Inside the Market’s roundup of some of today’s key analyst actions
Canaccord Genuity analyst Carey MacRury raised his 12-month price target on Teranga Gold Corp. to $11.50 from $9.00 and maintained a “buy” recommendation on the stock, reiterating that it is one of his top picks among junior/intermediate gold producers.
Teranga concluded the equity financing to acquire a 90 per cent stake in Senegal’s Massawa Gold Project from Barrick Gold Corp. (the deal was announced on Dec. 10). The acquisition will give Teranga access to high-grade gold that will boost reserves and lower the company’s overall cost of production (on a per ounce basis) at its existing Sabodala mill. The deal that should close in the first quarter of 2020.
Mr. MacRury said that AISC (all-in sustainable costs) will decline to about US$843 per ounce, down from US$1,092 per ounce, for a 23 per cent reduction.
“Teranga is targeting to process first ore from Massawa in the second half of 2020, but conservatively we have modelled production starting in 2021 with the exploitation license outstanding (a condition of closing) and given time required to complete the road and strip waste from the initial pits,” the analyst said.
His new target for the stock price is based on improving financial performance with the acquisition. He raised his estimates for EBITDA (earnings before interest, taxes, depreciation and amortization) and free cash flow (both on a per share basis) for 2021-2022 by 10 to 30 per cent, with even bigger gains after 2023 -- “as high grade Massawa ore offsets our previous forecast of declining grades at Sabodala,” he said.
“We now forecast consolidated production nearing 500,000 oz by 2023 (from about 375,000 oz previously) and from 278,000 oz in 2019, positioning Teranga into the mid-tier producer range with further upside potential as Golden Hill advances,” Mr. MacRury said.
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Nike Inc. reported its quarterly financial results on Thursday, showing sales for the U.S. sportswear giant increased 10 per cent globally and profit increased to US70 cents per share beating estimates of US58 cents per share. The stock fell about 2 per cent in after hours trading, but Citigroup analyst Paul Lejuez maintained a “buy” recommendation on the stock and raised his 12-month price target to US$115 from US$103 previously.
“While China was the only region where growth decelerated this quarter (+23 per cent versus +27% in in the first quarter), growth accelerated on a 2-year stack, underscoring the strength of the Nike brand in China (its largest growth opportunity),” Mr. Lejuez said.
He added that fiscal second quarter gross margins, which increased 20 basis points (there are 100 basis points in a percentage point), were a bit disappointing, as was the flat guidance for margins in the third quarter. But he thinks that the headwinds affecting margins – mostly foreign exchange rates and tariffs – are transitory.
“Headwinds should begin to roll-off starting in the fourth quarter, setting Nike up for a big gross margin inflection in fiscal 2021 in addition to what is already a very strong top line,” Mr. Lejuez said.
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More to come
David Berman