Growth Focus: Silver Lake Resources Ltd (SLR)

by Patrick Taylor


Details

Name: SILVER LAKE RESOURCES LTD (SLR)
Classification: Gold Miner
Current Price: $0.83
Market Capitalisation: $655 M
Forecast EBITDA Growth: 42.21%
Yield Estimate: 0%
Consensus Price Target: $0.87 
# Covering Analysts: 3 
Discount at Current Price: 4.82% 
Price Target Trend (3-Month): Up-Flat +6.10%
Signal Timeframe: Quarterly-Monthly-Daily
TrendBias: Up-Flat/ Medium-Short
Indicators:
Short-term: Positive
Medium-term: Positive-Neutral
Long-term: Positive

Recommendation: Buy

Focus: Capital Growth

Setup Notes

  • SLR looks to be moving into the next stage of recovery as it clears through long-term resistance, backed up by standout performance and very strong forecast growth out to 2021. 
  • Robust earnings have been driving the price recovery higher after the major price slump from 2012-15, and here we see the pattern of increasing sales and profits continuing strongly into next year with solid margins in support.
  • Pricing has broken through a key resistance ceiling at $0.80 and now has no dynamic resistance above it, leaving price free to chase structural resistance levels higher above.
  • Support ($): 0.80, 0.75, 0.70 & 0.65
  • Resistance ($): 0.90, 1.00, 1.25 & 1.50

Growth Focus: SILVER LAKE RESOURCES LTD (SLR)

The primary focus is capital gain - stocks are selected from the ASX Top 500 All Ordinaries Index.
 
Recent strength has returned the shine to Silver Lake Resources as the newly expanded gold producer and explorer looks to continue its recovery track higher on the back of robust performance and glittering forecasts.
 
Silver Lake listed on to the ASX in late-2007 and remains a gold producer and explorer based in Western Australia, with three mining centers feeding a central mill at its Mount Monger asset. The focus in recent years has been increasing production and high-grade feed while investing in expansion and exploration. This approach has worked well with the company increasing the life of mine in its core assets while eliminating debt and increasing cash balance.
 
The ability for Silver Lake to increase assets organically has been significantly boosted with the merger with Doray Minerals last month, transforming the entity into a mid-tier operator with complementary operations in WA. The stated focus will initially be in maximising the value of established assets (reporting showed year on year growth of Ore Reserves up 13% and Measured and Indicated Resources up 37%) while also running an active acquisition strategy with plenty of scope for expansion.
 
Strong fundamental performance has been key to recent strength with increasing sales, margins and profits being seen since 2016, and forecasting shows this trend is expected to stay positive through to 2021. The favourable view is matched by positive analyst sentiment and rising consensus price targets, with valuations increasing in front of price for much of the last two years, and currently offers an attractive discount today's pricing.
 
Silver Lake enjoyed some good timing by floating on the ASX just prior to the gold-run sparked when the GFC began just a few months later and has since shown a tendency to move up and own in large multi-year trends. With a greater recovery rally underway, the immense price swings that followed the boom and bust of the gold market from 2007-2013 provide key resistance targets for the current uptrend that should have further to go.
 
Right now we see important resistance barriers being broken as the stock rallied up to current levels, and we think there should be plenty of potential upside remaining for continued outperformance. Strong fundamental expectations combine well with an excellent technical profile showing growing momentum across multiple key timeframes, all of which should add to the current silver-lining.

 

Disclaimer

This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.