This ASX 200 gold stock can rise 30% and could be a takeover target

Bell Potter thinks investors should be snapping up this gold miner before it's too late.

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Investors who are looking to add some gold exposure to their investment portfolio might want to consider the ASX 200 gold stock in this article.

That's because if the team at Bell Potter are on the money with their recommendation, there could be some very big returns on the cards for investors.

Which ASX 200 gold stock is the broker bullish on?

According to a note from last week, the broker is tipping Regis Resources Ltd (ASX: RRL) as a top buy right now.

The note reveals that its analysts have reiterated their buy rating with an improved price target of $2.80.

Based on its current share price of $2.12, this implies a potential upside of 32% for this ASX 200 stock over the next 12 months.

To put that into context, a $10,000 investment would become $13,200 by this time next year if Bell Potter's recommendation proves accurate.

The broker also sees potential for further gains, noting that the gold miner could be an attractive takeover option for a larger player.

What did the broker say?

Firstly, let's take a look at what the broker was saying about the ASX 200 gold stock's recent quarterly update.

Its analysts note that production was softer than expected due to heavy rainfall. However, it is happy to overlook this as management has reaffirmed its FY 2024 guidance and the company is now benefitting from unhedged gold sales. It said:

RRL released its March 2024 quarterly report, which came in below our expectations as a result of the impacts of severe rainfall events during the quarter. RRL achieved production of 90.6koz at AISC of A$2,735/oz, vs BPe 104.1koz at AISC of A$2,081/oz and FY24 guidance 108.8koz at AISC of A$2,155/oz (midpoint basis). Tropicana was particularly hard hit, with attributable production dropping 40% from 38.8koz to 23.2koz qoq, as processing was forced to be suspended from 22 March to 1 April.

Despite this, FY24 guidance has been maintained at for production of 415koz – 455koz at AISC of between A$1,995/oz and A$2,315/oz. RRL enjoyed its first full quarter of unhedged gold sales and at quarter-end held cash and bullion of $186m (from $155m qoq) and drawn debt of $300m.

Why is it a buy?

Bell Potter believes the ASX 200 gold stock is undervalued at current levels. This is thanks to its unhedged gold sales, local operations, strong cash flow generation, and takeover appeal. It explains:

Earnings changes in this report are: FY24: +28%; FY25: +20% and FY26: +7% as our increased gold price forecast offsets the weaker than expected March 2024 quarter performance. RRL is the 5th largest ASX gold producer and the largest with an all-Australian asset portfolio. RRL offers unhedged exposure to the gold price and strong free cash flow growth over FY24 and FY25. These attributes also make RRL an appealing corporate target in the current M&A environment. Our NPV-based valuation is up 8% to $2.80/sh and we retain our Buy recommendation.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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