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blue-chip

Two NYSE-Listed Stocks in the Buy Zone - HMC, SBSW

Dec 30, 2021 | Team Kalkine
Two NYSE-Listed Stocks in the Buy Zone - HMC, SBSW

 

Honda Motor Co., Ltd.

HMC Details

Honda Motor Co., Ltd. (NYSE: HMC) is a Japanese corporation that specializes in motorcycles, automobiles, financial services, and power products. It sells all-terrain vehicles (ATVs), side-by-sides (SxS), and motorcycles under its Motorcycle business. Automobile parts are provided by its Automobile segment. Sales financing and leasing are part of the Financial Services segment.  Power products and other related parts are provided by the power product segment. HMC has 1.81 billion American Depository Shares (ADS) listed and outstanding (each ADS representing one ordinary shares).

Latest News:

  • Zero Traffic Collision Goals: HMC announced on November 25, 2021, that it will use two essential technologies (Intelligent Driver-Assistive Technology driven by artificial intelligence (AI) and Safe and Sound Network Technology) to achieve its objective of zero traffic collision fatalities involving its motorcycles and automobiles by 2050. HMC will expand the launch of Honda SENSING 360, a recently announced omnidirectional safety and driver-assistive system, to all models to go on sale in all key markets by 2030, in order to achieve a collision-free society.

H1FY22 Results:

  • Growth in Topline: The company reported growth of 21.00% in sales to JPY 6,988.23 billion during H1FY22 (ended September 30, 2021) from JPY 5,775.14 billion during H1FY21.
  • Increase in Net Income: The company's net income increases to JPY 408.60 billion during H1FY22 from JPY 172.57 billion during H1FY21.
  • Cash and Debt Position: As of September 30, 2021, the company had cash and cash equivalents of JPY 2,810.53 billion with the total debt of JPY 7,737.95 billion.

Key Risks:

  • Purchasing and Procurement Risk: HMC seeks to keep purchasing products at reasonable costs and in a timely manner, so it buys raw materials and parts from a variety of sources and relies on a few suppliers for certain raw materials it uses to make its products. Its capacity to continue obtaining these supplies in a timely and cost-effective manner is dependent on a number of circumstances, some of which are beyond its control. These criteria include its suppliers' capacity to deliver a steady supply of raw materials and its ability to compete for supplies with other users.

Outlook:

  • FY22 Estimates: HMC expects to reach an FY22 operating profit of JPY 660 billion, which is the same as the previous FY21, through ongoing efforts to increase profitability, such as controlling selling, general, and administrative (SG&A) expenses and lowering costs.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

HMC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

HMC' share price has fallen 12.40% in the past six months and is currently leaning towards the lower-band of its 52-week range of USD 26.33 to USD 33.42. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 48.93. We have valued the stock using the Price/Earnings multiple-based relative valuation methodology and arrived at a target price of USD 33.46.

Considering the correction in the stock price in the past six months, market dominance in the automobile industry, future sustainability goals, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 28.18, down 0.03% as of December 29, 2021,

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. 

Sibanye Stillwater Limited

SBSW Details

Sibanye Stillwater Limited (NYSE: SBSW) is a mining company based in South Africa. SBSW owns and manages five gold mines in South Africa: the Cooke, DRDGOLD, Driefontein, and Kloof operations in the West Witwatersrand region, and the Beatrix operation in the southern Free State province. It owns and operates extraction and processing facilities at its mines, where gold-bearing ore is processed and beneficiated to generate gold dore, in addition to mining. SBSW has 702.10 million American Depository Shares (ADS) listed and outstanding (each ADS representing four ordinary shares).

Latest News:

  • Updates Operating Guidance: SBSW notified on December 15, 2021, that its FY21 operational guidance has been revised. SBSW safety intervention between October 28 and November 02, 2021, and the suspension of Kloof 1 shaft and Beatrix 3 shaft for the rest of the year, has resulted in a 600 kg (19,000 oz) reduction in forecast output for the SA gold operations. However, between November 29 and December 03, 2021, the SA operations regrettably suffered three distinct deadly safety events that took the lives of five of its colleagues.
  • Top Tier rating: SBSW stated on December 14, 2021, that CDP, a non-profit global environmental disclosure platform, has given it an average 'A-' rating for its Water Security.  It was the first time SBSW entered the Water Security category, and it scored higher than the global and African regional averages of 'B' and 'B-' in the metallic mineral mining sector.

H1FY21 Results:

  • Rise in Topline: The company reported a 63.49% growth in revenues to ZAR 89.95 billion during H1FY21 (ended June 30, 2021) compared to ZAR 55.02 billion during H1FY20.
  • Gold Production: During H1FY21, total gold production of 16,138 kg compared to 12,554 kg of gold produced during H1FY20.
  • Surge in Net Income: Net income for H1FY21 increased to ZAR 25.32 billion from ZAR 9.73 billion reported during H1FY20.
  • Cash and Debt Position: As of June 30, 2021, the company had cash & cash equivalents of ZAR 26.10 billion and total debt of ZAR 17.48 billion.

Key Risks:

  • Metal Price Risk: The highly unpredictable and uncontrollable prices of gold and other metals on the global market substantially impact SBSW's business. As a result, any unfavorable price movement could have a detrimental influence on the company's financial performance.

Outlook:

  • FY21 Estimates: Due to delays in delivery of certain capital assets and recent industrial action in South Africa, its capital expenditure was amended on October 28, 2021, and is now expected to be around ZAR 4,100 million. It aims to keep gold production from its SA gold operations between 27,500 and 29,500 kg in FY21, with an all-in sustaining cost (AISC) of between ZAR 815,000 and 840,000 per Kg.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

SBSW Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

SBSW's share price has fallen 30.07% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 11.15 to USD 20.68. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 47.02. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 15.00.

Considering the correction in the stock price in the past six months, strong profitability margins, robust ROE, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing  price of USD 12.50, up 0.16% as of December 29, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.