{"id":59549,"date":"2012-02-23T14:13:20","date_gmt":"2012-02-23T03:13:20","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/02\/23\/kingsgates-shock-raising\/"},"modified":"2012-02-23T14:13:20","modified_gmt":"2012-02-23T03:13:20","slug":"kingsgates-shock-raising","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/02\/23\/kingsgates-shock-raising\/","title":{"rendered":"Kingsgate’s Shock Raising"},"content":{"rendered":"

\n\t – Kingsgate<\/span> surprises with capital raising
\n\t – Interim earnings broadly in line with expectations
\n\t – Broker downgrades follow interim result<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tThere were few major surprises in the interim earnings result of Kingsgate<\/span> Consolidated ((KCN<\/span>)), as underlying earnings of $33.8 million were only slightly below market expectations due primarily to higher costs during the period.<\/p>\n

\n\tWhat was more of a surprise was the announcement of an equity raising, Kingsgate<\/span> seeking to raise $70 million from institutional investors via an issue of shares at $7.10 each. Proceeds will be used to fund expansion and development of growth projects and to pay down some debt.<\/p>\n

\n\tThe issue itself surprised RBS<\/span> Australia, as the broker notes the announcement of a 10c<\/span> per share dividend means a payout of $15 million, which is 20% of the funds to be raised. This makes the raising appear a discretionary move rather than a necessity, especially as the upcoming debt maturity of $40 million could be met from cash flows and bullion on hand.<\/p>\n

\n\tBA Merrill Lynch has also questioned the move, as development of Kingsgate's<\/span> silver development from 2013 will likely require more than US$500 million. This implies either further debt or equity will need to be raised, or Kingsgate<\/span> will consider a potential listing of its 51% stake in the Chatree<\/span> project.<\/p>\n

\n\tA potential Thai IPO for Chatree<\/span>, the need for final approval for an expansion of the project and feasibility studies at Nueva<\/span> and Bowdens<\/span> mean management at Kingsgate<\/span> has a lot going on in the view of Citi<\/span>.<\/p>\n

\n\tWhile all of these are potential positive catalysts assuming successful outcomes, Citi<\/span> cautions there remains potential for time slippages<\/span> in relation to the above projects and this makes Kingsgate<\/span> a higher risk play at present.<\/p>\n

\n\tPreviously RBS<\/span> had factored in a 10% premium to valuation for Kingsgate<\/span> given expectations of production growth and positive earnings momentum. But with a capital raising at an 8% discount to the previous closing price this premium is no longer justified, so RBS<\/span> has adjusted its model.<\/p>\n

\n\tMinor changes to earnings estimates and the removal of the previous valuation premium mean RBS's<\/span> price target for Kingsgate<\/span> falls to $7.11 from $7.85. Others in the market have reacted in a similar fashion, as BA-ML's target has also fallen to $7.30 from $8.75. The consensus price target for Kingsgate<\/span> according to the FNArena<\/span> database now stands at $7.44, down from $8.97 prior to the result.<\/p>\n

\n\tWith price targets lower value in Kingsgate<\/span> is also being brought into question. Citi<\/span> now sees better value elsewhere via the likes of Perseus<\/span> Mining ((PRU<\/span>)), Regis Resources ((RLL<\/span>)) or Medusa Mining ((MML<\/span>)) and so have downgraded Kingsgate<\/span> to Sell from Neutral.<\/p>\n

\n\tRBS<\/span> has followed suit and downgraded to Hold from Buy to reflect both weaker cash flows and capex<\/span> concerns in relation to development projects. As with Citi<\/span> there is better value elsewhere in the view of RBS<\/span>, the broker preferring Alacer<\/span> Gold ((AQG<\/span>)) for mid-cap exposure. BA-ML has also downgraded to Underperform<\/span> from Neutral. Overall the FNArena<\/span> database shows Kingsgate<\/span> is rated as Buy once, Hold once and Sell twice. <\/p>\n

\n\tShares in Kingsgate<\/span> today are weaker and as at 1.50pm the stock was down 57c<\/span> or more than 7% at $7.18. Over the past year the stock has traded in a range of $5.62 to $9.91, the current share price implying upside of less than 4.0% to the consensus price target in the FNArena<\/span> database.<\/p>\n

\n\t 
\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

While interim earnings were broadly as expected a surprise capital raising by Kingsgate has prompted brokers to lower their ratings for the stock.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[22],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/59549"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=59549"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/59549\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=59549"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=59549"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=59549"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}