Canaccord lifts Centamin's target price, retains 'buy' rating

Centamin’s shares advanced on Wednesday as Canaccord Genuity raised its target price to 110p from 105p and reiterated its ‘buy’ rating on the gold miner’s stock.

The Egypt-based company last Monday reported a 28% fall in pre-tax profit to $58.4m (£40.5m) in 2015, down from $81.5m the year before.

The decline came as gold prices fell and the company wrote down $5.9m after abandoning exploration activities in Ethiopia. Centamin also took a $6.8m tax charge on foreign exchange gains on its cash holdings in Australia.

On top of that, the group took a $46.7m charge due to a protracted legal dispute with its diesel supplier.

Nevertheless, the company’s revenue rose 7.4% to $508.3m as production at the Sukari mine in Egypt increased 16% to 437,600 ounces. Cash costs fell from $729 per ounce to $713 per ounce and all-in sustaining costs (AISC) dropped from $912 per ounce to $885 per ounce.

“We make no change to our production or sales assumption for 2016 (470,800oz), but have made some modest changes to our cost assumptions following the 2015 results, increasing AISC to US$898/oz from US$892/oz, and increasing some central costs,” said Canaccord analyst Nick Hatch .

“As a result, we lower our 2016 EBITDA from US$254M to US$237M, and our earnings per share estimate drops from 13.3c to 11.8c, with the dividend forecast declining 3.0c to 2.9c per share. We have lowered our cost assumptions slightly in subsequent years, which has a positive impact on net asset value, increasing it from 105p to 110p/share.”

Hatch said Centamin remains “our preferred London-listed gold miner” and the increased target price is based on a 5% discount rate and a 1.0x price to net asset value ratio.

Shares were up 5.18% to 88.40p at 1014 BST.