Perenti Global Limited

PRN Details

FY21 Performance Update: Perenti Global Limited (ASX: PRN) provides surface and underground mining and additional support services in the mining sector. The company has recently declared its FY21 results and provided revenue to be in line with the prior-year period.

• The company reported a total revenue of $2.02 billion in FY21, with ~73% of the revenue delivered from the underground business segment.
• EBITDA decreased by 14.4% to $380 million in FY21, compared to $443.8 million in FY20.
• The Group reported a decrease in NPAT (before amortisation) by 30.2% to $77 million in FY21.
• The company ended the period with a cash position of $264.7 million as of 30 June 2021.

Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company's line of business makes it dependent on demand from mining activities from its clients, and adverse impact on the sector due to macro issues might impact the profitability of the company.

Outlook: The company has decent prospects in the future with work in hand of $6.6 billion and $1.4 billion in extensions. The work in hand value in the regions of Australia, North America and Botswana have increased by ~$1.4 billion from 30 June 2020. It also reported a decent organic pipeline of ~$11.0 billion, driven by underground mining projects of worth $8.4 billion.

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 update, L1 Capital Pty Ltd has undergone a change of shareholding in the company and has increased its voting power to 10.94% from 7.98%. The stock of PRN is trading below its average 52-weeks' levels of $0.625-$1.555. The stock of PRN gave a negative return of ~29.00% in the past one year and a positive return of ~8.77% in the past one month. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers' average, considering the decrease in bottom-line and decline in liquidity position. For the purpose of valuation, peers such as Macmahon Holdings Ltd (ASX: MAH), Emeco Holdings Ltd (ASX: EHL), MACA Ltd (ASX: MLD) have been considered. Considering the current trading levels, indicative upside in valuation, comfortable work in hand position, decent organic pipeline and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.90, as on 16 September 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia. Investors with high-risk appetite should evaluate this stock in view of the technical support and resistance levels as well as taking into consideration associated risks in project delays, delay in regulatory approvals, and change in mining technology.

PRN Daily Technical Chart, Data Source: REFINITIV

Buddy Technologies Limited

BUD Details

Components Supply Update: Buddy Technologies Limited (ASX: BUD) operates in two core businesses – Commercial & Consumer business verticals. In its commercial vertical, the company provides its customers with digital technologies and resource monitoring applications. It operates under the brand of LIFX in its consumer business vertical and provides smart lighting solutions. As per a recent update, the company has advised that approx. 1 million pieces of critical components used in the manufacture of LIFX smart products is expected to be received.

FY21 Performance Update:

• The company reported customer revenues of $28.77 million in FY21, reflecting a decrease of ~7% from the prior year owing to reduced revenue in its Commercial business and also impacted by store closures in the Consumer business.
• Core operating expenses decreased by 20% to $16.05 million in FY21, compared to FY20.
• During the year, the net loss narrowed down to $6.64 million, from a loss of $45.27 million in the prior year.
• It ended the period with cash and equivalents of $2.09 million as of 30 June 2021.

Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company has been impacted by the onset of the COVID-19 pandemic in both of its business units and further worsened due to the closure of retail store locations due to lockdowns.

Outlook: The company has updated that it has closed its Entitlement Offer on 27 August 2021 and has received applications for 8,818,184 new Shares from eligible shareholders for an aggregate subscription amount of $220,455.57. It has also issued convertible notes to PFG to raise US$4.25 million, which will be used for debt repayment purposes.

Stock Recommendation: The stock of BUD is trading below its average 52-weeks' levels of $0.016-$0.080. The stock of BUD gave a negative return of ~11.11% in the past one month and a negative return of ~61.904% in the past six months.  On a TTM basis, the stock of BUD is trading at an EV/Sales multiple of 2.3x, lower than the industry median (Software & IT Services) of 5.8x. Considering the current trading levels, valuation on TTM basis, decrease in operating expenses, close of entitlement offer, expected receipt of critical components and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.016, as on 16 September 2021, 12:44 PM (GMT+10), Sydney, Eastern Australia. Investors with high-risk appetite should evaluate this stock in view of the technical support and resistance levels as well as taking into consideration associated risks in supply chain, the pandemic impact and competition risks.

BUD Daily Technical Chart, Data Source: REFINITIV

Note, the blue line indicates SMA (21-day), purple color represent RSI and green histogram indicates share traded volume.

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 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 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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