On today’s TSX Breakouts report, there are 23 stocks on the positive breakouts list (stocks with positive price momentum), and 16 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that is on the cusp of appearing on the positive breakouts list - B2Gold Corp. (BTO-T).
The company has a number of catalysts in the months ahead that could give the share price a lift. In addition, should global economic growth concerns and trade tensions between the U.S. and China intensify, the price of gold could trend higher. The stock has 14 buy recommendations and a 27-per-cent expected one-year return. Last month, the company reported solid financial results and management announced an inaugural dividend.
A brief outline is provided below that may serve as a springboard for further fundamental research.
Headquartered in Vancouver, B2Gold is a gold producer with three operating mines, the Fekola Mine (located in Mali), Masbate Mine (located in the Philippines), and Otjikoto (located in Namibia).
After the market closed on Nov. 5, the company reported solid third-quarter financial results. The company reported adjusted earnings per share of 9 US cents, surpassing the consensus estimate of 7 US cents. Cash flow per share was 16 US cents, beating the Street’s forecast of 13 US cents. Production from continuing operations was 213,000 ounces. Consolidated all-in sustaining costs (AISC) from continuing operations were US$755 per ounce. The company has a strong balance sheet with US$146-million in cash and cash equivalents at quarter-end.
Management’s production growth outlook is positive. For 2019, management anticipates consolidated gold production will come in around the middle of its guidance of between 935,000 ounces and 975,000 ounces, the bulk of which will come from the Fekola Mine. Gold production from Fekola is anticipated to be between 420,000 ounces and 430,000 ounces. Masbate is expected to produce between 200,000 ounces and 210,000 ounces of gold. Finally, at Otjiko, management is guiding to producing between 165,000 ounces and 175,000 ounces of gold. The consolidate AISC is forecast to be between US$835 and US$875 per ounce. Looking out to 2020, production is expected to be between 995,000 ounces and 1.04-million ounces. Projected AISC for 2020 will be announced when the company releases its first quarter 2020 financial results.
The company has a strong organic growth profile given its upcoming exploration and development activities. Potential near-term catalysts include a new mineral resource that will be provided on the Fekola Mine before year-end with an updated mine plan provided in the first quarter of 2020. At Otjikoto, exploration results and an underground mining study at the Wolfshag pit will be released before year end.
The company will be hosting an investor day in Vancouver on Dec. 9.
In the earnings release issued on Nov. 5, management announced its inaugural dividend, “B2Gold’s Board of Directors declared its first dividend of $0.01 per common share and expects to declare future dividends quarterly at the same level (which on an annualized basis would amount to $0.04 per common share), subject to authorization of the board of directors and all applicable laws.”
On the earnings call, president and chief executive officer Clive Johnson said, “We’ve actually announced yesterday that we’re paying our first dividend and that’s a very important milestone for the company, and I believe for its shareholders.”
He added, “The goal all along when we created B2Gold 11 years ago, what we aspired was to become a successful low-cost responsible gold producer that could generate cash flow for two reasons. One is to continue to grow the company by building additional great projects and finding more gold, but the other was ultimately to see if we could do that but at the same time pay a dividend back to our shareholders, and that’s where we are with the start of this dividend. Obviously, it’s something we’ll look to grow over time and so it’s a good start. I think it puts us in the middle of a pack in terms of gold producer dividends. But once again, we’re a growth company so we want to make sure we maintain enough cash flow and access to cheap debt to be able to continue to do what we do and that’s building very good gold mines and running them extremely well.”
This mid-cap stock is well covered.
Since the company released its third-quarter financial results, 15 analysts that have issued reports, of which 14 analysts have buy recommendations and one analyst has a ‘hold’ recommendation (Anthony Campagna, an analyst at ISS-EVA). BofA Merrill Lynch’s Lawson Winder also covers the company, however he has not revealed a rating.
The firms providing recent research coverage on the company are: BofA Merrill Lynch, BMO Nesbitt Burns, Canaccord Genuity, CIBC World Markets, Cormark Securities, Eight Capital, GMP, Haywood Securities, ISS-EVA, M Partners, National Bank Financial, PI Financial, Raymond James, RBC Dominion Securities, Scotiabank, and TD Securities.
This month, after the company reported its quarterly earnings results, several analysts increased their target prices for its shares, including:
- National Bank’s Don Demarco to $8 (the high on the Street) from $7.50.
- PI Financial’s Chris Thompson to $6 to $5.60.
- TD Securities’ Steven Green to $7.50 from $7.
- ISS-EVA’s Anthony Campagna upgraded the stock to a “hold” recommendation from an “underweight” recommendation.
The Street is forecasting earnings per share of 22 US cents in 2019 and 32 US cents in 2020. Cash flow per share is anticipated to come in at 48 US cents in 2019, rising to 62 US cents in 2020.
Earnings expectations have increased in recent months. To illustrate, three months ago, the Street was forecasting earnings per share of 20 US cents for 2019 and 32 US cents for 2020. Cash flow per share was expected to come in at 46 US cents in 2019 and 59 US cents in 2020.
The stock is commonly valued on a price-to-net asset value basis and at a price-to-cash flow basis.
According to Bloomberg, the stock trades at a price-to-cash flow multiple of 6 times the 2020 consensus estimate, in-line with its five-year historical average.
The average one-year target price is $6.29, suggesting the share price has 27 per cent upside potential over the next 12 months. However, target prices vary widely, ranging from a low of $5.30 from Haywood Securities’ Steven Butler to a high of $8 from National Bank’s Don Demarco.
Insider transaction activity
Quarter-to-date, two insiders have reported trades in the public market – both sales.
On Dec. 2, Kevin Bullock, who sits on the board of directors, exercised his options, receiving 50,000 shares at a cost per share of $2, and sold 50,000 shares at a price per share of $4.94 according to Bloomberg, leaving 60,367 shares in his account. Net proceeds, not including trading fees, totaled $147,000.
On Nov. 26, Roger Richer, executive vice-president, general counsel and secretary, exercised his options, receiving a total of 200,000 shares at a cost per share of $1.12, and sold 200,000 shares at an average price per share of approximately $4.73 with 1,350,000 shares remaining in his account. Net proceeds, not including trading fees, exceeded $722,000.
Year-to-date, the stock has lagged its peers. The share price is up 24 per cent, while its gold sector peers such as Alacer Gold Corp., Eldorado Gold Corp., and Detour Gold Corp., are up 199 per cent, 162 per cent, and 116 per cent, respectively. Alacer Gold is the top performing stock in the S&P/TSX composite index year-to-date.
Looking at key technical resistance and support levels, the stock price is approaching an initial ceiling of resistance between $5 and $5.15, near its record closing high of $5.16 reached on Aug. 7. After that, there is a major resistance around $6. There is downside support around $4.50, close to its 50-day moving average (at $4.55). Failing that, there is strong support around $4, near its 200-day moving average (at $4.16)
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.