2 ASX Stocks Under Investors’ Radar - SYR, BTR

Syrah Resources Limited (ASX: SYR)

SYR is into graphite exploration with its flagship Balama Graphite Operation in Mozambique and a downstream Battery Anode Material Project in the United States. It operates in two segments - Balama and Vidalia. SYR holds a market capitalization of $1.05 billion as of March 24, 2022.

Financial and Operational Updates: SYR was added to S&P/ASX 300 Index effective from March 22, 2022. The company completed the retail entitlement offer for its 1 for 5.9 fully underwritten pro rata accelerated non-renounceable entitlement offer at A$1.48. Together with an institutional entitlement offer, SYR raised about $250 million.

As announced on February 23, 2022, SYR awarded a contract to Worley Group to provide construction management services at its Active Anode Material (AAM) facility in Vidalia, USA. This was followed by the Board’s approval of the final investment decision for initial expansion to 11.25ktpa production capacity. The total cost is estimated at US$176 million.

For Q4FY21, shipments at Balama reached 19kt natural graphite and the weighted average sales price reached US$530/t. It had invested US$79 million in de-risking Vidalia with entry into the downstream AAM market. It had closed the period with a cash balance of US$52.91 million as of December 31, 2021.

Technical Analysis: After witnessed significant breakdown in prices, SYR is trying to reverse from lower levels getting three consecutive weekly positive closing on a weekly chart. Prices are also trading above its 21-period and 50-period SMA that further support our bullish stance. RSI (14-period) is hovering at ~57.987 level on a weekly chart that indicates stock is getting upside momentum. Immediate support levels are AUD 1.320 while immediate resistance level appears to be at AUD 1.750 level.

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

Stock Recommendation: The stock of SYR has been corrected by ~4.40% in over the past three months. It is trading slightly above to its 52-week low-high price band of $0.911-$2.128. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price with an upside of low double-digit (in % terms). The company can trade at a slight premium to its peers, considering the fundraising and developments around its Active Anode Material (AAM) facility. For the purpose of valuation, few peers such as Allkem Ltd. (ASX: AKE), Strandline Resources Ltd. (ASX: STA), IGO Ltd. (ASX: IGO), and others have been considered. Considering the demand for battery materials in the middle of the EV revolution, final investment decision at its AAM facility, higher output at Balama graphite plant, upside indicated by the valuation, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ on the stock at the closing market price of $1.535, down ~2.85% as on 24 March 2022. However, the risk levels are high considering the delay in FIDs, funding risks, etc. 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.

SYR Daily Technical Chart, Data Source: REFINITIV 

Brightstar Resources Limited (ASX: BTR)

BTR is a gold exploration company with major development projects namely, Cork Tree Well, Beta, and Alpha. Its gold province is located in the Laverton region of Western Australia.

Financial and Operational Updates: As announced on March 24, 2022, BTR plans for 10,000m of RC drilling at its Cork Tree Well in 2022. It had completed a 2,000m aircore program at its South Project area. It had capital rising for its Laverton Gold project in WA. In H1FY22, BTR posted lower other income reaching a $150.3k as compared to $63.4 million in the prior year. Due to sizeable exploration and financing costs, it had incurred a net loss of $2.09 million as compared to a net profit of $59.63 million in the prior year. The cash balance went up to $1.73 million as of December 31, 2021, aided by the fundraising.

Technical Analysis: BTR prices are trading in a long consolidation phase between AUD 0.025 and AUD 0.070 though the prices are trading below its 21-period SMA on a monthly chart that indicates bearish sign for the stock. The prices are getting good volumes with decrease in prices further indicating bears are active in the stock. RSI (14-period) is hovering at ~44 level that indicates indecision in the stock prices. Immediate support levels are AUD 0.026 and AUD 0.017 while immediate resistance levels are AUD 0.034 and AUD 0.038.

Considering nil core revenues, net loss in H1FY22, and current trading levels, a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 0.029 per share, as of 24^th March 2022, up ~7.407%.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

BTR 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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