmed its contracted position, in short to medium term, to substantially support the continued delivery of reliable revenue outcomes.

As per the 1HFY19 report, the expected Fiscal 2019 portfolio-wide average bundled price range for production sold from Infigen’s owned assets is confirmed at $125-130/MWh. Also, Infigen projects its revenue to be further influenced by increased production volumes driven by the additional contribution from Bodangora WF and the sales of a greater proportion of electricity on a contracted basis.

The report read that Infigen is actively considering additional physical firming opportunities to support an expansion of contracted volumes, which will provide greater stability and less volatility to earnings. It also in talks with stakeholders to resolve the energy policy debate in due course.

Stock Performance: IFN stock price is trading at $0.460, down 1.075%, on 21 June 2019 (1:33 PM AEST). The stock’s price to earnings multiple stands at 11.070x with the company’s market capitalisation of $444.8 million.

Over the past 12 months, the stock has declined by 33.57% including a dip of 1.06% in the last three months.

Also Read: Infigen Energy acquires Smithfield OCGT to tap into stable energy markets

MACA Limited (ASX: MLD)

MACA Limited recently announced that it has increased a working capital facility of up to $12 million to publicly listed Blackham Resources Limited. This translates the extension of MACA’s interest in Blackham to 19.3% in the form of extended payment terms with facility payable by February 2020 under the surface mining contract.

In consideration for providing the working capital facility, MACA will reportedly be issued with 265 million shares in Blackham at $0.00906 per share being equal to the 5-day VWAP as at 14 June 2019.

Moreover, MACA informed that this extension of the working capital facility is separate to the $14.3 million secured loans provided by the company, against which Blackham continue to make repayments with the balance having reduced to $11.3 million as at 31 May 2019. Since this separate existing loan facility continues to reduce by $1 million every month, MACA expects its total exposure and cash flow for FY19 to remain unaffected. However, based on the terms of extension contract MACA eyes favourable cash inflow of ~20 million during Fiscal 2020.

Rationale of the Facility: The provision of the facility by MACA allows Blackham to improve its operational performance in 2H FY19 while providing valuable certainty for the mine development work to progress towards its sulphide expansion plan. The investment in mine development planned for March 2019 and June 2019 quarters is projected to realise benefits over the coming 6 months, stated Blackham.

The management believes that this extension of the facility has strengthened the relationship between Blackham and MACA to continually improve productivity and be in line for building a stable platform for Blackham’s transition to sulphide production in 2020. Further, it is worth noting that no interest is payable on the Working Capital Facility.

The company also announced that its program to reduce exposure to Beadell Resources in on track, which is forecasted to have a positive cash impact for MACA over the next 12 months.

1H19 Results: MACA delivered a half year net profit after tax attributable to members at December 2018 of $8.1 million, down 32% on the previous corresponding period. However, there has been a top-line growth of 14% to $324 million compared to 1HFY18.

MACA 1HFY19 results (Source: Company Announcement)

The Board declared a fully franked interim dividend of 2.0 cents per share. Operating cash flow for the period ending 31 December 2018 was $18.8 million. Further, MACA expects a significant unwinding of the working capital position and therefore increased cashflow from operations in the second half of the year.

Capital expenditure for the half year was $79.9 million relating to plant and equipment. The company expects to realise the benefit of this outlay over the coming years.

Stock Performance: MLD is trading at $0.950 on 21 June 2019 (3:06 PM AEST). The stock’s price to earnings multiple stands at 12.930x with a market capitalisation of $254.61 million.

Over the past 12 months, the stock has declined by 16.67% including a negative price change of 2.06% in the past three months.

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