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ST Barbara Ltd (SBM) - The Comeback Kid

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St Barbara Ltd (SBM) reported double digit growth for their FY17 results with underlying NPAT of $160m (+26% y-o-y), operating cashflow of $303m (+25% y-o-y) and EBITDA of $321m (+13% Y-o-Y). Consolidated gold production for FY17 came in at 381koz at an AISC of $907/oz, at a realised gold price of A$1,685/oz generating EBITDA margins of 50%. FY18 guidance of 350-375koz @ AISC $970-1,035/oz was announced, with production back-weighted to 2HFY18 to incorporate mine sequencing from Gwalia as the extension project is implemented. SBM announced its maiden dividend of 6cps (2% dividend yield), but remains cautious on a consistent policy pending balance sheet strength. FY17 was a standout year with over $228m of debt repaid. SBM has made a stellar comeback, and is appealing longer term. However, with capex expected to double and lower forecast FY18 production and higher costs at Gwalia we see limited upside versus our valuation at this juncture. HOLD maintained.

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