AMA Group Limited (ASX: AMA)

AMA provides vehicle accident repairing and accessories. It operates in two segments - Vehicle Panel Repairs, and Automotive Parts and Accessories. AMA holds a market capitalization of $306.73 million as of April 6, 2022.

Financial and Operational Updates: On February 22, 2022, AMA appointed Caroline Waldron as an Independent Non-Executive Director effective from March 1, 2022. In H1FY22, AMA posted lower revenues reaching $418.1 million as compared to $435.1 million in the prior year. The company experienced lower repairing volumes during the first half. An increase in raw material costs and consumables compressed the EBITDAI which stands at $2.8 million in H1FY22 vs. $55.7 million in H1FY21. AMA posted a net loss of $48.0 million as compared to a net profit of $4.6 owing to non-cash impairment charges to the tune of $16.7 million.

Despite the turbulent results, AMA maintained a strong financial position with a cash balance of $81.3 million as of December 31, 2021 (vs. $64.2 million as of June 30, 2021). It had undrawn bank guarantees of $8.2 million. Gross debt reduced drastically to $165 million in H1FY22 from $340 million in the preceding period. AMA is expecting to scale up the business through acquisitions and a partnership model. It is pursuing acquisition opportunities in collision repair and associate businesses.

Technical Analysis: AMA prices witnessed significant downside movement in the past 12 months. However, prices have reversed from key support levels last month and settled in positive territory indicates positive price momentum. RSI (14-period) moved up from the oversold region to ~42.78 levels further indicating positive momentum. Immediate support levels are AUD 0.280, while immediate resistance levels are AUD 0.370.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock is trading lower than its average of the 52-week low-high price band of $0.280-$0.637. The stock has corrected ~31.87% in last three months and ~41.47% in last nine months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers, considering the optimistic outlook, partnership initiatives, etc. For the purpose of valuation, peers such as Vmoto Ltd. (ASX: VMT), Carbon Revolution Ltd. (ASX: CBR), GUD Holdings Ltd. (ASX: GUD), and others have been considered. Considering the easing of lockdown restrictions and its impact on consumer sentiment driving volumes, ample liquidity, debt reduction, current trading level, upside potential as indicated by the valuation, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $0.310, up by ~3.333%, as on 6 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.

AMA Daily Technical Chart, Data Source: REFINITIV 

Australian Potash Limited (ASX: APC)

APC operates as an exploration company with Lake Wells Sulfate of Potash Project, Lake Wells Gold Project, Laverton Downs Project, and Lake Darlot Potash Project. APC holds a market capitalization of $62.85 million as of April 6, 2022.

Financial and Operational Updates: In an update on its Lake Well Sulphate of Potash project, APC developed about 20 bores out of 79 brine bores identified as part of the LSOP Front End Engineering Design Study. The geochemical assay tests at The Laverton Downs Project proved Kambalda-style nickel deposit host rocks. In November 2021, it had raised over $12 million in private placement in two tranches.

In H1FY22, APC realized other income of $70.19k as compared to $78.86k in the prior year. Due to an increase in exploration and administration costs, it had posted a net loss of $3.63 million in H1FY22 as compared to $1.89 million in H1FY21. It had closed the period with a cash balance of $7.80 million as of December 31, 2021. As per March 3, 2022, update, APC contracted out maintenance work at Lake Wells’s processing plant on an EPC basis to GR Engineering Services Limited.  

Technical Analysis: On the daily chart, APC price witnessed a breakout of a horizontal trendline at USD 0.073 level (on March 28, 2022). Since the breakout, prices are sustaining above the trendline, which indicates bulls are in action. Moreover, the prices are trading above the trend-following indicator 21-period SMA, which may act as a support level. Further, the momentum oscillator RSI (14-period) is trading at ~61.901 level, indicating positive momentum. An important support level for the stock, is placed at AUD 0.070 while the key resistance level is placed at AUD 0.093.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock is trading lower than its average of the 52-week low-high price band of $0.055-$0.250. The stock has corrected ~44.82% in last nine months. The stock has been valued using a P/BV multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers, considering the positive assay results at its The Laverton Downs Project. For the purpose of valuation, peers such as Kalium Lakes Ltd. (ASX: KLL), Agrimin Ltd. (ASX: AMN), Danakali Ltd. (ASX: DNK), and others have been considered. Considering the drilling progress at its Lake Well Sulphate of Potash project, recent grant of $250k from the WA government, adequate cash balance, upside potential as indicated by the valuation, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $0.080, up by ~2.564%, as on 6 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.

APC Daily Technical Chart, Data Source: REFINITIV 

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 for 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 is 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 the 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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