Oz Minerals out with decent production numbers

James Gerrish

Market Matters

A fairly upbeat sort of day for the Australian share market with a strong open backed up by reasonable buying throughout the session. The Energy sector was best on ground while the Materials lagged, however all sectors closed higher implying good, broad-based buying across the bourse.

Asian markets were reasonable, the Nikkei adding +1.17% while the rest of the region edged higher. US Futures were marginally higher into our close.

Overall, the ASX 200 lost -9 points today or -0.14% to 6691. Dow Futures are trading up +31 points / +0.11%.

ASX 200 Chart

ASX 200 Chart


Oz Mineral (OZL) +1.19%: Posted quarterly production numbers today along with an update on Carrapateena, Brazil and West Musgrave growth projects. In terms of production, Prominent Hill copper production at ~27kt (104kt annualised) is tracking ahead of required FY guidance rate (mid-point 100kt) and costs (AISC) tracking below FY guidance range, $1.10-1.20. Brazil production looks on track to meet FY guidance although 2Q costs were abnormally high ($2.88).

Here’s the bullish take from our Resource Analyst, Peter O’Connor… 

What an incredible journey … when the new team started at OZL in early 2015 – led by CEO Andrew Cole – the market viewed OZL as a disappointing “one trick pony” with a short mine life (~2022) with just one asset, the challenging Prominent Hill. The latest position has Prominent Hill churning out extraordinary CF to 2030 (2018 EBITDA ~$600m). The “one trick pony” has now made way for a myriad of growth options that could be delivered across the companies “province strategy”. OZL has a LONG term valuation tail that the market hasn’t yet fully grasped, let alone valued – top line growth could hit ~200 % over the 7-year period to 2026/27. Do the math, that’s a CAGR (%) of ~15% vs. RIO and BHP at ~1-3% and pretty much internally funded to boot. So in the near term copper price tribulations will whip-saw the share price but long term the company valuation will grow with future CF.

Oz Minerals (OZL) Chart

Computershare (CPU) -3.57%: The market never likes a CFO resigning just ahead of an earnings result and that’s what happened with CPU today. CFO Mark Davis intends to step down from his position during the coming year after almost seven years in the role and 19 years with the company. Importantly, the company reaffirmed earnings guidance with EPS for FY19 in constant currency is expected to increase by around 12.5% on FY18. They report FY19 earnings on the 14th August. Not sure why the announcement was made today instead of then which is the likely reason for the SP decline.

Computershare (CPU) Chart

Broker moves;

Domain (DHG) -6.21%; walked into the fire of the UBS analysts dropping their rating a level to a sell ahead of the full year result. They noted the company had ‘robust’ longer term prospects, but the near term showed a number of challenges facing the real estate tech play. Analytics house CoreLogic suggests that listing volumes had continued to deteriorate and are tracking below market analyst expectations and UBS suggest that Domain will be forced into talking down FY20 expectations at the full year. Many pundits have taken the house price bottoming as a sign Domain will reap the benefit of an improving market, however volumes remain light which is key to earnings. UBS see upside if Domain can execute outside of NSW where it has been most dominant.

  • Event Hospitality Downgraded to Hold at Ord Minnett; PT A$13.99
  • Domain Holdings Downgraded to Sell at UBS; PT Set to A$2.75
  • Reliance Worldwide Rated New Neutral at UBS; PT A$3.75
  • Saracen Mineral Cut to Underperform at Macquarie; PT A$3.50
  • Saracen Mineral Downgraded to Sector Perform at RBC; PT A$3.50
  • Navigator Global Downgraded to Neutral at Macquarie; PT A$3.62
  • Oil Search Upgraded to Overweight at Morgan Stanley; PT A$8
  • Janus Henderson GDRs Cut to Neutral at Evans & Partners

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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