Investec upgrades Centamin to 'buy' on dividend potential

23rd Mar 2015 15:50

Full-year results from gold miner Centamin mostly missed analysts' estimates on Monday, though a much higher-than-expected dividend saw shares surge and prompted Investec to upgrade its recommendation.The broker now rates the stock as a 'buy', from 'hold' previously, though it lowered its target price from 68p to 64p.While production and cost figures were also reported for 2014, the group missed expectations with earnings before interest, tax, depreciation and amortisation (EBITDA) of just $165m, down from $234m the year before and below the consensus forecast of $176m. Earnings per share (EPS) of 7.2 cents also missed the 8.1 cents estimate."While FY14A EPS was below expectations, the dividend was a significant positive [...], highlighting confidence in ongoing cash-flow," said Investec´s Hunter Hillcoat.After a maiden dividend of 0.87 cents per share was paid at the half-year stage, Centamin proposed a final payment of 1.99 cents, taking the full-year total to 2.86 cents. This compared with the consensus prediction of just 1.3 cents."Following years of investment, Centamin is now in a position to harvest the Sukari asset and generate substantial free cash flows, enabling it to pay meaningful dividends while still continuing to build up a net cash position that can be applied against its other projects."The stock was up 16.8% at 62.8p by 16:21.