Latin Resources Limited

LRS Details

Decent Results of the March 2021 Quarter: Latin Resources Limited (ASX: LRS) is engaged in the mining and exploration projects in Argentina, Brazil, Australia, and Peru. As of 3 May 2021, the market capitalisation of the company stood at ~$89.19 million. At the Noombenberry Halloysite (NH) project, LRS undertook many drilling campaigns during the March 2021 quarter and completed 197 holes for 4K meters. The samples tested from drilling returned the presence of a white blanket of kaolinite spanning the area tested. It confirmed the presence of high-grade halloysite mineralisation. At its Yarara Gold Project in New South Wales (NSW), LRS has started on-ground fieldwork and analysis and inference of the historical data sets.

At the Burdette - Manildra Gold Project (NSW), LRS has obtained a new exploration license application (ELA6145) in the Lachlan Fold Belt (LFB). It purchased a new ELA6024 tenement next to the Manildra during Q1FY21. In October 2020, LRS signed a JV with Integra Capital (IC) for its lithium projects in Catamarca, Argentina. LRS received $201k for an exercise of 16.82 million LRSOC options by the Directors. During Q1FY21, LRS terminated its convertible funding agreement with Lind Partners New York (Lind) and repaid the entire debt. LRS held a cash and cash equivalent balance of $4 million as of 31 March 2021.

Cashflow from Operating Activities (Source: Company Reports)

Key Risks: The company faces the risk of identifying drilling targets, interpreting, and analysing drilling assay results, and estimating mineral resource. The company is exposed to the risks caused by the pandemic, regulatory delays, and funding challenges on its ongoing projects.

Outlook: LRS plans further air-core drilling (400m x 400m) to the north of the present drill holes commencing the second quarter of FY21. The company targets a JORC resource estimation at the project and is progressing well for completion in May 2021. LRS is currently in discussions with the key shareholders for land access for the Burdette-Manildra projects known for the highly prospective gold and copper mineralisation. IC will undertake an exploration program (US$1 million) to deliver its first JORC resource, undertake project development studies henceforth for a 50% earn-in.

Stock Recommendation: The stock of LRS gave a positive return of 300% in the past six months and a positive return of 566.67% in the past nine months. The stock is currently trading higher than the 52-weeks’ average price level of $0.002-$0.10. The stock of LRS has a support level of ~$0.038 and a resistance level of ~$0.089. Considering the significant returns for six months and nine months, debt-free status as reported in Q1FY21, decent assay results at the Noombenberry Halloysite project, drilling planned in 2HFY21 at the NH project, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.060, down by 10.448% on 3 May 2021.

LRS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Boom Logistics Limited

BOL Details

New Project with GE Renewables: Boom Logistics Limited (ASX: BOL) is a logistics-solutions provider with Lifting Solutions, and Labour Hire segments. Lifting Solutions entail the provision of travel towers, cranes, and all related services. Labour Hire segment involves the provision of skilled electricians, travel tower operators, truck drivers, riggers, and others. As of 3 May 2021, the market capitalisation of the company stood at ~$59.88 million. On 29 March 2021, BOL reported that one of its substantial shareholders, who holds indirect interest in the company, Stephen Anthony Grove, has acquired 500,000 ordinary shares on 24 March 2021, and 1,000,000 ordinary shares on 26 March 2021 via on-market purchase by Grove Investment Group Pty Ltd. On 18 March 2021, BOL announced the attainment of a new project involving the construction of the Bango wind farm with GE Renewables in New South Wales. BOL services will include installation of 38 towers, deployment of ~12 cranes, and crew on the project and generate ~240MW of energy. The project was slated to commence in March 2021.   

1HFY21 Results Highlights: The company posted revenue of $84.2 million, down by 11.3% YoY in 1HFY21 due to the continued impact of COVID-19 pandemic. BOL obtained new contracts, widened the revenue stream and project work during 1HFY21. It delivered a Statutory EBITDA of $17.9 million, up by 49.2% YoY in 1HFY21. It reported an NPAT of $0.4 million for 1HFY21 versus a net loss of $5.8 million in 1HFY20.

BOL reduced its net debt to $14.2 million as of 31 December 2020. It declared 0.5 cents per share of unfranked interim dividend, which was paid on 16 April 2021. BOL’s net operating cash flow stood at $13.49 million as of 31 December 2020. It held a cash and cash equivalents balance of $4.72 million as of 31 December 2020.

1HFY21 Highlights (Source: Company Reports)

Key Risks: The company is exposed to the impact of the pandemic uncertainties and constrained labour markets on its new business activity. It is exposed to the risk of obtaining large customer contracts and experiencing low demand from clients spanning mining, telecom, and infrastructure sectors.

Outlook: The company has robust tender pipeline for the next three years for infrastructure, renewable energy projects, and improvements to the electricity grid. It has a pipeline of new wind farm projects for tenders. BOL plans to invest $10 million in FY21 to upgrade assets and dispose of less productive assets per its capital recycling program. BOL estimates consistent earnings in 2HFY21.

Stock Recommendation: The stock of BOL gave a positive return of 16.67% in the past six months and a positive return of 42.85% in the past nine months. The stock is currently trading above its 52-weeks’ average price level of $0.085-$0.19. The stock of BOL has a support level of ~$0.131 and a resistance level of ~$0.149. Considering the EBITDA growth and positive NPAT posted in 1HFY21, an interim dividend paid in April 2021, new wind farm projects obtained, we believe most of the company’s positives have been factored at the current juncture. Hence, we suggest investors wait for better entry levels, and give an ‘Expensive’ rating on the stock at the current market price of $0.140 as on 3 May 2021.

BOL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: 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.

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