Things have been going pretty well for KAZ Minerals (LSE: KAZ) shareholders of late. Following the prolonged share-price slump that started in 2010, there’s been an impressive recovery — and at today’s 820p level, we’re looking at a 10-bagger since the lows of late 2015.
A recovery in the price of copper has been a big help, with the metal putting on around 50% over the past 12 months, and the ongoing ramping up of production volumes at KAZ has strengthened the surge.
That production rise is set to continue after the company told us it has received approval for a $1.2bn expansion at its Aktogay copper mine in Kazakhstan. The project will double Aktogay’s sulphide ore processing capacity starting in 2021, from 25m tonnes per year to 50m. Current output of copper from sulphide ore should rise by 80 kt to around 170 kt.
Heavy debt
When I last looked at KAZ Minerals in July, I liked what I saw, especially the low P/E and PEG growth characteristics. But since then, the share price has put on nearly 30%, and I’m starting to wonder if the current bull run might be running out of steam.
I’ve also been looking more closely at the debt situation, and I’m actually a bit more concerned now than I was then. Although the debt figure has been cut to $2.2bn since a 2016 year-end level of $2.7bn, that’s actually still a pretty big multiple of pre-tax profit — about 4.8 times this year’s forecast figure.
I still like the long-term outlook, but I think I see better bargains elsewhere now, and if I owned these shares I think I’d be looking to cut my holding and take some profit.
Cash cow
A multi-bagger that I’d consider transferring my money to is Games Workshop Group (LSE: GAW) whose shares have almost quadrupled in value over the past 12 months, to 2,515p.
Back in October I was bullish about what still seemed like a modest P/E rating, and the company’s subsequent trading updates have kept me on board. After telling us in October that sales were continuing strongly, December’s update revealed estimated sales of around £109m for the first six months of the current year, generating an operating profit of about £38m.
It’s early days yet, but with sales and profits growing “in all channels in constant currency terms“, the board reckons things are going in line with full-year expectations.
That suggests we could be seeing an 80% hike in earnings per share. Even after the share price rises, that would still leave the P/E multiple at around 15.5, and I don’t see that as too stretching at all.
Dividend
The big attraction for me is dividend income, and it’s unusual for a company going through such a strong growth phase to also be distributing much in the way of cash. But Games Workshop’s forecast full-year dividend yield stands at around 5%.
Admittedly, cover is looking modest at around 1.3 times — and there is a small fall in EPS pencilled in for 2019, which could put the dividend under a little pressure.
But even if earnings growth is set to slow (which it inevitably will at some stage), as a mature post-growth dividend payer, I’d still see this as a tempting investment.
At this stage, I’d buy for the dividends and take any future growth as a bonus.
