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Petra's growth looks priced-in

RESULTS: Diamond minder Petra is growing solidly - but shorter-term weakness in the rough diamond market could limit the share price upside
September 25, 2012

Exceptional items may have meant a slide in full-year profits for diamond miner Petra Diamonds (PDL), but production grew by an impressive 98 per cent year-on-year to 2.2m carats - beating output targets and helping boost revenues. Still, with the rough diamond market set to remain weak in the short-term, Petra’s growth isn't enough to drive the shares up much further.

IC TIP: Hold at 121p

Buying the Finsch mine last year, and the resultant production boost, leaves Petra well on the way to reaching its 5m carats a year production target by 2019. Nevertheless, spending plans have been revised slightly so as to limit expansion spending by $60m (£37m) to $170m in 2013. That seems sensible while diamond prices remain soft and the company renegotiates its debt facilities. Fortunately, a syndicate of Petra’s lenders recently gave a provisional thumbs-up to a new funding arrangement, which increases the likelihood of Petra making good on its big plans: it's expecting to boost production by 30 per cent in the next year.

Goldman Sachs forecasts underlying EPS of 17¢ in 2013 compared to a loss per share of 3¢ in the year to end-June - which reflected unrealised foreign exchange losses of $39m.

PETRA DIAMONDS (PDL)

ORD PRICE:121pMARKET VALUE:£612m
TOUCH:121-122p12-MONTH HIGH:189pLOW: 93p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:126¢NET DEBT:3%*

Year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
200877.09.30-3.20nil
200969.0-93.9-50.2nil
201016469.022.7nil
201122164.412.8nil
20123178.40-0.48nil
% change+43-87--

*Includes $16m of restricted cash

£1=$1.62