Andromeda Metals Limited

ADN Details

Rise in Measured Resource Category: Andromeda Metals Limited (ASX: ADN) is engaged in the exploration of economic gold and copper deposits. The market capitalisation of the company stood at ~A$78.41 Mn as on 24^th January 2020. Recently, the company notified the market with updated mineral resource estimate for the Carey’s Well kaolin deposit, which is situated on EL 5814 near Poochera on the west coast of the Eyre Peninsula of South Australia. The company experienced a rise in the measured resource category by around 80% after the infill drilling at Carey’s Well. These results have outlined improved confidence in resource quality. In addition, there was also an increase in overall “bright white” kaolinised granite mineral resource by more than 28% to 26.0 million tonnes.

The cash balance of the company stood at $1.888 million as at 30^th September 2019. Following the end of the quarter, the company has wrapped up a share placement and raised an amount of $3,997,199 before costs. During the quarter, the company released results of the scoping study, which stated that the Poochera Halloysite-Kaolin project is a technically sound as well as financially robust venture. The study also evaluated that this project has the potential to deliver decent cash flows. 


Net Cash Used in Operating Activities (Source: Company Reports)

Focus of ADN: The focus of the company has been shifted towards an optimisation to the scoping study for considering the wet processing at site and purification of halloysite. Advancement of the Poochera Halloysite-Kaolin Project is also a key focus of the company.

Stock Recommendation: During the September 2019 quarter, several large Chinese potential customers have inked non-binding offtake letters of intent for DSO (Direct Shipping Ore) products, including dry-processed and wet-refined halloysite-kaolin. Current ratio of the company stood at 3.91x in FY19 as compared to the industry median of 1.81x. This reflects that the company is in a decent position to address its short-term obligations as compared to the industry. As per ASX, the stock of ADN is trading towards its 52-week higher levels of A$0.082. During the span of six months and one year, the stock of ADN witnessed a rise of 170% and 671.43%, respectively. Therefore, considering the current trading levels and price movements in the past, we advise the investors to closely watch the stock at the current market price of A$0.051 per share, down 5.556% on 24^th January 2020 and wait for better entry levels.

 
ADN Daily Technical Chart (Source: Thomson Reuters) 
 

Netlinkz Limited

NET Details

Competition of Acquisition: Netlinkz Limited (ASX: NET) is engaged in the delivery of virtualised network services via a virtual services platform. The market capitalisation of the company stood at ~A$191.5 million as on 24^th January 2020. The company recently announced that it has completed the acquisition of Security Software International (SSI) Pacific for a consideration amounting to A$10.2 million. The acquisition would help the company in the global expansion of the business. Also, the company is expecting that the acquisition of SSI would deliver an additional A$1.5 million of annualised profits after expenses. The acquisition has been financed via debt and financing facilities.

For the quarter ended 30^th September 2019, cash balance of the company stood at A$2.05 million and received proceeds amounting to A$2,715,402 from the exercise of share options. To raise an amount of A$30.75 million, the company entered into an agreement via issue of secured convertible notes convertible at a price of A$0.30 each and an option to raise additional $22.75m over the upcoming 24 months. In another update, the company statedthat its China joint venture agreement with iSoftStone Information and Technology (Group) Co. Limited has been completed. Consequently, the company has established Beijing iLinkAll Technology Co. Ltd, with 80% ownership in the entity, via its wholly owned subsidiary Netlinkz Technology Hong Kong Limited, with an entity nominated by iSoftStone owning 20%.


Net Cash Outflow (Source: Company Reports)

Revised Guidance: The company recently through a release has revised its guidance for projected revenue (1 Jan 2020 to 31 December 2020) from A$10.1 million to A$15.3 million, as a result of its ownership of Beijing iLinkAll Technology Co. Ltd via its wholly owned subsidiary Netlinkz Technology Hong Kong Limited.

Stock Recommendation: The company is expecting organic sales growth in Australia from the acquisition of SSI, the iSoftStone Joint Venture and its Hong Kong reseller’s China-based agent JAST Limited. As per ASX, the stock of NET is trading below its 52-weeks low-high average. Also, the stock reported negative returns of 16% and 36.36% over a period of one month and three months, respectively. Thus, in light of the recent acquisition by the company, revised guidance, and price movements, we advise the market participants to wait for the positive catalysts to drive the stock. Hence, we have a wait and watch stance on the stock at the current market price of A$0.100 per share, down 4.762% on 24^th January 2020.

 
NET Daily Technical Chart (Source: Thomson Reuters)

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