DRD took a tumble this week, at > 50% below fair value is this a buy opportunity after a week of Index Exit adjustment or more of the same ahead? DRD this week does not seem to have been tracking gold price recently. Is DRD finally in sync with the current gold price range or more downside coming? Any ideas?
Thank you for the chart. Gold miners and Precious metals prices seasonality weak period until end October .December to February strong seasonality. Thanks
In terms of valuation, we highlight that DRDGold trades at a discount to mid and large-cap market leaders on consensus revenue. A forward EV to Revenue ratio of 2.8x compares to 3.6x in GoldFields Ltd (GFI)and 3.1x from AngloGold Ashanti Ltd (AU) which are also South African based gold producers. One explanation for DRDGold lower growth premium is based on its smaller scale with only 2 major operating projects. Separately, the market may be discounting the stock given the controlling interest from Sibayne Stillwater while other names are more independent.With the same group of companies, we also highlight that DRDGold is an exception among gold miners as it does not carry long term debt. In some ways, the financial leverage is positive in a bullish commodity pricing environment but the strong balance sheet from DRDGold adds to its quality and should limit risk in a potential market downturn. Finally, as mentioned, DRDGold has one of the highest dividend yields in the sector.We believe the combination of strong earnings, attractive dividends, and positive long-term growth outlook offers a compelling buying opportunity. The company is well-positioned to benefit from the current bullish trends in Gold where we see more upside for the year ahead.
While there is always the risk that the stock can see further pressure should gold pricing decline, DRDGold's unlevered balance sheet could limit downside volatility on a relative basis. Monitoring points going forward include production levels as the ERGO mine operation normalizes and we want to watch closely the operating margins indicative of yields. This was a view I agree with and i thing they are going to grow ....they are trying to enter the PGM market ( Sibanye might provide that access and looking for further growth options as we speak )