Has Western Areas Ltd got the potential to rise?

Team Veye | 04 May 2018 ASX - WSA
Has Western Areas Ltd got the potential to rise?

Western Areas Ltd (ASX:WSA)

The company published its H1 FY2018 results on 20th Feb’18 highlighting a strong performance across key metrics. The following were the key highlights:

· Strong balance sheet with cash at bank of $132.6m, supplemented by a further $21.5m in receivables and a Kidman equity position of $32.8m;

· Sales revenue of $115.8m ($113.4m);

· Average realised price of nickel (before payability) of $6.81/lb ($6.59/lb);

· EBITDA of $36.4m (underlying $28.9m1);

· EBITDA margin increased to 31.4% (25.5%)

· NPAT increased to $3.5m ($0.5m, including $3.6m gain on Bluejay Mining equity sale);  

· Primed for growth with construction completion of the Mill Recovery Enhancement Project (MREP) and the Odysseus Project to be larger with a longer mine life


On 10th Apr’18, the company announced that an early capital works program for the Odysseus Project at Cosmos has been approved by the Board and an Eighteen‐month program with an estimated cost of A$32m to commence later this month with key government approvals in place.


On 23rd Apr’18, the company announced that the Mill Recovery Enhancement Project (“MREP”) has been commissioned and is producing premium high grade nickel sulphides as planned.  MREP product will be blended initially with existing nickel concentrate product for sale. And, construction of dedicated filtration and bagging facilities, at a capital cost of A$3m, to commence this quarter (Q2 CY18), with completion scheduled for Q3 CY18 (Data Source – Company Reports).



The company currently offers very minute fully franked Annual Dividend Yield of 0.59% against a sector average of a decent 2.23%. The company’s EPS stands at 6.95 and EBITD margin at 40.69. The Debt-to-Equity ratio is 0.00 against a sector average of 31.13. The group has a P/E ratio of 43.21 against the sector average of only 28.97. The stock has a Market cap of 927.5m & a Share Volume of 272.79m. The company had cash in hand of $132.5m and 0 debt at 31st Dec’17. The stock price of the company witnessed a growth of 23% immediately followed by a fall of 11% during Apr’18 and seems to back on its way to recovery now (Data Source – Reuters.com).


Veye’s Take    

We are Bearish on “Western Areas Ltd” and give it a “Stay Away” at the current price of $3.50


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