On Friday, Central Asia Metals reported production results for the third quarter of 2014.
The company's 3Q2014 production increased by 12.7% YoY to 3,337 tons of copper cathode, while for 9M2014 output rose by 7.8% YoY to 8,432 tons of copper cathode. The management reiterated its 2014 production guidance of 11,000 tons of copper cathode.
Also during the quarter CAML commissioned an additional boiler capacity of 5.6MW, which will facilitate increased production throughout the winter months.
Our view. The news is positive for the stock price as strong 3Q2014 and 9M2014 production results suggest that the company is likely to achieve higher-than-guided full-year output. Last year, the company produced 75% of its annual output during the first nine months and 28% in the third quarter. Therefore, extrapolating from the above values, we arrive at expected 2014 output in the 11,240-11,920 range. As a result, we revise our 2014 production estimate from 11,000 to 11 600 tons (up 5.5%).
We maintain a Buy recommendation on the stock and increase our 12-month target price by 6GBp to 236 GBp. We expect the full year revenue and net income at $80.5mn and $40mn, respectively. We increase our full-year dividend forecast from 10GBp to 11GBp per share which implies a 6.4% dividend yield to the last close price.