1. Envirosuite Limited (Recommendation: Speculative Buy, Market Cap: $148.58 Mn)

Envirosuite Limited (ASX: EVS) is engaged in the development and sale of environmental management technology solutions. The company has its solutions across the Air, Noise, and Water segments, and serves 500 customers worldwide, including BHP, Thames Water, Tata, Lendlease, etc. The below section provides a quick overview of the business:

• EVS to be EBITDA Positive by Q3FY21: The company notified that it expects to be EBITDA positive by the end of Q3FY21, i.e., end of March 2021, three months earlier than the previous target of Q4 2021. The revision comes in after continued progress in ongoing cost reduction and synergies program along with new projections of both one-off and recurring contract revenues.
• Debt Scenario: As on 31^st December 2019, the company had cash and short-term investments amounting to $17.23 million and total debt of $1.2 million.
• Overview of Financials/Fundamentals: During 1HFY20, the company had a gross margin of 25.6%, higher than the gross margin of 9.2% in 2HFY19. Current ratio for the half stood at 4.74x, as compared to the industry median of 1.82x.

A Pictoral Presentation of Key Financials:

SWOT Analysis:

 Stock Recommendation:

• The stock of the company gave positive returns of 20.83% in the last three months and is currently inclined towards its 52-week low of $0.07.
• The company has now become a global leader in environmental intelligence and has a decent pipeline of opportunities for future growth.
• Key Risks: foreign exchange risk, credit risk, liquidity risk.
• As the company expects to be EBITDA positive by Q3FY21, we can expect an upside of lower double-digit growth (in % terms) in the medium to long-term.
• Considering the business performance to date, growth opportunities, benefits from the acquisition, key risks and threats stated above, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.145.

2. Byron Energy Limited (Recommendation: Speculative Buy, Market Cap: $192.45 Mn)

Byron Energy Limited (ASX: BYE) is primarily engaged in oil and gas exploration, development and production in the shallow waters in the Gulf of Mexico, USA. As at 30^th June 2019, the company had a strong reserves and resources position. In FY19, the company reported annual oil production of 453,527 bbls, up by 220%. Revenue increased by 229% to US$31.3 million.

• No Material Impact of COVID-19 During June Quarter: The company recorded net revenue of ~US$3.7 million from SM71 and SM58, with realised net prices of US$36.20 per barrel of oil and US$1.28 per mmbtu of natural gas. The company raised ~A$27.6 million in equity through a placement and Share Purchase Plan to accelerate drilling development.
• Debt Scenario: As on 30^th June 2020, the company had cash at bank amounting to US$16.6 million and borrowing amounting to US$18.4 million.
• Overview of Financials/Fundamentals: During 1HFY20, the company had a gross margin of 58.7%, higher than the industry median of 46.8%. Current ratio for the half stood at 3.34x, as compared to the industry median of 1.06x.

A Pictoral Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation :

• The stock of the company gave positive returns of 27.59% in the last three months and is currently inclined towards its 52-week low of $0.105.
• The company has increased its financial flexibility through the recent capital raising and additional finance facilities.
• On a trailing twelve months (TTM) basis, the stock has an EV/Sales multiple of 4.9x, as compared to the industry median (Oil & Gas) of 13.9x.
• Key Risks: geographical concentration, climate change, heavy competition, price volatility.
• Considering the financial performance, decent outlook, key risks and threats stated above, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.175, down 5.405% on 31^st July 2020.

3. Arafura Resources Limited (Recommendation: Speculative Buy, Market Cap: $78.24 Mn)

Arafura Resources Limited (ASX: ARU) is primarily engaged in conducting engineering studies and Pilot Programs at its Nolans Project, mineral exploration, definition and development. During FY19, the company moved closer to the goal of commercialising the massive resource of neodymium and praseodymium at the Nolans site. The company delivered a Definitive Feasibility Study on the project with positive results and completed a Pilot Program to ensure a smooth production ramp-up at Nolans. Decent performance during the year increased the ability to raise equity, demonstrated by an investment of ~$5 million by Talaxis Group later in the year.

• Pre-FEED Activities Nearing Completion: During the June quarter, the company reported significant progress on the pre-front end engineering and design (pre-FEED) activities aimed at finalising the basis of design, design specifications and philosophies along with finalising Arafura's overall project requirements. The company selected Clough Worley joint venture as the preferred contractor for the hydrometallurgical plant design and construction for Nolans Project.
• Debt Scenario: As on 31^st December 2020, the company had no debt, with cash and short-term investments amounting to $22.9 million. As on 30^th June 2020, the company reported a cash balance of $22.8 million, reflecting a robust financial position.
• Overview of Financials/Fundamentals: During 1HFY20, the company had a current ratio of 12.56x, as compared to the industry median of 1.85x.

A Pictoral Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation :

• The stock of the company gave positive returns of 17.54% in the last one month and is currently trading below the average of its 52-week low and high of $0.046 and $0.102, respectively.
• The company has reported decent progress on project development activities and retains a strong cash position.
• On a trailing twelve months (TTM) basis, the stock has a price to book value multiple of 0.6x, as compared to the industry median (Metals & Mining) of 2.1x.
• Key Risks: Foreign Exchange Risk; COVID-19 Uncertainties; Slowdown in Demand.
• Considering the company’s established reputation in the market, decent demand outlook, risk factors stated above, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.070, up 4.478% on 31^st July 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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