Endeavour Silver – Ave analyst TP: US$9.37 vs EXK price $6.22. What
gives?
gives?
Two weeks ago, I have the privilege
of meeting Mr Godfrey Walton, President & Chief Operating Officer of
Endeavour Silver Corp (“EXK”). He was very patient and detailed in his presentation
as he understood that we are not exactly familiar with silver mining companies
and their industry.
of meeting Mr Godfrey Walton, President & Chief Operating Officer of
Endeavour Silver Corp (“EXK”). He was very patient and detailed in his presentation
as he understood that we are not exactly familiar with silver mining companies
and their industry.
I found EXK quite an interesting
company and decided to do a brief introductory writeup on my blog. This is my
first writeup on a foreign listed company.
company and decided to do a brief introductory writeup on my blog. This is my
first writeup on a foreign listed company.
Description of EXK
EXK has three producing silver-gold
mines in Mexico, viz. Guanacevi, Bolanitos and El Cubo. In 2012, EXK produced
4.49m ounces of silver and 38.69k ounces of gold through its three mines. Do
refer to their informative website http://www.edrsilver.com/about_us/profile/
and the Bloomberg snapshot below (See Figure
1) for more information. EXK is listed on both the New York Stock Exchange
and Toronto Stock Exchange under the quotes “EXK” and “EDR” respectively.
mines in Mexico, viz. Guanacevi, Bolanitos and El Cubo. In 2012, EXK produced
4.49m ounces of silver and 38.69k ounces of gold through its three mines. Do
refer to their informative website http://www.edrsilver.com/about_us/profile/
and the Bloomberg snapshot below (See Figure
1) for more information. EXK is listed on both the New York Stock Exchange
and Toronto Stock Exchange under the quotes “EXK” and “EDR” respectively.
Figure 1: Bloomberg description of EXK
Source: Bloomberg
(as of 27 Mar 13)
(as of 27 Mar 13)
Record revenue and earnings in FY12
EXK announced a record set of FY12
results on 12 Mar 13. FY12 revenue and net profit rose 63% and 125% to US$208m
and US$42m respectively. (See Table 1
below)
results on 12 Mar 13. FY12 revenue and net profit rose 63% and 125% to US$208m
and US$42m respectively. (See Table 1
below)
Table 1: EXK’s FY12 results
|
US$m
|
FY12
|
FY11
|
% inc
|
|
Revenue
|
208.1
|
128.0
|
63%
|
|
Net profit
|
42.1
|
18.8
|
125%
|
Source: Company;
Ernest’s compilations
Ernest’s compilations
Notwithstanding the record results,
EXK also registered their eighth consecutive year of growth in silver and gold
production. (See Charts 1 & 2)
EXK also registered their eighth consecutive year of growth in silver and gold
production. (See Charts 1 & 2)
Chart 1: Production: 16 fold growth in 8 years
Source: Company
Chart 2: Reserves / Resources: 38 fold growth in 8 years
Source: Company
2013 Outlook
In EXK’s 2013 outlook, they estimate
that silver and gold production are likely to jump 11-18% and 19-27%
respectively in FY13F. (See Table 2
below) Cash cost is expected to rise from US$7.33 per oz Ag in FY12 to US$9.00-10.00
per oz Ag. This was mainly attributable to increased production at the higher
cost El Cubo and the lower grades being mined at Guanacevi.
that silver and gold production are likely to jump 11-18% and 19-27%
respectively in FY13F. (See Table 2
below) Cash cost is expected to rise from US$7.33 per oz Ag in FY12 to US$9.00-10.00
per oz Ag. This was mainly attributable to increased production at the higher
cost El Cubo and the lower grades being mined at Guanacevi.
Table 2: EXK’s 2013 production outlook vs 2012 actual
|
Production
|
FY13F
|
FY12
|
% inc
|
|
Silver
(‘m oz) |
5.0-5.3
|
4.49
|
11-18%
|
|
Gold (‘k
oz) |
46.00-49.00
|
38.69
|
19-27%
|
|
Silver
equivalents (‘m oz) |
7.30-7.80
|
6.40
|
14-22%
|
Source: Company,
Ernest’s compilations – rounded to 2 decimal places
Ernest’s compilations – rounded to 2 decimal places
EXK statistics against its peers
With reference to Chart 3, EXK seems to compare rather
favourably among its comparables.
favourably among its comparables.
Chart 3: EXK vis-à-vis its peers
Source: Company
Active investor relation efforts
EXK has an informative company
website and updates the investment community on its upcoming road shows http://edrsilver.com/investors/events/. Between 15-19 Apr, EXK is hosting
their road shows in Stocholm, Zurich and Monaco. It also updates shareholders
on their production updates every quarter sometime around the 2nd
week of Jan, Apr, Jul and Nov.
website and updates the investment community on its upcoming road shows http://edrsilver.com/investors/events/. Between 15-19 Apr, EXK is hosting
their road shows in Stocholm, Zurich and Monaco. It also updates shareholders
on their production updates every quarter sometime around the 2nd
week of Jan, Apr, Jul and Nov.
Analyst call: 6 Buys vs 2 holds
According to Bloomberg (Refer to Figure 2 below), there are 6 buys vs 2
holds for EXK (it is noteworthy that EVA Dimensions does not seem to have an
updated report after EXK’s 4Q results on 12 Mar, thus the ‘hold’ call may not
be updated.) Average analyst target price is about US$9.37, which offers about
51% potential upside vs EXK’s closing price of US$6.22 on 28 Mar, Thursday.
holds for EXK (it is noteworthy that EVA Dimensions does not seem to have an
updated report after EXK’s 4Q results on 12 Mar, thus the ‘hold’ call may not
be updated.) Average analyst target price is about US$9.37, which offers about
51% potential upside vs EXK’s closing price of US$6.22 on 28 Mar, Thursday.
Figure 2: Average analyst target price: US$9.37
Source: Bloomberg
(as of 27 Mar 13)
(as of 27 Mar 13)
Chart – consolidating mode – May break out soon
EXK is on a downtrend since Oct
2012. (See Chart 4 below) The
downtrend line, coupled with the historical resistance, gap, 50D EMA and
Fibonacci retracement formed significant resistance between US$6.44-6.61. There
are some redeeming factors, such as positively placed parabolic SAR and the
slowly inching upwards of its 21D EMA. As the consolidation range narrows, the
possibility of a breakout (upwards or downwards) increases. If EXK can provide
a reassuring production update in Apr, it may form the catalyst to break out of
this range on the upside.
2012. (See Chart 4 below) The
downtrend line, coupled with the historical resistance, gap, 50D EMA and
Fibonacci retracement formed significant resistance between US$6.44-6.61. There
are some redeeming factors, such as positively placed parabolic SAR and the
slowly inching upwards of its 21D EMA. As the consolidation range narrows, the
possibility of a breakout (upwards or downwards) increases. If EXK can provide
a reassuring production update in Apr, it may form the catalyst to break out of
this range on the upside.
Chart 4: EXK in consolidation mode
Source: CIMB itrade complimentary chart (28 Mar 13)
Potential catalysts… Apr’s production update & 1QFY13F results
In a nutshell, market is likely to
be watching EXK’s production update in Apr and its upcoming 1QFY13F results in
May. If EXK can surprise on the upside, it may just provide the rerating
catalysts for the share price to move higher.
be watching EXK’s production update in Apr and its upcoming 1QFY13F results in
May. If EXK can surprise on the upside, it may just provide the rerating
catalysts for the share price to move higher.
*This is a brief introduction on
EXK. Readers who are keen to know more are encouraged to visit the following
links for more information. As i have difficulty pasting some charts here, feel free to email me at crclk@yahoo.com.sg for the complete writeup on EXK.
EXK. Readers who are keen to know more are encouraged to visit the following
links for more information. As i have difficulty pasting some charts here, feel free to email me at crclk@yahoo.com.sg for the complete writeup on EXK.
Sources:
Disclaimer
The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or invest in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.
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