Independent Online

Monday, June 27, 2022

Like us on FacebookFollow us on TwitterView weather by locationView market indicators

Momentum’s stock pick of the week: Gemfields

Published Apr 8, 2022


Momentum’s stockbroking division, Momentum Securities, said yesterday that its stock pick of the week was the Gemfields Group.

Gemfields, a company incorporated in Guernsey and headquartered in London, UK, is a supplier of coloured gemstones. The company specialises in the mining, processing and sale of coloured gemstones, in particular emeralds and rubies.

Story continues below Advertisement

Faheema Adia, an equity analyst at Momentum Securities, said yesterday that a key component of Gemfields’ model had been the development of its proprietary grading system and a pioneering auction and trading platform.

“Gemfields has reported an excellent set of results for FY21 (full year 2021), rebounding well from the impact of Covid-19, which has in the past, disrupted operations,” she said.

The group had reported record-high revenue and cash flow generation, benefiting from the Covid-19 related demand. This record-high revenue and the high price per carat achieved during 2021, showed a positive development in both travel and product demand.

Story continues below Advertisement

“We expect the demand to remain strong and Gemstone pricing to remain elevated for FY 22 and FY 23,” Adia said.

In terms of the valuation, Gemfields was trading at a 12-month forward price to earnings (PE) of 5.6 times. This was below the average peer forward PE of 6.7 times, it was also trading below Gemfields own five-year historic forward PE of 21 times.

“In our view, it is undervalued and looks attractive at the current price level of R3.62. We have a price target of R6 on the share, which would result in an upside of over 65 percent,” she said.

Story continues below Advertisement


Related Topics:

miningStock Markets