CNMC Gold

CNMC Gold: DBSV has an unrated note, but values co. at $0.50, based on 10x FY13 P/E, given CNMC’s growth profile and identified gold resource with mine life of 10 years. Note that re-rating catalysts come from production ramp-up and upward revision in gold resource. Listed on 28 Oct 2011 at $0.40, its stock price peaked at $0.58 in mid-Nov 2011 before plunging to a low of $0.30 in end June 2012. House believe the sluggish share price was due to execution disappointments with the company missing its output guidance and the delay with the heap leach plant. Its fortune has changed with the rollout of that facility, which should lead to meaningful production increases. For the share price to re-rate beyond its fair value, successful exploration of gold resources in its huge unexplored area (7sq km vs 3 sq km) along Kelantan’s gold belt would be a key catalyst.