Petra Diamonds Ltd. – Value Analysis (LONDON:PDL) : December 19, 2017

Capitalcube gives Petra Diamonds Ltd. a score of 79.

Our analysis is based on comparing Petra Diamonds Ltd. with the following peers – Gem Diamonds Limited, Botswana Diamonds Plc, Stellar Diamonds plc and Karelian Diamond Resources Plc (GEMD-GB, BOD-GB, STEL-GB and KDR-GB).

Investment Outlook

Petra Diamonds Ltd. has a fundamental score of 79 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It currently trades at a Price/Book ratio of (0.79).
  • PDL-GB‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • PDL-GB has a successful operating model with relatively high net profit margins and asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • PDL-GB‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • While PDL-GB‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • PDL-GB seems too levered to raise additional debt.

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Leverage & Liquidity

PDL-GB would seem to have a hard time raising additional debt.

  • With debt at a relatively high 58.66% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 28.85%), and relatively tight interest coverage level of 1.12x, PDL-GB would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • Of the 4 chosen peers for the company, only 3 of the stocks have an outstanding debt balance. Companies with no debt include BOD-GB.

PDL-GB has moved to a Limited Flexibility from a relatively high leverage profile at the prior year-end.

  • PDL-GB‘s interest coverage is its lowest over the last four years and compares to a high of 6.31x in 2014.
  • The decrease in its interest coverage to 1.12x from 2.44x (in 2016) was also accompanied by a decrease in its peer median during this period to 2.63x from 43.41x.
  • Interest coverage rose 39.46 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • PDL-GB‘s debt-EV is its highest over the last four years and compares to a low of 11.92% in 2014.
  • The increase in its debt-EV to 58.66% from 38.70% (in 2016) was also accompanied by an increase in its peer median during this period to 28.85% from 7.51%.
  • Relative to peers, debt-EV fell 1.37 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Gem Diamonds Limited 13.54 1.18 4.15 233.87
Botswana Diamonds Plc 0 0.39 No interest exp 999
Stellar Diamonds plc 44.17 0.26 -4.84 -104.09
Karelian Diamond Resources Plc N/A 1.7 0 -153.28
Petra Diamonds Limited 58.66 1.2 1.12 22.58
Peer Median 28.85 1.18 2.63 22.58
Best In Class 13.54 1.7 No interest exp 999

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Company Profile

Petra Diamonds Ltd. operates as an independent diamond mining group, which engages in supplying rough diamonds to the international market. Its projects include Finsch, Cullinan, Koffiefontein, Kimberley Underground, and Williamson. The firm operates through Mining and Exploration segments. The Mining segment engages in the extraction and sale of rough diamonds from mining operations in South Africa and Tanzania. The Exploration segment consists of exploration activities in Botswana and South Africa. The company was founded by Adonis Pouroulis in March 25, 1997 and is headquartered in London, the United Kingdom.


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