From fosters stockbroking, make of it what you will.......
Tiger Resources Ltd (TGS.ASX)
Consolidates Kipoi to become 4th largest ASX-listed Cu producer.
Recent price weakness represents buying opportunity.
Events:
· Acquisition of additional 40% interest in Kipoi Copper from JV partner
Gecamines for consideration of US$111m; and
· Financed via a $73m equity raising and US$100m bridging debt facility.
Comments:
· Low risk acquisition of an asset already well understood. We consider the
acquisition to be a low risk, value accretive transaction given TGS management
have an extensive understanding of the asset and significant experience in DRC.
The acquisition price of US$111m for 40% implies a valuation of US$280m on a
100% basis for Kipoi, which compares favourably to that implied by TGS"s market
cap prior to the deal being $450m and also our NPV of $735m.
· Simplified ownership structure and removal of Gecamines increases likelihood
of new corporate debt facility. The removal of Gecamines as a 40% shareholder
in the JV ownership structure is, in our view, likely to increase the likelihood of
TGS putting in place a new debt facility to replace the current Taurus and Gerald
Metals debt. This would permit TGS to maintain their current SXEW expansion
plans, which include spending ~$110m (FSBe) on the Phase 2 expansion during
2015. However should a new finance facility not be put in place, we expect TGS to
push back the timeline 6-12 months and repay existing debt from operating cash
flow, so as to not place stress on the balance sheet. The differential in NPV
between these two scenarios (new finance facility vs. repay current from cash
flow) is ~$28m.
Recommendation:
· We maintain our BUY on TGS however reduce our price target to $0.50 (from
$0.70 previously). The change in our valuation and price target is primarily a
function of our updated commodity price deck and refinement to output and
opex estimates following discussions with management.
· The recent sell off in the stock represents a great buying opportunity in our view.
Unfortunately the TGS share price traded below the equity raising issue price of
$0.30/sh during the rights issue offer period, resulting in only a 4% take-up of the
$27m retail rights issue component. This has, in our view, led to additional selling
pressure as sub-underwriters manage their positions. We think that once this has
been digested through the market, the stock will respond and believe a new
finance facility announcement would be a key catalyst and endorsement.
· We think the corporate appeal of TGS has also improved, as Gecamines would
have been considered to be a "poison pill" for many potential acquirers.
· Certainly we consider TGS to be our preferred ASX-listed Cu producer given the
low operating costs, scaleable operation and now strong corporate appeal.
hotcopper.com.au/threads/.../page-6?get_post=true#.VDOcBxY0_d8
"Prognosen sind schwierig, besonders wenn sie die Zukunft betreffen."
Greeny
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