Analysts at Canaccord Genuity initiated coverage of Central Asia Metals at ‘buy’, pointing out to clients the long life of the miner’s main assets, los cash costs and consistent output.
In their opinion, those attributes meant the copper, zinc and lead miner offered “high-quality lower risk exposure to those base metals”.
The low-cost assets were key, as they underpinned the outfit’s commitment to its dividends, providing margins on an earnings before interest, taxes, depreciation and amortisation basis of 60-70%.
Central Asia Metals required capital expenditures were also “modest”, the broker said.
The broker continued: “we believe that free cashflow (>17% p.a. yield over our medium-term forecasts) will remain robust through a wide range of commodity price environments, thus providing confidence in the underpinning of an attractive dividend.”
Indeed, the company was anticipated to turn net cash positive in 2021 and to generate excess cash – after dividends and debt repayments that is – of approximately $233.0m in aggregate over the next five years.
The latter would be equivalent to 40.0% of the company’s market capitalisation.
Canaccord had penciled-in an annual dividend yield of about 7.0% for over the next five years working from the middle of the company’s stated dividend policy of paying out 30-50% of its free cash flow as dividends.
The analysts set an initial target price of 280.0p for the stock derived from a combination of their 12-month forward growth forecast for the company’s EBITDA of 0% and the targeted dividend yield for 2022 of 5.0%.
