Danakali Limited

DNK Details

Danakali Limited (ASX: DNK) is a resource company operating Colluli Potash Project in Eritrea, East Africa. The project is a joint venture between Eritrean National Mining Corporation and Danakali Limited.

Material Business Updates:

• On March 1, 2022, DNK appointed Mr. Greg MacPherson as Chief Financial Officer effective from March 1, 2022.
• As mentioned in the company presentation, DNK completed extensive drilling at Colluli Potash Project. JORC estimated the mine life of over 200 years at a 1.0m TPA of SOP.
• Its Mannheim project has an estimated project cost of $900/t. Australian Brine project has the highest capital intensity with a production cost of roughly $1,100/t. Its African Colluli bears the lowest capital cost per tonne of production.
• In December 2021 quarter, DNK found that Colluli has the capability to produce Magnesium Chloride from two sources at its Sulphate of Potash operation.
• During the quarter, DNK invested ~$1.9 million in developing the Colluli project.
• For the full-year FY21, DNK posted operating cash outflows of $2.58 million and closed the period with a cash balance of $22.88 million as of December 31, 2021.

FY21 Cashflow Summary (Analysis by Kalkine Group)

Key Risks: DNK is yet to generate core revenues, any delays in the project may drain cash balance and may expose to funding risk.

Outlook: DNK is expected to produce 128MT of rock salt at an annual production rate of 1.8mtpa. With the rise in rock salt prices and with CATL battery technology, the company considers Colluli’s Rock Salt as a potential economic resource.

Stock Recommendation: The stock of DNK is trading close to its 52-week low price of $0.280. The stock has been corrected by ~19.99% in the past three months. On a TTM basis, DNK is valued at a Price/Book Value multiple of 1.6x, lower than the industry median of 2.4x (Basic Materials), signaling undervaluation at current levels. Considering the new JORC estimate at Colluli Potash Project, potential to produce Magnesium Chloride, decent cash balance, valuation on a TTM basis, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.290, as of 14 April 2022, 10:39 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.

DNK Daily Technical Chart, Data Source: REFINITIV 

Ai-Media Technologies Limited

AIM Details

Ai-Media Technologies Limited (ASX: AIM) operates as a media technology company providing live and recorded captioning, transcription, and translation services. It caters to education, government, broadcast, and corporate.

H1FY22 Result Key Takeaways:

• Topline inclined 30.2% to reach $29.6 million in H1FY22 driven by increased SaaS and Devices revenue mix. Captioned minutes volume for its Lexi and Smart Lexi showcased a 98% uptick over the prior year.
• It had achieved EBITDA breakeven in H1FY22 as compared to an EBITDA loss of $7 million in the prior year.
• Net loss narrowed down from ~$7.5 million in H1FY21 to a net loss of ~$2.4 million in H1FY22.
• AIM closed the period with a cash balance of $15.87 million as of December 31, 2021.
• So far it had bought back over 36% of 2 million shares that were announced on November 15, 2021.
• In the recent development, it had appointed Cherly Hayman as its Non-Executive Director effective from March 14, 2022.

Improving Financials (Analysis by Kalkine Group)

Key Risks: Increasing competition for SaaS-based translation services may escalate customer churns. Integration of the acquired companies may put pressure on margins.  

Outlook: AIM is targeting full-year FY22 revenue in the range of $60-62 million. It has successfully launched fully automated captioning products that enable to increase in the size of AIM’s addressable market.

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 AIM is trading close to its 52-week low price of $0.470. The stock has been corrected by ~28.47% in the past three months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers, considering the surge in premium-based product mix, low debt levels, etc. For the purpose of valuation, peers such as Link Administration Holdings Ltd (ASX: LNK), Straker Translations Ltd. (ASX: STG), Nine Entertainment Co Holdings Ltd (ASX: NEC), and others have been considered. Considering the expansion to fully automated translation services, EBITDA breakeven, upside potential as indicated by the valuation, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.475, as of 14 April 2022, 01:05 PM (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.

AIM 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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.