Liu Jinshu, director of research at NRA Capital, presents his analysis of the gold sector and CNMC's place in it. Photo by Eric HanIT'S NOT OFTEN that a Singapore company can achieve business performance that makes it stand out globally in the industry it is in.
Thus, it's notable that CNMC Goldmine has done so and, even more surprisingly, in an industry that Singapore is least known for ---- gold mining.
CNMC Goldmine is majority-owned by Singaporeans, including its controlling shareholders and its minority shareholders.
While CNMC, as a listed company in Singapore, has made public its financial performance every quarter since its listing in 2011, how it ranks among global peers came to light only last Thursday evening (May 26).
Liu Jinshu, research director, NRA CapitalThis was at an event organised by Financial PR, where Liu Jinshu, director of research at NRA Capital, gave his analysis (following which CNMC's CEO, Chris Lim, gave a presentation on his company).
Mr Liu's findings:
♦ Globally, CNMC was one of the few profitable gold miners in 2015.
♦ Better still, "its trailing 12-month EBITDA, EBIT and net margin rank above the top 10 percent of 158 gold miners in our global sample set," said Mr Liu.
| Global miners | CNMC Goldmine | |
| Profitability | Few were profitable in 2015 | US$10.64 m net profit in 2015 |
| Balance sheet | Only 73 of 158 are in net cash | US$26 m net cash |
| Return on equity | - 26% average | 36.4% |
♦ And CNMC also has one of the strongest balance sheets, he said.
Of the 158 gold miners, 73 are in a net cash position, which averages 23.5% of their book value of equity.
In comparison, CNMC’s net cash is equivalent to 58% of the book value of its equity.
The eye-opening string of positive metrics does not stop there. The average return on equity of CNMC was positive 36.4% (on a trailing 12-month basis) while the 158 gold miners' was negative 26% on average.
Chris Lim, CNMC's CEO.
NextInsight file photo.With all that good work, CNMC, you would think, should be a market darling and investors have been queueing to pay top dollar for its shares.
Turns out that on a price to book basis, CNMC trades at only 2.34X (not counting its gold reserves and resources) compared to the average 3.6x.
In other words, CNMC has gone largely under-appreciated, even when it also has the strong free cashflow to pay dividends, which currently translate into a decent 3.15% yield.
OK, gold prices aren't exactly shooting through the roof. At current gold price levels, however, CNMC makes about US$700 per oz in net profit (ie US$1,200 gold spot price minus CNMC's all-in cost of US$500 per oz).
If it's any consolation, gold miners everywhere appear to be under appreciated, according to Mr Liu.
| CNMC Goldmine | |
| Share price: 27 c |
Fair value: 43 c |
| Source: NRA Capital | |
He said that the ratio of the NYSE Arca Gold Miners Index to gold spot price has fallen below 1 to 0.51 as of 24 May 2016.
The long term average since September 1993 was 1.2x.
CNMC Goldmine's CEO, Chris Lim, presents. Photo by Kamal Samuel
The public invitation to the above event was made here --> You are invited: An evening with CEO of CNMC Goldmine
