Newcrest Mining (NCM) Share Trading Recommendation

Submitted by Craig Strzelecki on 28 February, 2007 - 07:24

Newcrest Mining (NCM) have a Neutral 2 share trading recommendation and a price target of $26 per share (from $24) from analyst UBS. Newcrest reported NPAT of $37m vs UBS estimates $30m vs Consensus $35m and $74.2m in H106. No dividend was declared as expected. Gearing has fallen to 49% from 50% at June 30. The analyst has been aware of flat margins following the production results, and hence the result was inline with our expectations. They did not see any significant new information in the financial accounts. The presentation the analyst's attended however provided a positive picture for the future highlighting that: 1) cashlfow should increase as hedging rolls off, 2) downside risk to the Telfer "worst case" reserve downgrade scenario ruled out, 3) there are substantial growth opportunities aside from Telfer at Kencana and CVO. These points were not new to us, but the focus of the presentation was positive. The analyst believe today's presentation may have alleviated some of the market's concerns regarding further downgrade potential at Telfer. This should be a catalyst to reverse Newcrest's recent underperformance compared to the sector. Their share price target is now $26.00, set at the global average P/NPV of 2.4x to our valuation of $10.86 based on the likely case reserve scenario for Telfer. (Previously $24 set at the average P/NPV of 2.3x and worst case valuation scenario)

Newcrest Mining Limited is listed on the Australian Stock Exchange (ASX) under stock code NCM. You can view their investor website here. NCM was listed on the ASX on 4 June, 1987 as Newmont Mining. Newcrest Mining Limited was formed in 1990 from the merger of Newmont Australia Limited and BHP Gold Limited. Newcrest and its predecessors have a strong history of successfully exploring, developing and operating gold mines, predominately in Australia. Ian Smith is the CEO of Newcrest Mining and Don Mercer the Chairman. Current operations are: Ridgeway, Cadia Valley, Telfer, Toguraci and Cracow. They have current explorations in the Cadia District, Gosowong, Telfer District, Cracow and Ashburton, WA. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade NCM. Check your charts and good luck with your share trading!