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1、20,16,12,8,4,Lonmin Plc,Deutsche BankMarkets Research,RatingHoldSub-Saharan AfricaSouth Africa,CompanyLonmin Plc,Date9 November 2012Results,Platinum,Price at 8 Nov 2012(GBP)Price Target(GBP),452.80515.00,ReutersLMI.L,BloombergLMI LN,Exchange TickerLSELMI,52-week range(GBP),1,128.00-452.80,Rights siz
2、ing the business,Grant Sporre,Research Analyst(+44)20 754-The strike impacts cash more than expected,We were looking for two aspects out of todays announcements.Firstly,towhat extent had the strikes impacted the companys cash burn.The answerwas more drastically then we had expected to the tune of c.
3、US$90m.Secondly,we were looking for the size of the discount on the rights issue as asignal whether all shareholders were likely to follow.However the size of thediscount and the commentary around Xstrata means that this is not certain.Adjusting for the results,we still think there is modest upside
4、on an NAV basis,but the company only trades on a sensible PER in FY15.HOLD.The end of a painful period:FY12 results ex the strike are fairLonmin reported an underlying profit before tax of US$57m,excluding aUS$159m charge for costs relating to the illegal strikes in 4Q12,and also animpairment charge
5、 of US$602m for the Akanani deposit.Including the charge,Anna Mulholland,CFAResearch Analyst(+27)11 775-Rob CliffordResearch Analyst(+44)20 754-Key changes,for the illegal work stoppage,we reach an underlying loss of US$(102)m,Target Price,490.00 to 515.00,5.1%,which compares to our forecast of US$(
6、13)m-the strike had much more of an,impact than we had forecast.The companys net debt of US$421m was betterthan our forecast,a function of a much higher inflow from the liquidation ofworking capital.However,this is a temporary positive movement asmanagement confirmed that net debt had risen to US$55
7、0m by end October.The rights issue ensures survival,but management will“sweat”to flourishLonmin announced a 9 for 5 underwritten rights issue of up to 365.5m newshares at 140p or R19.4872 per new share to raise net proceeds of US$777m.,Price/price relative,We think the size is enough to ensure Lonmi
8、ns survival over the next three,11/10,5/11,11/11,5/12,years,in a very modestly rising Rand basket price environment.However,management will need to“sweat”by cutting overheads and being very,FTSE 100 INDEX(Rebased),judicious on capex,to drive significant value.Given the high operating leveragehowever
9、,every dollar saved will be seen on the bottom line.Fair value reduced to 5.15/R67,discount to NPV now removed;risks,Performance(%)AbsoluteFTSE 100 INDEX,1m-12.3-1.1,3m-40.3-1.2,12m-57.53.7,Our target price was set at 1x NAV,based on a life of mine DCF,using aWACC of 10%.Previously we applied a 20%d
10、iscount to our fair value toaccount for uncertainty around the timing and size of a Rights Issue.Our targetprice reflects the revised fair value of 5.15/R67,down from 6.12/R81 due toa cut to our valuation of the Akanani and Limpopo deposits,given theimpairment of Akanani announced today.A key downsi
11、de risk is a resurgencein worker unrest and an upside risk is higher than expected cost savings.Forecasts And Ratios,Year End Sep 30EBITDA(USDm)DB EPS(USD)%ChangeP/E(DB EPS)(x),2012A1930.07-139.7%193.9,2013E93-0.295.3%,2014E2330.12-21.7%62.2,2015E3520.4715.3,Source:Deutsche Bank estimates,company da
12、ta_Deutsche Bank AG/LondonAll prices are those current at the end of the previous trading session unless otherwise indicated.Prices are sourcedfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deutsche Bank and subjectcompanies.Deutsche Bank does and seeks to do busin
13、ess with companies covered in its research reports.Thus,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.DISCLOSURES ANDANALYST CE
14、RTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,9 November 2012PlatinumLonmin Plc,Model updated:09 November 2012,Fiscal year end 30-Sep,2010,2011,2012,2013E,2014E,2015E,Running the numbers,Financial Summary,Sub-Saharan AfricaSouth AfricaPlatinumLonmin Plc,DB EPS(USD)Reported EPS(USD)DPS(U
15、SD)BVPS(USD)Weighted average shares(m)Average market cap(USDm),0.700.570.1513.81975,335,1.111.340.1514.52025,177,0.07-2.010.0012.32032,885,-0.29-0.290.0013.22031,466,0.120.120.1614.52031,466,0.470.470.1516.12031,466,Reuters:LMI.L,Bloomberg:LMI LN,Enterprise value(USDm),6,083,5,822,3,563,2,451,2,686,
16、2,919,Valuation Metrics,Hold,P/E(DB)(x)P/E(Reported)(x),38.747.7,23.019.0,193.9nm,nmnm,62.262.2,15.315.3,Price(8 Nov 12)Target Price52 Week rangeMarket Cap(m),GBP 452.80GBP 515.00GBP 452.80-1,128.00GBPm 918USDm 1,466,P/BV(x)FCF Yield(%)Dividend Yield(%)EV/Sales(x)EV/EBITDA(x)EV/EBIT(x),1.91nm0.63.81
17、7.426.7,1.134.20.62.913.519.0,0.73nm0.02.218.553.2,0.55nm0.01.626.4nm,0.50nm2.21.411.527.1,0.45nm2.11.48.313.6,Company Profile,Income Statement(USDm),Lonmin specializes in the mining of PGMs(platinum groupmetals).The Group operates a number of platinum mines,concentrators,smelters and a refinery wit
18、hin its coreMarikana operations,all situated in the Bushveld IgneousComplex of South Africa.After declining production from2006,the companys new growth target is 950koz ofplatinum ounces by 2015Price Performance20161284,Sales revenueGross profitEBITDADepreciationAmortisationEBITNet interest income(e
19、xpense)Associates/affiliatesExceptionals/extraordinariesOther pre-tax income/(expense)Profit before taxIncome tax expenseMinoritiesOther post-tax income/(expense)Net profitDB adjustments(including dilution)DB Net profit,1,5853593501220228183024011810011226138,1,9924254311240307-59-180293-28480273-47
20、226,1,614202193126067-144-7550-698-148-1400-41042515,1,563102931320-39-52800-83-2510-590-59,1,977242233134099-53700531613024024,2,1133613521370215-496001725224097097,Nov 10,May 11,Nov 11,May 12,Cash Flow(USDm),Cash flow from operations,80,630,263,-193,-2,222,Lonmin PlcMargin Trends24201612840-4,FTSE
21、 100 INDEX(Rebased),Net CapexFree cash flowEquity raised/(bought back)Dividends paidNet inc/(dec)in borrowingsOther investing/financing cash flowsNet cash flowChange in working capitalBalance Sheet(USDm),-264-184234-221230151-229,-4102201-40-223-30-72232,-404-1410-454241239275,-175-3680017510-183-25
22、9,-220-22200250028-165,-400-1780-311000-109-30,10,11,12,13E,14E,15E,Cash and other liquid assets,148,76,315,184,212,103,EBITDA MarginGrowth&Profitability,EBIT Margin,Tangible fixed assetsGoodwill/intangible assetsAssociates/investmentsOther assetsTotal assetsInterest bearing debtOther liabilitiesTot
23、al liabilitiesShareholders equityMinoritiesTotal shareholders equityNet debt,2,1991,0915768104,8245231,2191,7422,7093733,082375,2,7421,1064005384,8623101,2111,5212,9304113,341234,2,8895025783394,6237361,0721,8082,4882572,745421,3,1075025788995,2709111,3732,2842,6822582,940727,3,4145025787325,4371,16
24、11,0422,2032,9412713,212949,3,9275025787825,8921,2611,0652,3263,2732953,5681,158,Key Company Metrics,Solvency,Sales growth(%)DB EPS growth(%),49.2na,25.759.0,-19.0-93.4,-3.2na,26.5na,6.9307.3,35302520151050,706050403020100,EBITDA Margin(%)EBIT Margin(%)Payout ratio(%)ROE(%)Capex/sales(%)Capex/deprec
25、iation(x)Net debt/equity(%),22.114.426.38.616.72.212.2,21.615.411.120.720.63.37.0,12.04.2nm-30.625.03.215.3,5.9-2.5nm-4.411.21.324.7,11.85.0136.51.811.11.629.5,16.710.231.47.218.92.932.4,10,11,12,13E,14E,15E,Net interest cover(x),nm,61.4,4.8,nm,1.9,4.4,Net debt/equity(LHS)Grant Sporre,Net interest c
26、over(RHS,Source:Company data,Deutsche Bank estimates,+44 20 754-58170Page 2,Deutsche Bank AG/London,9 November 2012PlatinumLonmin PlcFlourish or merely survive?FY12 results:the end of a painful periodLonmin had already reported production results for the year to September 2012 on 30October,so todays
27、 results were merely a confirmation of the underlying financialsattached to the known production and sales numbers.Lonmins production for FY13-FY15,associated capex and cash costs for FY13 had already been disclosed.We werelooking for two key items out of todays results;the cash burn due to the exte
28、ndedstrike and of course the terms of the rights issue.Overall,the results are reflective of the painful 2012 had by Lonmin.The companyreported an underlying profit before taxation of US$57m,but this excludes a US$159mcharge for costs relating to the illegal strikes in 4Q12,and also an impairment ch
29、arge ofUS$602m for the Akanani deposit.If we include the charge for the illegal workstoppage,we reach an underlying loss of US$(102)m,which compares to our forecastof US$(13)m,thus the strike had much more of an impact than we had forecast.Thecompanys net debt of US$421m was better than our forecast
30、s,a function of a muchhigher inflow from the liquidation of working capital than we had estimated.However,this is a temporary positive movement as management confirmed that net debt hadrisen to US$550m by end October.This increase in debt levels,in our view,serves tohighlight the need for an equity
31、capital raising.The“discount”on the rights issue washigher than our expectation which we think signals a degree of uncertainty that allmajor shareholders will participate.We discuss this in more detail later on.Figure 1 shows the results compared with our estimates.Our estimates include anelement of
32、 the“exceptional”costs caused by the strike,so the fact that underlyingearnings were better than our forecasts is perhaps not a true reflection of the result.Figure 1:Lonmin FY12 results vs.our forecasts,2011,2012%chg y-,2012e,%diff,on-yProduction,Mined platinum in concentrateRefined platinum incl.t
33、oll refinedPlatinum salesCash costs:C1 pre-base metals credits,kozkozkozR/PGM oz,7197317217,534,6806877028,507,-5.5%-6.0%-2.6%12.9%,6716716868029,1.3%2.4%2.3%6.0%,Financials,RevenueCost of salesUnderlying EBITDAUnderlying EBITUnderlying EPSDPSNet debtCapex,US$mUS$mUS$mUS$mUScUScUS$mUS$m,1,9921,68143
34、331111215234408,1,6141,547193677.4-421404,-19.0%-8.0%-55.4%-78.5%-93.4%-100.0%79.9%-1.0%,15421420122-1-18.80460430,4.7%8.9%58.2%-8.5%-6.0%,Source:Deutsche Bank estimates,Company data,Deutsche Bank AG/London,Page 3,9 November 2012PlatinumLonmin PlcOperating performance was solid despite strike interr
35、uptionAs reported last week,Lonmin produced saleable platinum in concentrate of 680oz,down 5.5%y-on-y and sold 702koz of platinum in the period,down 2.6%y-on-y.Thelatter was despite a loss of 110koz of mined platinum from the strike at Marikana inAugust and September,which was mitigated somewhat by
36、the draw-down of pipelinestocks.Notwithstanding the strike disruption,Lonmin continued to improve its development,with immediately available ore reserves at 3.3m centares,up 14%y-on-y.This equatesto just over 18 months of development,the highest level of development(and thereforemining flexibility)t
37、hat Lonmin has had in the past six years:Figure 2:Immediately available ore reserves,3.532.521.510.50,20181614121086420,FY07,FY08,FY09,FY10,FY11,FY12,Centares,Months,Source:LonminLonmin reported a good processing performance last week in its 4Q12 productionreport:to recap,there has been a sustained
38、improvement in concentrator recoveryrates,up to 82.4%by end FY12;in terms of smelting,the No.1 furnace was stablethroughout the year and,having been kept warm during the strike,is now back tonormal operating levels;the No.2 furnace was commissioned successfully,with firstslag tapped 11 July 2012 and
39、 first matte tapped 16 July 2012.In terms of costs,Lonmins group cost per PGM ounce produced increased 12.9%toR8,507.This includes the US$159m of costs associated with the work stoppage as wellas reflecting the agreed FY11-12 8.5%wage increase and Eskom tariff increases of24%.The increase was mitiga
40、ted somewhat by a 15%weakening of the ZAR/USD ratey-on-y.Lonmins estimate of the normalized cost increase;excluding events atMarikana were 5.2%YoY.If this were the case,that would have been a very goodperformance.Cash and balance sheetAs at 30 September 2012,Lonmin had net debt of US$421m,comprising
41、 US$739m ofdrawn facilities,less US$315m of cash and equivalents.This represents an increase ofUS$187m y-on-y,driven in particular by a drop of US$382m in operating cash flow,capex of US$408m(flat y-on-y),offset by a release of working capital which saw apositive US$278m swing.,Page 4,Deutsche Bank
42、AG/London,9 November 2012PlatinumLonmin PlcDespite the fact that net debt was slightly lower than our forecast of US$460m,mainlydue to the swing in working capital,management confirmed that the current ramp-upat Marikana mine is now consuming working capital and by end October net debt hadrisen to U
43、S$550m.In terms of future cash uses,Lonmin reiterated its plans for capex of US$175m in FY13.Much of the capex in the near term will be focused on the Saffy shaft which is only at50%utilization and struggling with difficult ground conditions hence the highest costshaft.Offsetting this cash outflow a
44、re Lonmins plans to cut operating costs by R200mper year from a review of its operating model,and the companys pre-paid sale of goldproduction.Lonmins contract to sell forward its gold production remains in place andwas unaffected by the work stoppages-as announced in 1H12,Lonmin entered into apre-p
45、aid sale of 75%of its current gold production for the next 54 months.Under thecontract,Lonmin will deliver 70.7koz of gold for the upfront payment of US$106.7m atan average realized price of c.US$1,510/oz.Figure 3:Net debt increased by US$187m in FY12,1000,107,-27,-100,202,171,-200-408-234,-300-400,
46、-176,-46,-500,US$m,-10,-421,Opening Underlying Special,Working,Deferred,Net,Capex,Equity Tax/Other Closing,Net Debt EBITDA,costs,Capital,revenue Financing,dividends,Net Debt,Source:Lonmin,Deutsche BankFY13 outlook:production,cost and capex plans reiteratedLonmin expects to mine 680koz platinum in co
47、ncentrate in FY13,and use 20koz of thisproduction to rebuild its pipeline stocks which were drawn down throughout the strike,thus sales are expected to be 660koz.This compares with our previous forecast of708koz.We note that Lonmin management see the ramp-up post the strike,progressing well ahead of
48、 expectations,and that October productivity was at 85%ofpre-strike run rate levels a commendable performance in our view.Thereafter,Lonmin aims to grow production to 750koz for FY14 and FY15 and up to800koz for FY16.On the above production base,the company expects unit costs to average R9,350 per4E
49、oz in FY13.This is higher than our previous estimate of R9,252/4PGE oz.Costsavings will be sought throughout FY13 from a review of Lonmins operating model,procurement and productivity initiatives.Lonmin expects steady-state cost savingsfrom these initiatives from FY14,including R200m per annum from
50、the review of theoperating model(primarily from reducing headcount,in our view),R100m fromprocurement initiatives and an unspecified amount from a new“productivity,Deutsche Bank AG/London,Page 5,9 November 2012PlatinumLonmin Plcenhancement programme”.In Lonmins view,these cost saving initiatives wil
