• Revenue increased 4% QoQ and 180% YoY, exceeding our estimate by 2%, driven by higher gold prices. EBITDA and free cash flows improved significantly both QoQ and YoY.
  • As of September 2024, MMY had $24M in working capital, with no debt.
  • The company is planning a resource upgrade drill program in the coming months aimed at potentially converting inferred to M&I resources. MMY has not engaged in exploration at its Murchison gold project in Australia lately, but management intends to start with historical resource confirmation drilling, and regional geological analysis.
  • Gold is trading near record highs. We are more bullish on gold stocks than the metal itself, with gold producer valuations averaging 12% lower than the past three instances when gold surpassed $2k/oz. 
  • The sector has experienced multiple M&A activity this year. We foresee larger miners continuing to grow their portfolios via M&A.
  • MMY is up 67% YoY, but remains significantly undervalued, trading at just 0.9x forward EBITDA, compared to the sector average of 5.8x, an 84% discount. We anticipate record production and EPS in FY2025.

 

Price Performance (1-year)

 

  YTD 12M
MMY 47% 67%
TSXV 12% 13%
Gold 30% 29%
GDXJ 30% 26%

 

 

Portfolio Summary

Owns a producing gold mine in Malaysia, and exploration projects in Western Australia. Total compliant resources of over 1.2 Moz Au 

 

MMY has been processing sulphide materials since December 2022, with cumulative production exceeding 46 Koz by September 2024

Q1 production was up 11% YoY to 8 Koz, but down 33% QoQ, missing our estimate by 11%, as the company processed lower grade ore

We expect grades will improve in the coming quarters, as the average grade of the sulphide reserves is 15% higher than the Q1 average

 

Despite lower grades, cash costs declined 1% QoQ and YoY to $837/oz, driven by operational efficiencies, beating our estimate of $890/oz

With over 700 Koz of sulfide resources remaining, we believe the mine could produce up to 14 more years, with annual production expected to rise to 40 Koz from the previous five-year average of 12.5 Koz

 

Financials (Year-End: June 30th) 

Q1 revenue was up 4% QoQ, and 180% YoY, beating our estimate by 2%, driven by higher gold prices

EBITDA margins, EBITDA, and free cash flows improved significantly both QoQ and YoY, driven by higher revenue and lower cash costs

However, EPS declined QoQ due to unusual FOREX losses driven by a weaker US$. Strong balance sheet, with $25M in working capital, and no debt

 

FRC Projections and Valuation 

We are raising our EPS estimates due to higher gold prices, partially offset by lower production in Q1

Sector multiples are down 8% since our previous report in October 2024. MMY is trading at a 77% discount (previously 75%) to comparable junior gold miners

 

Applying sector multiples, we arrived at a fair value estimate of C$0.45/share (previously C$0.43/share) on the Selinsing mine

Our DCF valuation on Selinsing is C$0.43/share (previously C$0.42/share), driven by higher near-term EPS estimates.

 

Using a sum-of-parts valuation model, we arrived at a fair value estimate of C$0.59/share (previously C$0.56/share)

We are reiterating our BUY rating, and adjusting our fair value estimate from C$0.56 to C$0.59/share. MMY delivered solid operational performance in Q1-FY2025, despite lower grades. While the stock has seen significant gains in the past 12 months, its valuation remains attractive compared to peers. Given our bullish outlook for gold, and potential M&A activity in the sector, we believe MMY offers significant upside potential.

 

Risks

The following risks, though not exhaustive, will cause our estimates to differ from actual results:

  • The value of the company is dependent on gold prices 
  • FOREX
  • Operational 
  • Exploration and development 

Maintaining our risk rating of 4 (Speculative)

 

APPENDIX