Pilbara Minerals Limited
PLS Details
This report is the updated version of the report uploaded on 17 June 2022 at 3:55 GMT.
Material Updates & Q3FY22 Highlights (ended 31 March 2022): Pilbara Minerals Limited (ASX: PLS) operates the Pilgangoora project in Western Australia and produces lithium and tantalite.
- On 1 June 2022, Director Nicholas Luigi Cernotta acquired ~3,091 shares in PLS, which were issued upon vesting of his share rights.
- In Q3FY22, PLS undertook project improvements at the Pilgan plant and increased the installed production capacity from ~330kt to ~360 - ~380kt of spodumene concentrate per annum.
- At the Ngungaju plant, PLS is accelerating the commissioning activities at the processing plant to commission it from the September 2022 Quarter fully.
Quarterly Summary of Production & Shipments; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of lithium price changes, COVID-19 led disruptions in labour supply and logistics, and exploration risk.
Outlook: PLS estimates to produce ~340K-380K dry metric tonnes (dmt) of spodumene concentrate in FY22. It is also progressing activities for the creation of a downstream JV with POSCO.
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: The stock of PLS gave a negative return of ~25.71% in the past three months and a negative return of ~24.36% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.290 - $3.890. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peersS, considering a relatively higher debt-to-equity ratio than industry median and COVID-19 led labour supply disruptions. For this purpose of valuation, a few peers like Allkem Ltd (ASX: AKE), IGO Ltd (ASX: IGO), Piedmont Lithium Inc (ASX: PLL), and others have been considered. Considering the current trading levels, robust lithium spot prices on the Battery Metals Exchange (BME),, project growth investments for increasing production, an indicative upside in valuation, we give a ‘Buy’ rating on the stock at the current market price of $2.035, as of 17 June 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.
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.
PLS Daily Technical Chart, Data Source: REFINITIV
Peninsula Energy Limited
PEN Details
Q3FY22 Highlights (Ended 31 March 2022): Peninsula Energy Limited (ASX: PEN) is a uranium explorer operating the wholly owned Lance projects in Wyoming, USA.
- In Q3FY22, PEN sold ~200,000 pounds of U 3 O 8 based on its long-term sales agreements and realised an average cash price of ~US$51.98 per pound.
- PEN held ~110,000 pounds of uranium inventory at a market value of US$6.4 million (US$58.20 per pound U 3 O 8) as of 31 March 2022. PEN plans to execute a hedging settlement in the June 2022 quarter to replenish the stock by ~200,000 pounds.
Comparative Net Loss; (Analysis by Kalkine Group)
Key Risks: The company faces exploration risk, funding risk to undertake project studies and develop the Lance project, commercialization risk, and uranium price changes.
Outlook: PEN is progressing with the early preparatory work programmes and a revised Feasibility study to restart the Lance production operations and undertake a final investment decision (FID).
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: The stock of PEN gave a negative return of ~23.25% in the past three months and a negative return of ~21.42% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.115 - $0.350. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median EV/Sales multiple, considering a negative net margin, a negative ROE, and the risk of uranium price changes. For this purpose of valuation, a few peers like Central Petroleum Ltd (ASX: CTP), Cooper Energy Ltd (ASX: COE), Energy Resources of Australia Ltd (ASX: ERA), and others have been considered which come under Oil, Gas & Consumable Fuels industry. Considering the current trading levels, nil debt-to-equity ratio, plans to engage customer base, new contracts, replenish stock levels, an indicative upside in valuation, and associated key business risks and market volatility, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.155, as 17 June 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.
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.
PEN Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: 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.
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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