Petra Diamonds (Price: 196p | Target: Under Review | Rec: Buy) Full year results showed EBITDA of US$187.7m (Investec US$177m), up 47% yoy, leading to adjusted PBT of US$138.3m (Investec US$132m) and adjusted EPS of 14.82cps, up 31% yoy (Investec 13.4cps).

Petra took a US$13.9m write down on its small Helam fissure mine that brought reported EPS down to 12.8cps.

A key development that will please shareholders is management’s intention to bring forward dividend payments to FY15 from FY16 highlighting their confidence in the business.

We do not anticipate significant changes to our forecasts or target price and reiterate our Buy. * Petra concluded the year with net debt of US$124.9m.

Total debt stood at US$158.9m (or US$170.5m including FX settlement lines) with a further US$39.9m undrawn, cash of US$34m (of which US$12.1 is restricted) plus diamond debtors of US$55.4m and diamond inventories of US$27m.

The debtors are a consequence of the timings of the sales process.

We therefore do not anticipate issues with the company funding its ongoing capital programmes from cash flows and facilities, with capex expected to fall after the current financial year.

Another positive was a three year wage agreement with its workers.

We also note that despite ramping up and investing capital the company has managed to reduce working capital by US$17.8m, a significant accomplishment in our view. * Petra sees the diamond market as being in good shape that enabled it to lift prices over January to June by 10%.

Management anticipate further strength in 2015.

We note that a recent DeBeers report highlighted record diamond jewellery sales in 2013 of US$79bn outlining a market that was facing long term declining supply and growing demand particularly from China and India as well as the recovery in US demand. * Management remains confident of being on track to achieve its 5m carat target by 2019, and clearly its commitment to accelerate the dividend payment timing reflects the positive outlook.
To access the full note please click here Analyst: Marc Elliott +44 (0)20 7597 5189
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