300 likes | 324 Views
Explore LionGold Corp Ltd, a gold investment holding company, with in-depth ratio analysis, valuation methods, industry outlook, and main risks assessment.
E N D
Lion Gold Corp Case Study Tan Weihan
Disclaimer and Declaration The objective of the presentation is for educational purposes. The full content of the presentation is for illustration purposes only and should not be used as investment recommendations. The presenter is not responsible for all investment activities conducted by the participants and cannot be held liable for any investment loss. The presenter may have personal interest in the particular shares presented.
Agenda 1 Company Background Industry Overview 2 3 Ratio Analysis Valuation 4 Risk 5
Company Background • LionGoldCorp Ltd is a Main Board SGX • listed investment holding company focused on gold mining, mine development and exploration. Primary gold interests are currently in Ghana and Australia.
Company Background Source: Company’s Presentation Slides
Company Background Source: Company’s Presentation Slides
Company Background Source: Company’s Presentation Slides
Business Model Revenue Breakdown for 2013 Source: Annual Report
Business Model Source: Company’s Presentation Slides
Business Model Source: Company’s Presentation Slides
Business Model Source: Company’s Presentation Slides
Business Model Source: Company’s Presentation Slides
Industry Outlook • Central Bank become Net Buyers of Gold Source: CPM Group
Industry Overview • Gold jewellery, bars, coin still in Demand Source: World Gold Council
Industry Overview • Gold Mining hits a Plateau Source: CPM Group
Industry Overview • Diminishing Margin Return for Gold Mining Source: Bloomberg. Barclay Research
Recent News • Liongold on course to achieve 40,000 to 50,000 production annual target Source: SGX Announcement
Ratio Analysis Did not generate returns for shareholders Solid cash balance with no default risk
Valuation • Methodology • Enterprise Value/Resource Comparison • Discounted Cash Flow
Valuation (EV/Resource) • Enterprise Value • How much are you willing to pay to buy the company? • Market Cap + Debt + Preferred shares - Cash Source: Bloomberg and respective company websites
Valuation (EV/Resource) Source: Bloomberg and respective company websites
Valuation (EV/Resource) • Fair Value • Current Share Price: $0.154 • Gold Company Valuation Median : 217 • Lion Gold EV/Resource : 17 • Fair Value Calculation Fair Value = 217 / 17 x 0.154 = $1.96
Valuation • Profit / FCFF projection
Valuation – Fair Value • Low valuation, because financial reports had shown that Lion Gold been unable to generate returns for shareholder
Trading Data Source: Yahoo Finance
Main Risks • Valuation assumes cash cost per ounce remains stable at USD $1200/oz for the next 5 years • Fluctuation in Spot Gold prices is likely to have an impact on the profit margin of Gold mining companies.
Main Risks • Recent plunge in share price means that Lion Gold is unable to use its strategy of using share placement for acquisition of gold mines. • Default Risk – Very Low • Current ratio = 2.73x • Interest coverage = NA • D/E ratio = 0.17 • Loans maturing this year = $2.7 mil • Cash = $46 mil
Conclusion • Lion Gold Corp had been using a acquisition model to grow its business however due to the sudden plunge, their M&A model is likely to be halted. • Low Enterprise Value to Resource makes Lion Gold a potential takeover target for large capital group or bigger gold mine • Lion Gold is asset rich, however the jury is still out on whether they can continue to create returns for Shareholders, thus explaining the low valuation for this counter.