Galaxy Resources Limited

GXY Details

Cash Position on June 30, 2019 Reported at US$176.3 Mn With Zero Debt:Galaxy Resources Limited (ASX: GXY) is involved in the production of lithium concentrate and exploration for minerals in Australia, Canada and Argentina. The company recently announced an issuance of new 137,000 fully paid ordinary sharesin part consideration for the provision of services, effective from September 4, 2019. In another update, following the appointment of voluntary administrators by the Board of Alita Resources Limited, GXY announced about the appointment of Martin Jones, Matthew Woods and Andrew Smith from KPMG as receivers and managers of Alita Resources Limited. The company will now work with the Receivers and the voluntary administrators to determine a course of action for the Alita Group.

H1FY19 Key Highlights:Total lithium concentrate production and sales volumes for the period was reported at 98,334 dry metric tonnes (dmt) and 44,630 dmt, respectively. Average unit operating costs for the period was reported at US$387/dmt produced, positioning Mt Cattlin as one of the lowest costs spodumene producers. Revenue from operations for the period was reported at US$28.0 million, down from US$88.4 million in the prior corresponding period. This was due to lower realised selling price and lower sales volumes, due to customer shipping schedules as compared to H1FY18. The average realised selling price for concentrate volumes sold in H1FY19 was 38% lower than the prior corresponding period and 36% lower than H2FY18.

Underlying net profit after tax for the period was reported at US$4.9 million, excluding one-off write down of inventory, impairment of property plant and equipment, and derecognition of deferred tax assets of worth US$176.8 million.The company reported net loss after tax of US$171.9 million, including one-off write down of inventory, impairment of property plant and equipment and derecognition of deferred tax assets of US$176.8 million. Cash position as on June 30, 2019 was reported at US$176.3 million, with no debt.


H1FY19 Key Financial and Operational Metrics (Source: Company Reports)

What to expect:The company has reaffirmed guidance provided in the June’19 Quarter activities report. Targeted lithium concentrate production volume for Q3FY19 has been estimated at 45,000 – 55,000 dmt, with full year guidance being maintained at 180,000 – 210,000 dmt. Target shipping volumes for Q3FY19 has been estimated at 60,000 – 70,000 dmt.

Stock Recommendation:Galaxy Resources’ share generated a negative YTD return of 51.83%. Its current ratio for H1FY19 stood at 4.97x, better than the industry median of 1.94x, which implies that the company is in a better position to address its short-term obligations. Moreover, EV/Sales multiple on NTM basis stands at 1.1x, lower than the industry median of 1.6x, indicating better valuation at the current juncture. The company maintains its focus on productivity, safety, capital and operating cost efficiency, driving GXY to reinforce its current market position as a low-cost producer of lithium concentrate and to maximise value derived from Mt Cattlin.Core portfolio of the projects, operating results in 1H19, robust balance sheet, strategic flexibility, etc. augur well for the future growth of the company. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $1.105, up 4.739% on September 6, 2019.

ORE Details

FY19 Cash Balance Stood at US$279.8 million:Orocobre Limited (ASX: ORE) is engaged into metal and mining business and the primary activity involves exploration, development and production of lithium and boron. The company recently announced appointment of Mr. Hersen Porta as Chief Operating Officer. Mr. Porta will be responsible for overseeing the operations of both the Olaroz Lithium Facility (Olaroz) and Borax Argentina S.A. (Borax). He has around 28 years of experience at Dow Chemicals, where he moved from initial engineering roles to site management and Operations Director roles. In another update, ORE announced a change in directors’ interest where Leanne Heywood and Robert Hubbard, acquired 5,000 shares at $11,450 and 25,000 shares at $56,350, respectively, taking the final holdings to 19,050 shares and 100,293 shares, effective from August 26, 2019.

FY19 Key Highlights: Statutory Group net profit for the period was reported at US$54.6 million, which included several one-off items. Underlying NPAT for the period was reported at US$24.8 million, down from US$25.7 million in the previous corresponding period. Underlying EBITDAIX (Earnings before interest, tax, depreciation and amortisation, impairment and foreign currency gains) for the period was reported at US$54.1 million. At the end of the period, the cash balance of the company stood at US$279.8 million.


FY19 Income Statement (Source: Company Reports)

Stock Recommendation:The stock of ORE has corrected 21.71% and 38.02% during the last three and six months, respectively. Currently, the stock is trading at a Price to Earnings multiple of 8.120x on TTM basis against the industry median of -3.4x. EV/Sales multiple for the stock at 6.3x on TTM basis is below the industry median of 74.9x. Considering the aforesaid facts and current trading levels, we recommend a 'Buy' rating on the stock at the current market price of $2.520, up 4.132% as on September 6, 2019.
 

 
ORE  Daily Technical Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.