德银-南非-黄金市场-南非黄金2018年展望：2018年现金流回升-20171129-Deutsche_Bank-SA_Gold：outlook_for_2018，Recovery_in_cash_flows_into_2018_41页_4mb

Document Summary: Industry Outlook for South African Gold Sector (2018)

Core Content

This document provides an analysis of the gold industry outlook in South Africa for 2018, focusing on key companies: AngloGold Ashanti (ANGJ.J), Gold Fields (GFIJ.J), Sibanye-Stillwater (SGLJ.J), and Harmony (HARJ.J). It outlines updated forecasts, price targets, and recommendations based on changes in the ZAR/USD exchange rate and gold prices.

Main Points

Gold Sector Recovery in 2018

• The gold sector is expected to see a recovery in free cash flow in 2018, driven by:
  • Improved margins
  • Reduced project capital expenditure (capex)
• 2017 was a particularly capex-heavy year, which contributed to depressed cash flows.

Key Companies and Recommendations

• AngloGold Ashanti (ANGJ.J):
  • Upgraded from Hold to Buy
  • Target Price: R175 (up from R130)
  • Expected to return to positive free cash flow in 2018
• Gold Fields (GFIJ.J):
  • Upgraded from Hold to Buy
  • Target Price: R65 (up from R52)
  • Expected to return to positive free cash flow due to reduced capex and increased production
• Harmony (HARJ.J):
  • Upgraded from Sell to Hold
  • Target Price: R25 (up from R21)
  • Expected to see cash flow improvements but faces challenges due to an equity raise and capex for a life extension project
• Sibanye-Stillwater (SGLJ.J):
  • Hold recommendation
  • Target Price: R20 (up from R15.50)
  • Forecast to deleverage to below 1x net debt to EBITDA by the end of 2019, but its palladium price outlook is uncertain

Exchange Rate and Gold Price Forecasts

• The ZAR/USD exchange rate was updated to use a blended 30- and 90-day trailing average
• For 2018E, the forecasted Rand price is R14.22/USD
• The average Rand gold price is expected to increase by 13% from 2018E to 2026E
• Gold price in USD is forecasted to remain relatively stable, with a slight decline in some years

Valuation and Trading Metrics

• An average 27% increase in price targets due to a 13% higher average Rand input
• Key metrics:
  • P/NPV: A measure of valuation
  • P/E ratio: Reflects earnings expectations
  • EV/EBITDA: Used to evaluate enterprise value relative to earnings before interest, taxes, depreciation, and amortization
  • Dividend Yield and Free Cash Flow Yield: Used to assess investment attractiveness

Key Information

Target Price Changes

Key Events to Watch in 2018

• Progress on projects like Kibali, Obuasi, Salares Norte, Stillwater Blitz, Hidden Valley, and Gruyere
• Harmony seeking $200m in equity funding to complete the acquisition of Moab Khotsong

Financial Forecasts

• Production and Sales: Expected to increase for all companies, with notable growth for AngloGold and Gold Fields
• Gold Price (R/kg): Expected to rise from R542,340 in 2016 to R664,529 in 2021
• Operating Costs: Projected to increase in some years, especially in 2017
• EBITDA Margin: Expected to improve over time, with a peak of 21.4% in 2018

Conclusion

The gold sector in South Africa is projected to recover in 2018 with improved free cash flow, driven by higher margins and reduced capex. AngloGold and Gold Fields are upgraded to Buy due to their strong fundamentals and recovery potential, while Harmony is upgraded to Hold due to ongoing challenges related to the acquisition and capex. Sibanye-Stillwater remains on Hold due to uncertainty in the palladium price outlook. The updated ZAR/USD exchange rate and gold price forecasts are crucial for the valuation of these companies, with an average 27% increase in price targets. Investors should closely monitor the progress of key projects and the impact of currency fluctuations on the sector.