1. HRL Holdings Limited (Recommendation: Speculative Buy, Market Cap: ~$61.72 million)

Decent Financial Performance in H1FY21: HRL Holdings Limited (ASX: HRL) provides sampling, laboratory testing and data management services across food, environmental, occupational hygiene and construction industries. The company’s subsidiary brands include Analytica, Octief, Precise Consulting, Morrison Geotechnic, and Octfolio.

• For the first half of FY21, the company reported revenue of $16.35 million, up by 0.4% on pcp. Notably, the company witnessed strong revenue growth across the food laboratory divisions.
• The company reported a statutory profit of $460k in H1FY21 from the loss of $2.72 million in H1FY20. HRL continued its decent performance in Q2FY21 as well as it generated revenues of $8.8 million and an underlying EBITDA of $2.0 million for the quarter. One of the important highlights of Q3FY21 was the acquisition of Water Testing HB (2016) Limited (WTHB) which has expanded HRL’s geographic coverage in New Zealand to the Hawkes Bay region on the east coast.
  

• Cash and Debt Status:  HRL has ended the H1FY21 period with a net cash position of $533k. As at 31 December 2020, HRL had cash & cash equivalent of $3.74 million, and total borrowings of $2.3 million. Current ratio for H1FY21 stood at 1.00x in H1FY21, up from 0.81x in H1FY20, demonstrating that the company has improved its ability to pay short-term obligations. Debt to equity ratio for H1FY21 stood at 0.19x, down from 0.24x in H1FY20.

• Outlook: Looking ahead, the company is focused on rolling out new analytical testing services in both New Zealand and Australia. At HAZMAT and Geotech divisions, HRL plans to secure new projects as the infrastructure and government sectors show signs of growth. For FY21, the company expects its underlying EBITDA to reach $7.3 million.

Current Ratio Trend (Source: Analyses by Kalkine Group)

SWOT Analysis: 

Stock Recommendation:

• Over the last three months, the stock has provided a return of 8.69%.
• The stock is currently trading above the 52-weeks’ average price band of $0.086 and $0.145.
• On a TTM basis, the stock is trading at a price to book value multiple of 2.3x, lower than the industry median of 3.1x, demonstrating that the stock might be undervalued.
• Looking ahead, the company is focused on assessing and pursuing acquisition opportunities in the laboratory sector.
• Key Risks: COVID-19 Uncertainties, Foreign Currency Risk, Weather-Related Risk, etc
• Considering the company’s rising cash level, decent financial performance in H1FY21, modest outlook and associated key risks, we give a “Speculative Buy” rating on the stock at the current market price of $0.125 as on 11 June 2021.

HRL Daily Technical Chart (Data Source: REFINITIV)

2. Bowen Coking Coal Ltd (Recommendation: Speculative Buy, Market Cap: ~$62.46 million)

Progressing the Development of Broadmeadow East Project: Bowen Coking Coal Ltd (ASX: BCB) is a Queensland based coking coal exploration company with advanced exploration and development assets. The company’s exploration portfolio includes Broadmeadow East (100%), Isaac River (100%), Cooroorah (100%), Hillalong (90%) and Comet Ridge (100%) coking coal projects in the world-renowned Bowen Basin in Queensland, Australia.

• During H1FY21, BCB was focused on the development of its Broadmeadow East project. Over the period, BCB completed two private placements, raising $5.25 million. These proceeds were used for the acquisition and transaction costs of the Broadmeadow East project and for the general working capital requirement. For H1FY21, BCB reported net loss after tax of $1.72 million. BCB recently commenced drilling at Hillalong Coking Coal Project with a plan to drill up to 11 exploration holes to target the definition of a maiden resource in the southern area.
• Cash and Debt Scenario: As at 31 December 2020, the company had cash and cash equivalent of $3.75 million and nil debt on its balance sheet. Cash position was further improved in the March 2021 quarter to $4.4 million. For H1FY21, BCB reported current ratio of 6.69x, up from 5.28x in H1FY20, mainly driven by the two private placements in H1FY21. Debt to Equity ratio was nil in H1FY21.
• Outlook: Looking ahead, the company is focused on fast-tracking opencut production at the Broadmeadow East mining lease, in conjunction with the permitting process for Isaac River. Further, the company is focused on infill drilling of Hillalong South and then to scout drilling in an area which has not been explored by recent owners to test the potential for high quality Moranbah coking coal measures.

Current Ratio Trend (Source: Analysis by Kalkine Group)

SWOT Analysis: 

Stock Recommendation:

• Over the last three months, the stock has provided a return of 29.41%.
• The stock is trading higher than the average 52-weeks’ price level band of $0.042and $0.071.
• The company plans to drill up to 11 exploration holes at its Hillalong Coking Coal Project to target the definition of a maiden resource in the southern area.
• Key Risks: Exploration Related Risks, COVID-19 Uncertainties, Fluctuations in the Demand for Coal, etc.
• Considering the rising cash balance, nil debt to equity ratio, decent exploration results from Broadmeadow East, and key associated risks, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.066, up 1.538% as on 11 June 2021.

BCB Daily Technical Chart (Data Source: REFINITIV)

3. JCurve Solutions Limited (Recommendation: Speculative Buy, Market Cap: ~$20.02 million)

Decent Performance in Q3FY21: JCurve Solutions Limited (ASX: JCS) is a cloud solutions technology company that utilise the power of cloud technology to help customers make lasting, substantial improvements to their performance.

• Despite the challenges of the COVID-19 pandemic, the company reported total revenue of $5.7 million and a net loss after tax of $129,310 demonstrating the strength and resilience of its business. During Q3FY21, the company saw a decent improvement in profitability from underlying operations with a $0.3 million EBITDA. The results during Q3FY21 were favourably impacted from the reduction in ERP operating costs.
• Cash And Debt Scenario: As at 31 December 2020, the company had cash of $4.48 million and lease liabilities of around $1.8 million. Current ratio for H1FY21 stood at 1.26x, up from 1.20x in H1FY20. Debt to Equity ratio for H1FY21 stood at 0.37x, down from 0.45x in H1fY20.
• Outlook: The company has increased its sales and marketing efforts in Asia with the employment of two Business Development Managers in the Philippines. It is now exploring multiple NetSuite partner acquisition opportunities, which will deliver immediate material revenue and earnings growth.

Current Ratio Trend (Source: Analysis by Kalkine Group) 

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has provided a return of 1.66%.
• The stock is trading above its average 52-weeks’ price level band of $0.023 - $0.070.
• On a TTM basis, the stock is trading at a price to book multiple of 4.2x, lower than the industry average of 6.8x.
• Moving forward, JCS expects to generate improved earnings, supported by its strong underlying business
• Key Risks: Change in Cloud-based Technology, COVID-19 uncertainties, etc.
• Considering the company’s decent performance in Q3FY21, rising cash balance, valuation on TTM basis, modest outlook and associated key risks, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.061 as on 11 June 2021.

JCS Daily Technical Chart (Source: Analysis by Kalkine Group)

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. 

Technical Indicators Defined:  

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.

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