Regis Resources Limited

RRL Details

Shareholder’s Update: Regis Resources Limited (ASX: RRL) engages in the evaluation, exploration, and development of gold projects in Australia and owns the Duketon project as well as the McPhillamys project. As per a recent announcement, the company’s director, Jim Beyer, has undergone a change of interest and acquired 37,816 ordinary shares of the company.

Substantial holdings:  Recently, the company informed the market that, Vanguard Group has ceased to be substantial shareholder of the company, effective from 24 June 2021.

Q4FY21 Financial Performance (Period Ending 30 June 2021):

• After adjusting for hedging, the company has recorded gold sales of $279 million at an average realised price of $2,222/oz in Q4FY21.
• The group reported increased mineral resources by 35% to 10.4Moz, and ore reserves increased by 33% to 4.8Moz in Q4FY21.
• During the quarter, the gold production was 114,145oz at an AISC of $1,387/oz.
• RRL reported an improved 12 Month Moving Average Lost Time Injury Frequency Rate (LTIFR) to 1.3, down from 1.4 at the end of the previous quarter.
• The cash and bullion of the company increased to $269 million as of 30 June 2021.

Financial Performance (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company has a significant impact on its production, due to lockdown restrictions that might impact its operations, going forward.
• Market Risk- The company is exposed to foreign currency risk, commodity price, equity prices that could impact the company’s income.

Outlook:

• The company has provided FY22 guidance for production at 460 – 515Koz, AISC of $1,290-1,365/oz, growth capital as $155 – 165 million and exploration at $43 million.
• During the quarter, the company acquired 30% ownership in Tropicana Joint Venture with the target production of 450-500koz pa after FY22 and expecting to provide growth opportunities in the longer-term.

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: As per a recent announcement, the company has proposed an issue of 67,589 ordinary shares at a price of $2.42. The stock of RRL is trading above its average 52-weeks' levels of $2.360-$5.879. The stock of RRL gave a positive return of ~1.181% in the past one month and a negative return of ~54.64% in the past one year. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount to its peer average EV/Sales (NTM trading multiple), considering the COVID-19 pandemic impact and fluctuating AISC cost. For this purpose, we have taken peers such as Western Areas Ltd (ASX: WSA), St Barbara Ltd (ASX: SBM), OceanaGold Corp (ASX: OGC), to name a few. Considering its decent liquidity position, strategic acquisitions, lower debt-to-equity ratio, decent outlook, current trading levels, and valuation, we recommend a ‘Buy’ rating on the stock at the current market price of $2.570, as on 5 August 2021, 10:55 AM (GMT+10), Sydney, Eastern Australia.

RRL Daily Technical Chart, Data Source: REFINITIV

Cooper Energy Limited

COE Details

Adjustment in Debt Facility: Cooper Energy Limited (ASX: COE) is an oil & gas exploration company that produces and commercialises crude oil, offshore gas, and gas liquids. As per a recent announcement, the company has made adjustment in principal repayments through expiry of the Transition Agreement and principal repayments re-sculpted to mature in 2024. Therefore, the company has to repay $7 million in next quarter due on 30 September 2021, which will reduce drawn debt to $211 million and further strengthen the company’s cash position.

July Operational Update: The company has recorded average sole gas sales volumes of 59 TJ/day in July against 54 TJ/day in Q4FY21 and average processing rate of 40 TJ/day in July verses 33 TJ/day in Q4FY21.

Q4FY21 & FY21 Key Update:

• The company’s revenues increased by 31% to $47.1 million in Q4FY21 verses $35.9 million in Q3FY21, driven by higher Sole gas sales volume.
• COE has reported a decline in production by 14% to 0.66 MMboe in Q4FY21, compared to 0.77 MMboe in Q3FY21, impacted by the fluctuation in plant rates.
• The company has incurred capital expenditure of $8.2 million in Q4FY21, higher than the prior quarter, due to major spend on Athena Gas Plant.
• The company’s FY21 production up by 69% to 2.6 MMboe, hike in sales by 94% to 3.0 MMboe and revenue growth of 69% to $131.7 million in FY21.
• The cash balance of the company stood at $90.9 million as of 30 June 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Price Risk- Fluctuation in the price of oil & gas in the global market could have an adverse impact the company’s earnings.
• Liquidity Risk- The company requires adequate cash balance to continue its growth project and strategic investment. Therefore, the liquidity risk could impact company’s operations.

Outlook:

• The company has scheduled commissioning of Athena Gas Plant in Q2FY22 and expecting to enhance the ability of gas production.
• Further, the company has advised to release its FY21 full year results on 23 August 2021.

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: As per a recent announcement, the company has sold its stakes in the Worrior oil field and other exploration permits for $0.65 million to Bass Oil. The stock of COE is trading below its average 52-weeks' levels of $0.225-$0.405. The stock of COE gave a positive return of ~2.127% in the past one week and a negative return of ~35.99% in the past one year. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some discount to its peer average EV/Sales (NTM trading multiple), considering the impact of COVID-19 pandemic on demand of oil & gas and decline in production. For this purpose, we have taken peers such as Senex Energy Ltd (ASX: SXY), Oil Search Ltd (ASX: OSH), Woodside Petroleum Ltd (ASX: WPL), to name a few. Considering the decent cash balance, increased revenue in FY21, adjustment in debt facilities, higher demand from Sole customers and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.235, down by ~4.082% as on 5 August 2021.

COE 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 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 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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