Goldplat plc (LON:GDP) has delivered strong H1 FY 2017 results as Sterling denominated gold prices along with strong production, up 22% YoY and 5% HoH to 21.3koz, drove revenues up by 35% YoY and 52% HoH to £14.4m. Despite headwinds of a significantly stronger Rand, EBITDA of £1.4m was up 161% YoY and 9% HoH and GDP is on track to reach our full year estimate of £3m. However, net income of £742k was down 22% HoH as a result of FX losses.
The stronger Rand is expected to have a negative impact on earnings, however, this is likely to be offset by significantly stronger than expected production in South Africa. VSA Capital have upgraded their production estimate by 5koz to 43.5koz for the group in FY 2017F, as a result.
Kilimapesa Development on Track
The first mill at Kilimapesa, in Kenya, was successfully commissioned in early 2017, and VSA expect the benefits of the expanded production capacity to begin to be reflected in earnings during H2 FY 2017. Production is currently running at a rate of 4,500ozpa although VSA expect this to increase through the balance of the year as phases two and three of the development are completed. VSA believe that the turnaround of Kilimapesa and return to profitability will unlock significant value for GDP. Losses in recent years have undermined the performance of the wider group and their view the turnaround as a key catalyst for the shares which are up 188% from the 2015 lows.
Recommendation and Target Price
With the development at Kilimapesa on track VSA Capital believe that this provides a strong catalyst to drive a rerating while robust operational performance in the broader group underpins their forecast for a strong increase in earnings for FY 2017F.
VSA Capital Limited maintain a Buy recommendation and 11.2p/sh. target price.
