{"id":323439,"date":"2023-05-31T00:14:40","date_gmt":"2023-05-30T16:14:40","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=323439"},"modified":"2023-07-13T00:45:07","modified_gmt":"2023-07-12T16:45:07","slug":"stock-in-focus-apex-mining-co-inc-apx-31-may-2023-by-ab-capital-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-apex-mining-co-inc-apx-31-may-2023-by-ab-capital-securities\/","title":{"rendered":"Stock in Focus: Apex Mining Co. Inc. (APX) – 31 May 2023 by AB Capital Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>APX<\/td><\/tr>
Company Name<\/strong><\/td>Apex Mining Co. Inc.<\/td><\/tr>
Broker<\/strong><\/td>AB Capital Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>31 May 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 3.02<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Despite the 50% year-to-date (YTD) gain on the stock, we reiterate our BUY recommendation and retain our fair value Target Price estimate of P3.02\/share. <\/p>\n\n\n\n

We revise our top-line 2023 forecasts upward from P10.4 Billion to P11.5 Billion given the sustained elevation in gold prices. The higher top-line is offset, however, by the uptick in cash production costs and lower production volume expected for the year. As a result, we revise our bottomline forecast down from P3.9 Billion to P3.7 Billion.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

1Q 2023 net income hit P549 Million<\/strong><\/p>\n\n\n\n

Apex Mining Co. Inc.’s net income during the 1st quarter (1Q) 2023 hit P549 Million, down 15% year-on-year (YoY) despite the 16% jump in top-line. While the Company recorded higher gold prices, higher gold ore grades and a weaker Peso vs. the first quarter of 2022, the lower production as a result of a series of force majeure events and jump in operating costs squeezed profits. Result is tracking behind our estimates, accounting for only 14% of full year earnings.<\/p>\n\n\n\n

Disruptions led to a drop in production volume in Maco<\/strong><\/p>\n\n\n\n

A prolonged series of earthquakes and aftershocks, and as a result, safety inspections, led to a 5.74-day interruption in operations and brought mine production down 3% YoY to only 183,273 tonnes despite the higher production capacity of the Maco mine. <\/p>\n\n\n\n

Nevertheless, higher ore gold grades (averaging 4.56 grams per tonne vs. only 3.76 grams per tonne in 1Q22) and improved recovery rate (88.77% vs. 87.26% in 1Q22) led to a 6.5% increase in gold production to 23,608 ounces. This, coupled with higher realized gold price of US$1,929 (vs. US$1,872 in 1Q22) and a weaker Peso of US$54.42 (vs. US$51.52 in 1Q22) drove the 16% jump in top-line to P2.6Bn. Management noted that the Maco mine is now fully operational and mine production should improve starting 2Q.<\/p>\n\n\n\n

Input cost inflation, higher power prices and additional manpower squeezed profits<\/strong><\/p>\n\n\n\n

As a result, GPM and NIM contracted 8ppts YoY to 39% and 21%, respectively in 1Q23. Power costs jumped 84% YoY due to the surge in fuel and coal prices, despite the lower power usage per tonne. General & administrative expenses also increased 62% YoY as the Company increased its manpower as an effect of the normalization of its workforce after the pandemic and as the Company starts exploration efforts on its new mines. Management expects margins to improve starting 2Q as the Company begins to pick up volume production and as input cost pressures ease.<\/p>\n\n\n\n

New growth prospects unveiled after AAMRC acquisition<\/strong><\/p>\n\n\n\n

Recall that in December 2022, APX disclosed the acquisition of Asia Alliance Mining Resource Corp. (AAMRC) which operates the North Davao mines that surround the Company\u2019s existing Maco mine. Management highlighted three specific mines within the North Davao property, namely Amacan, Piaminyan and Hijo mines, which have prospective gold and copper deposits. The Company plans to fast-track validation drilling for the Hijo mine (gold) as part of its plan to maximize its gold play before going into copper. In addition, management noted that the veins of its existing Maco mine actually extend to the North Davao property that surrounds it, which should make it easier to reach the mineral deposits in the North Davao property in the future. Validation drilling needs to be completed before we get a clearer picture of how much this could boost the Company\u2019s capacity and earning potential.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>