Lucara Diamond Corp. is a Canada-based diamond mining company. The Company is focused on the development and operation of diamond properties in Africa. The Company holds a 100% interest in the Karowe Mine located in Botswana and a 100% interest in Clara Diamond Solutions Limited Partnership (Clara). Clara operates a secure, digital diamond sales platform that uses analytics together with cloud and blockchain technologies.

Canada

Lucara Diamond Corp.

Basic Materials

The company pays dividends irregularly. There have only been a few years with dividend payments in the past ten years. Dividend per share (DPS) has grown yearly, and there is a clear trend. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. 

LUC.ST reported revenue of USD 195mn in the last 12 months, down 5% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 18% from FY24 to USD 0.11. Market expects EPS to reach USD 0.02 in FY25.

Over the past six months, the stock has consistently fallen, resulting in a 54% total decrease. When measured against its worldwide peers from the same industry (as shown above), the stock has been weaker, underperforming by 75ppts. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is slightly unfavourable.

The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 37.2% in the last 12 months, up from 23.1% in FY23. 

Historically, LUC.ST has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 24.5%, a growth from -11.4% in FY23. 

Lucara Diamond Corp. reported a return on equity (RoE) of 18.4% in the last 12 months, up from -7.9% in FY23. The market consensus projects an RoE of -2.8% in FY24, again behind its peers. 

Another important profitability metric, return on assets (RoA), amounted to 7.6% in the last 12 months, an increase from -3.8% in FY23. The market analysts predict that RoA will be -1.2% in FY24, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 8.7%, below the peers. The consensus estimate for FY24 for RoCE is 1.6%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.9 in the past several years. This ratio implies a strong shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

LUC.ST has very poor trading liquidity. It will take several trading days for the average private investor to sell a common position under normal market conditions. Liquidity is very unstable and becomes extremely unfavourable on the days with the lowest activity. However, under highly turbulent market conditions, the trading volume tends to improve significantly. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is minimal. We note robust profitability, solid return on capital, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to slow historical revenue growth, excessive margin volatility.

In highly turbulent market conditions, LUC.ST is volatile. In other words, the stock will fall much more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be large. 

In normal market circumstances, LUC.ST is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to average. We would also like to highlight the mild intraday volatility of the instrument. 

Based on key historical and expected multiples, the stock is greatly undervalued relative to its peers. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITDA, undervalued on P/FCF. 

Lucara Diamond Corp.

SEK 1.7

4

Lucara Diamond Corp.

SEK 1.7

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

SEK 1.7

About

About

About

About