Source: Sharecast
Pan African shares closed down roughly 3.6% on Wednesday and took the weekly drop to around 14%, having sold off on 10 February following the release of a H1 trading statement that guided for lower earnings.
Berenberg stated the quantum of the selloff was, in its view, a reflection of "a stellar share price performance" over the past 12 months and "perhaps some profit taking".
The German bank noted that the results themselves flagged cost pressure in Pan African's two underground assets in South Africa, with management working to cut costs at these assets.
"Still, these assets are higher cost than the low-cost surface deposits that comprise the majority of production," noted Berenberg. "While Barberton and Evander should generate decent cash flow in H2 and beyond at current elevated gold prices, we think that investors want to see costs coming lower at these assets and look for demonstrable signs of this."
Berenberg adjusted its model for the H1 results and made some "conservative adjustments" to expenses given higher costs at mines like Barberton and Evander.
"We lift our EV/EBITDA multiple to 4.5x (from 3.9x) to reflect portfolio growth not exhibited in current multiples, but adjusted forecasts and a softer NAV sees our price target move to 39.0p per share. We remain 'buy'-rated, with the shares trading on 1.15x NAV and 2.3x FY26E EBITDA, but H2 needs to be a half of delivery."
Reporting by Iain Gilbert at Sharecast.com