AU
CA
NZ
UK
US
IND
Kalkine has a fully transformed New Avatar.
Company Overview: Nickel Mines Limited (ASX: NIC) engages in the low-cost production of nickel pig iron (NPI) which is used in the manufacturing of stainless steel. In Indonesia, it operates the Hengjaya nickel (HNI) and Ranger nickel (RNI) projects. Currently, NIC is commissioning ~4 RKEF (Rotary Kiln Electric Furnace) lines at the Angel nickel project (ANI - ~80%) located in Indonesia Weda Bay Industrial Park (IWIP). It is also developing ~4 RKEF lines at the recently invested Oracle nickel project (ONI).
NIC Details
This report is an updated version of the report published on 27 April 2022 at 3:55 PM GMT.
Investor Presentation Highlights: NIC consistently posted a robust EBITDA for nickel sold per tonne despite the increase in costs from December 2020 to December 2021.
RKEF EBITDA Performance, Source: Analysis by Kalkine Group
Commissioning RKEF Lines Ahead of Delivery Date: NIC has started commissioning its 3rd RKEF line and plans to begin commissioning the 4th line by April-end at the ANI project. Production levels at the first two installed RKEF lines are progressing according to expectations.
Material Tax Concessions at the ONI Project: On 14 March 2022, NIC reported that PT Oracle Nickel Industry, the operating entity of the ONI project in Indonesia, has been granted significant corporate income tax relief (~100%) for ~10 years from the start of the commercial production year.
Financial Highlights of FY21 (Ended 31 December 2021): NIC recorded growth across key metrics in FY21 versus FY20 despite significantly higher global energy costs depicting the strength of business operations across all commodity price environments.
Comparative Key Metrics Growth, Highlights; (Analysis by Kalkine Group)
Showing profitability trend below reflecting slight deterioration in net margin in FY21 over FY20, while the company maintained its operating profit marign despite macro headwinds.
Profitability Margin Trend (Analysis by Kalkine Group)
Key Metrics: NIC reported a higher net margin of ~27.2% in FY21 versus an industry median of ~11.6%. The operating margin also stood higher at ~30.0% in FY21 than the industry median of ~15.7%.
Top 10 Shareholders:
The top 10 shareholders together form ~52.17% of the total shareholding. Decent Investment International Pte. Ltd. and PT Karunia Bara Perkasa hold a maximum stake in the company at ~11.74% and ~6.91%, respectively.
Source: Analysis by Kalkine Group
Key Risks:
Key Dates and Expansion Plans:
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of NIC gave a negative return of ~19.23% in the past three months and a positive return of ~5.96% in the past six months. The stock is trading lower than the 52-weeks’ average price level band of $0.885 - $1.790. The stock has been valued using the P/E-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ mean P/E multiple, considering rise in its debt-to-equity ratio, new project acquisition risk, and changes in the nickel price and demand. For this purpose of valuation, a few peers like Western Areas Ltd (ASX: WSA), Mincor Resources NL (ASX: MCR), IGO Ltd (ASX: IGO), and others have been considered. Considering the robust demand for nickel, growth in FY21 key metrics, expected growth in EBITDA and production profile in the next twelve months, material corporate income tax concessions granted at the ONI project, an indicative upside in valuation, associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.120, as of 27 April 2022, 10:35 AM AEST (GMT+10), Sydney, Eastern Australia.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
NIC Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.
Please wait processing your request...