1. VRX Silica Limited (Recommendation: Speculative Buy, Market Cap: ~$97.72 million)
VRX Silica Ltd (ASX: VRX) is engaged in the development of world-class, high-grade silica sand projects in Western Australia. The company operates Arrowsmith North and Arrowsmith Central Silica Sand Projects. Silica Sand is the main ingredient in all types of glassmaking, including specialty solar panel and high-tech glass.
Business Updates: The below picture provides an overview of key business updates:
Business Updates (Source: Analysis by Kalkine Group)
Financial and Operational Highlights: VRX possesses multi-decade scale contiguous sand deposits on granted Mining Leases with secure tenure and a combined +1bn tonne Mineral Resource of 99.6% to 99.9% SiO2 grade silica sand. During the March 2022 quarter, the company received approval from the Environmental Protection Authority of Western Australia (EPA) for an Environmental Scoping Document (ESD) for proposed mining activities at its 100% owned Arrowsmith North Silica Sand Project. As of 31 March 2022, the company had cash & cash equivalents of ~$10.69 million.
Insights of 1HFY22: During 1HFY22, VRX recorded revenue amounting to ~$0.027 million against ~$0.083 million in 1HFY21. It posted a loss of ~$3.23 million as compared to loss of $0.82 million in 1HFY21.
Current Ratio Trend (Source: Analysis by Kalkine Group)
Outlook: The company believes that Arrowsmith North is on track to receive final EPA approval in December 2022. In addition, the six-month construction phase has been scheduled to commence in January 2023. Moreover, the company continue to carry out other lead time and cost-saving opportunities to capitalise on its first-mover advantage in Western Australia’s emerging silica sand sector.
SWOT Analysis:
Stock Recommendation:
- During the past month, the stock has corrected by ~10.26% and has recovered from its 52-week low level of $0.130.
- On a TTM basis, VRX is trading at P/BV multiple of 4.3x against the industry median (Metals & Mining) of 5.6x. Thus, it seems that the stock is undervalued at the current trading levels.
- Key Risks: COVID-19 led uncertainties, Stiff Competition, Change in Climate, etc.
- Considering the recent agreement for hydrogen supply, growing demand for glass, cost savings, optimistic outlook, 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 price of $0.180, up by ~2.857% as on 27 May 2022.
VRX Daily Technical Chart, Data Source: REFINITIV
2. Atlas Pearls Ltd (Recommendation: Speculative Buy, Market Cap: ~$17.97 million)
Atlas Pearls Ltd (ASX: ATP) is involved 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 recorded revenue amounting to $5.0 million, supported by sales events for the quarter. ATP started the quarter with loose pearls stocks of 76,023. It harvested 167,507 pearls and sold 99,561 pearls. The company had a cash balance of ~$2.92 million at the end of the quarter.
Liquidity Profile (Source: Analysis by Kalkine Group)
Outlook: For June 2022 quarter, the online platform would continue to be the primary medium for the sale of pearls whilst increasing customer reach. In addition, ATP anticipates harvesting 130,000 pearls and selling ~155,000 pearls. The company is focused on operational process improvements to ensure harvest quality is maximized. With respect to the Boneyard loan, the company has scheduled the last loan repayment of $1,125,000 on 30 September 2022.
SWOT Analysis:
Stock Recommendation:
- The stock has been corrected by ~14.28% in the past month, and the stock has a 52-week low-high range of $0.015 - $0.058, respectively.
- On a TTM basis, the stock is trading at a P/BV multiple of 0.8x against the industry median (Basic Materials) of 2.1x. Thus, it seems that the stock is undervalued at the current trading levels.
- Key Risks: COVID-19-led Uncertainties, Supply Shortfall, Demand & Supply Risk, Stiff Competition, etc.
- Considering the decent sales events, improving leverage 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 $0.041, down by ~2.380% as on 27 May 2022.
ATP Daily Technical Chart, Data Source: REFINITIV
3. Cellnet Group Limited (Recommendation: Speculative Buy, Market Cap: ~$8.28 million)
Cellnet Group Limited (ASX: CLT) is an ASX listed distributor of lifestyle technology products across Australia and New Zealand. The company demonstrates global brands and sources products in high- velocity categories, including mobile, AV and IT accessories, audio and gaming accessories and software, into retail, business, and online channels.
1HFY22 Financial and Operational Highlights: The company recorded revenue of $43.67 million in 1HFY22 against $56.46 million in 1HFY21. CLT’s online sales rose by 21% during the half year period. The company’s business seems to be in a decent position, evident by an EBITDA of $1.6 million despite several ongoing retail headwinds caused by Covid-19 restrictions in Australia and New Zealand. During 1HFY22, CLT posted a current ratio of 1.70x against 1.58x in 1HFY21.
Current Ratio Trend (Source: Analysis by Kalkine Group)
Outlook: Looking forward, the company will continue to focus on ramping up its growth strategies across gaming, refurbished devices, mobile accessories and online distribution.
SWOT Analysis:
Stock Recommendation:
- During the past three and six months, the stock has corrected by ~25.0% and ~56.88%, respectively and is trading near its 52-week low level of $0.027, offering a decent opportunity for accumulation.
- CLT has an EV/Sales multiple of 0.2x against the industry median (Specialty Retailers) of 0.9x on a TTM basis. Thus, it can be said that the stock is undervalued at the current trading levels.
- Key Risks: COVID-19 Led Uncertainties, Demand & Supply instability, loss of customers, Stiff Competition, etc.
- Considering the rising online sales, positive EBITDA despite global supply cues, the recent agreement with Renewable Mobile Group, 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 $0.030, down by ~11.764% as on 27 May 2022.
CLT Daily Technical Chart, Data Source: REFINITIV
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.
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.
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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