SBG Securities - Erstcoverage Platinum Report für Sibanye Gold - Kaufen mit Kursziel 75 ZAR

Bringing the low-cost “Harmonymodel” to a consolidated Rustenburg complex: We think Sibanye Platinum could consolidate the Rustenburg and Kroondal assets, and other potential neighbouring assets, into a single operating entity, in order to leverage off more efficient usage of infrastructure and mining of reserves. This could result in material cash and non-cash economic benefits. AMS’ remaining 50% share in Kroondal remains a hurdle in fully realising this strategy. We expect Sibanye to significantly grow earnings into FY17E and sustain these levels into FY18E at constant gold prices and under a conservative platinum forecast. Sibanye will need to seek further growth opportunities to sustain earnings momentum by FY19E, or prices will need to rise by then. In FY17E, the company could generate two thirds of earnings from gold and one third from platinum. In this report we consider the potential impact on non-cash charges from consolidation and we take a closer look at the chrome business.

FY17 Eearnings growth o f30%, to outperform EBITDA growth of 15%,driven by lower depreciation charges and cash cost savings: We expect earnings and EBITDA to grow 30% and 15% y/y in FY17E although free cash flow is likely to remain steady at our FY16 estimate of R5.2bn after accounting for higher capex at Rustenburg and AMS’ 35% share. We estimate depreciation charges could reduce by 70% at Rustenburg. We have increased our FY17E earnings significantly from R2.50 to R6.78 (Bloomberg consensus: R5.30) after incorporating the Rustenburg and Aquarius assets into our model as well as the chrome business which could contribute 4% to EBITDA. We think the chrome business will become a lot more important to Rustenburg in the future. We have kept our gold price constant at spot and marginally increased our platinum forecast to $1,100/oz. 

Balance sheet remains in a strong position: Assuming the acquisition of Rustenburg is debt funded; we expect balance sheet health to marginally worsen in the short term but then could materially improve. Gearing could peak at 0.34x by FY16 year end.

TP increased to R75 (R72 previously), total return potential of 46%: We increase our TP to R75 based on our 11x FY17E earnings. The share is currently trading on a FY16E forward PE of 10.1x and FY17E PE of 7.7x, a dividend yield of 4.3% and an attractive P/FCF forward multiple of 9x. However, we caution investors that these metrics could materially worsen in FY19E due to lower expected gold production. In order to offset this impact, we estimate that platinum and palladium prices will need to increase to $1,400/oz and $800/oz respectively, or, gold will need to rise to at least $1,450/oz.