1. Anglo Australian Resources NL (Recommendation: Speculative Buy, Market Cap: ~$54.84 million)
Anglo Australian Resources NL (ASX: AAR) is engaged in the exploration and mining of Gold and Base Metals (Copper, Lead, Zinc) in Australia.
Operational and Financial Highlights: Post divestment of Koongie Park, AAR intends to focus on exploration activities at its flagship Mandilla Gold project near Kalgoorlie, WA. In this regard, AAR finished 293 air-core drill holes during the March 2022 quarter for an aggregate of 10,260m identified significant gold anomalism to the southeast of Eos. The upgraded JORC 2012 Mineral Resource Estimate (MRE) stood at 24Mt at 1.0g/t Au for 784koz of contained gold completed, encompassing the cornerstone Theia and Iris deposits and an inaugural MRE at the Eos discovery. The company had closed the quarter with a cash balance of $4.8 million. Subsequent to the end of the quarter, the Company officially changed its name to Astral Resources, formerly Anglo Australian Resources. On April 5, 2022, AAR inked an agreement with AuKing Mining Limited (ASX: AKN) to acquire the remaining 25% JV interest from Astral, together with gold and PGE rights, for total consideration of A$6 million.
Operating Income (Source: Analysis by Kalkine Group)
Outlook: The divestment of Koongie Park further simplifies the company’s portfolio while providing additional working capital to deliver incremental growth at Mandilla and re-commence exploration activities at Feysville. AAR would be focused on initiating drilling at Feysville after receiving necessary approvals in the near future. In addition, the company believes that the initial exploration would commence diamond drilling at Think Big to enhance the structural understanding of this target.
SWOT Analysis:
Stock Recommendation:
- During the past one month, the stock has corrected by ~16.36% and is trading below its 52-week low-high average of $0.074 - $0.125, respectively.
- On a TTM basis, the stock is trading at a P/BV multiple of 2.5x against the industry median (Basis Materials) of 3.4x. Thus, it seems that the stock is undervalued at the current trading levels.
- Key Risks: COVID-19 Disruption, Climate Change Risk, Commodity Price Risk, etc.
- Considering the completion of new AC drilling, nil debt to equity, current trading level, valuation on a TTM basis, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of $0.092 as on 28 April 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
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AAR Daily Technical Chart, Data Source: REFINITIV
2. MC Mining Limited (Recommendation: Speculative Buy, Market Cap: ~$26.98 million)
MC Mining Limited (ASX: MCM) is a coal exploration, development and mining company operating in South Africa. The company’s key projects include the Uitkomst Colliery, Makhado Project, Vele Colliery, and the Greater Soutpansberg Projects.
Key Business Updates: On April 11, 2022, the company has appointed Mr Nhlanhla Nene as Chairman and Mr Godfrey Gomwe as Chief Executive Officer. MCM also appointed Mr Mathews Senosi to the role of Non-Executive Director with immediate effect. As announced on 13 April 2022, the company notified about the completion of a Bankable Feasibility Study (BFS) for its fully licenced Makhado hard coking coal project. MCM is likely to finalise the financing for the Makhado Project in Q3 CY2022, and construction for the same to commence soon.
Insights of 1HFY22 and Recent Quarterly Updates: Revenue for 1HFY22 amounted to US$13.0 million against US$8.8 million in 1HFY21, and the cost of sales for half stood at US$10.9 million, which resulted in a gross profit of US$2.1 million against a gross loss of US$0.4 million in 1HFY21. As per the Q3FY22 update, MCM had cash and cash equivalents of US$2.95 million as compared to US$1.86 million in the preceding quarter.
Cash Cycle (Source: Analysis by Kalkine Group)
Outlook: The company experienced a rising demand for coal during Q2FY22, which led to a rise in the price of quality South African export thermal coal, with average API4 prices improving to US$163/t compared to US$73/t recorded in Q2 FY21. Thus, it seems that the rising coal demand may act as a growth catalyst for the business.
SWOT Analysis:
Stock Recommendation:
- During the past one month, the stock has provided a return of ~20.83%, and the stock has a 52-week low-high range of A$0.078 - A$0.175, respectively.
- On a TTM basis, the stock is trading at a P/BV multiple of 0.2x against the industry median (Energy) of 2.0x. Thus, it seems that the stock is undervalued at the current trading levels.
- Key Risks: COVID-19 Disruption, Demand & Supply Risk, Change in Climate, Price Risk, Regulatory Risk, etc.
- Considering the completion of the BFS study, rising top line, a turnaround in the bottom line, current trading level, valuation on a TTM basis, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of A$0.165, up by ~17.857% as on 29 April 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
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MCM Daily Technical Chart, Data Source: REFINITIV
3. Atlas Pearls Ltd (Recommendation: Speculative Buy, Market Cap: ~$20.10 million)
Atlas Pearls Ltd (ASX: ATP) is engaged in pearl farming, manufacturing of perfumes as well as retailing and distribution of jewellery.
Operational and Financial Summary: During the quarter ended March 2022, the company sold 99,561 pearls which were intended for auctions in the upcoming June 2022 quarter in order to support its market expansion strategy. ATP recorded revenue amounting to $5.0 million. It closed the quarter with a cash balance of $2.92 million. During 1HFY22, ATP recorded revenue of ~$12.36 million against ~$6.82 million in 1HFY21. The company posted a net profit of ~$4.13 million against a net loss of ~$0.74 million in 1HFY21.
Debt to Equity Ratio Trend (Source: Analysis by Kalkine Group)
Outlook: For the quarter ended June 2022, the company expects to harvest 130,000 pearls and sell ~155,000 pearls. ATP is focused on operational process improvements to ensure harvest quality is maximized. It believes that the online platform would continue to be the primary medium for the sale of pearls whilst increasing customer reach.
SWOT Analysis:
Stock Recommendation:
- The stock has been corrected by ~7.84% in the past one month, and the stock has a 52-week low-high range of $0.014 - $0.058, respectively.
- On a TTM basis, the stock is trading at a P/BV multiple of 0.8x against the industry median (Metals & Mining) of 2.4x. Thus, it seems that the stock is undervalued at the current trading levels.
- Key Risks: COVID-19 Led Uncertainties, Supply Chain Issues, Demand & Supply Risk, Credit Risk, etc.
- Considering the growing sales, profitable business, decent liquidity position, current trading level, valuation on a TTM basis, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of $0.047, as on 29 April 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
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ATP Daily Technical Chart, Data Source: REFINITIV
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
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