CHEAP STOCK #5

Shares - - TALKING POINT -

Base Re­sources (BSE:AIM) 19.75p An im­prove­ment in the price of min­eral sands since 2016 has helped miner Base Re­sources to gen­er­ate a large amount of cash and dra­mat­i­cally re­duce its debt. Some an­a­lysts think it could be com­pletely debt free by the end of 2018.

The com­pany owns 100% of the Kwale min­er­als sands op­er­a­tion in Kenya. It has been pro­duc­ing from a high-grade sec­tion since De­cem­ber 2013 and plans to move to a low­er­grade sec­tion in 2020.

Ap­prox­i­mately 80% of the value of its pro­duc­tion comes from il­menite and ru­tile with zir­con ac­count­ing for the rest. They are used to help make paint, plas­tics and ce­ramic tiles among other ap­pli­ca­tions.

Base’s shares are in­cred­i­bly cheap, trad­ing on a mere 3.1 times EV/EBITDA (en­ter­prise value to earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion). That’s at least half the level at which we’d ex­pect some­one to pay for a miner of its cal­i­bre in a takeover sit­u­a­tion.

Bro­ker RFC Am­brian has a A$0.54 price tar­get which equates to 31p at cur­rent ex­change rates. In com­par­i­son, stock­bro­ker Nu­mis has a 30p price tar­get. Both im­ply you could make at least 50% re­turn in 12 months. (DC)

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.