🕐27.03.14 - 10:00 Uhr

INVESTEC: CENTAMIN : POTENTIAL FOR CLASS-LEADING DIVIDENDS - HOLD




Centamin (Price: 53p | Target: 54p | Rec: Hold) Centamin’s recent FY13A results were almost exactly in line with both our and consensus forecasts at an EBITDA and EPS level, and we make only modest adjustments to forward estimates.

Most interesting to us was a formal declaration of intent to return capital to shareholders, with further news on this due in 2014.

We have for some time been forecasting a 3cps share dividend and we retain this on the basis that CEY has the capacity to meet it and therefore deliver what would be a class-leading yield. * Centamin has for the past three years covered all capital expenditure, a total of almost $634m, through operating cash flows totalling $648m.

This has enabled it to finance the c.$330m Stage IV expansion and still retain $106m cash ($142m including receivables and investments), with no debt.

We anticipate substantial free cash flow going ahead, leaving it well able to meet our assumed 3cps dividend (average forecast pay-out ratio of less than 30%) for a forward dividend yield of 3.4%.

This would place it comfortably at the top of the dividend yield range of the major gold producers, where the average yield is 1.5% or less. * The company performed very well in FY13A and FY14E should be another significant year, with CEY guiding 18% higher production: 420koz at cash costs of $700/oz (Investec 419koz at $718/oz).

We expect further production growth in FY15E, to 459koz, with FY15E also expected to be the year in which Centamin commences profit sharing with the Egyptian government. * Our TP of 54p is based on an equal blend of NPV and 3-yr forward multiples.

The key risks to our outlook are the gold price, the outcome of the two pending court cases and the sovereign risk associated with political uncertainty in Egypt.
To access the full note please click here Analyst: Hunter Hillcoat +44 (0)20 7597 5182
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