Pan African Resources - H120 confirms FY20 forecasts

Pan African’s (PAF) H120 results were released on 18 February in the context of known production of 92,941oz (from its 24 January operational update) and a strongly indicated EPS range (via its 31 January trading statement). Within this context, PAF reported a near doubling in adjusted EBITDA and a 126.0% increase in pre-tax profit at the same time as a sharp (-63.9%) decline in capex relative to H119, resulting in the first decline in the group’s net debt since the development of Elikhulu, despite having to manage intermittent community unrest, Eskom load-shedding and challenging geology at Barberton. More than anything however, normalised headline EPS of 1.18c/share have caused us to upgrade our full-year forecasts for FY20 to in excess of 3.0c/share (cf a consensus of 2.0c/share, within a range 1.2–2.7c/share), putting the shares on a 5.0x prospective P/E multiple (cf an historic range of 6.7–14.8x since 2010).