Executive Summary
The return to the dividend from 2020 …, positive outlook in 2021
2020 achievements without surprises
The growth of SMI's activity in 2020 is in line with our initial forecasts (C.f. Start 2021 under the cash-conversion perspective). This is a slight increase in revenue of 0.5% to MAD 856 Mn against an estimate of MAD 865 Mn. In addition, EBITDA and NI are relatively lower-than-expected with respective annual achievement rates of 91% and 80%.
A profitable silver price, not yet reflected in profits
It is important to note that the SMI's financial performance during 2020 is far from reflecting the favorable mining context, for two main reasons :
- A -19% drop in silver production, from 170 T in 2019 to 138 T in 2020. This situation is linked to the business continuity plan put in place in dealing with the health crisis'context. As a reminder, recurring production of Imiter mine is around 180 T, i.e. 30% higher than the level recorded in 2020 ;
- An average silver selling price of $ 20.5 Oz in 2020 showing a 23% discount in comparison of the average spot price in 2021 (i.e. $ 26.5 Oz).
The return to the dividend, a positive signal for 2021
As expected, the SMI returns to the dividend in 2020, after two successive years of retention in 2018 and 2019. The mining company announced a DPA of MAD 50 compared to an initial estimate of MAD 60. This is equivalent to an 85% payout which would now be an indicator of the operator's future distribution policy.
Maintaining our target price at MAD 2,420 offering an upside of 22%
We believe that 2020 is not a basis year for SMI in terms of both earnings and dividend. The return to production of 170 T and the improvement in the average silver selling price by 25% in 2021 will have a cumulative impact on revenues for over 45%.
To this end, we are keeping our growth scenario unchanged, namely a doubling of the earning power going from MAD 97 Mn in 2020 to MAD 196 Mn in 2021. Consequently, the DPS would be around MAD 100 DH against an average level of MAD 143 over the period 2010-2017.
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