Aurelia Metals Limited 

AMI Details

3QFY21 Update: Aurelia Metals Limited (ASX: AMI) is engaged in gold and base metals mining and exploration. The company is primarily engaged in producing from its three operating gold mines: Peak Mine, Hera Mine and Dargues Mine in New South Wales (NSW). AMI has registered an increase in the production and sales of Gold in 3QFY21. The company has produced 34.9Koz gold in 3QFY21 against 15.9Koz in 2QFY21. Similarly, the company has seen an increase in sales of gold to 29.75Koz in 3QFY21 against 18.14Koz in 2QFY21. The company has posted an All-In Sustaining Costs (AISC) of $1,429/oz in 3QFY21 against $1,035/oz in 2QFY21 due to lower by-product credits. AMI has seen a decline in the production of Copper, Lead and Zinc. The company has registered a production of 870t for copper in 3QFY21 against 1.35kt in 2QFY21. Likewise, the production of lead declined to 4.64kt in 3QFY21 against 8.11kt in 2QFY21. AMI has registered a production of Zinc to 5.55kt in 3QFY21 against 7.61kt in 2QFY21.

Changes in Substantial Holdings: AMI has reported on 7 June 2021 regarding termination of a substantial holder. Commonwealth Bank of Australia and its related bodies have been ceased to become a substantial holder in the company on 4 June 2021. 

1HFY21 Financial Highlights: AMI has reported an increase in revenue to $207.70mn in 1HFY21 against $165.19mn in 1HFY20 on the back of increased gold sales. The company has registered an increase in profit to $19.76mn in 1HFY21 against $15.60mn in 1HFY20. The cash balance was reported at $105.75mn as on 31 December 2020 against $79.10mn as on 30 June 2020. 

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company is engaged in gold and other metal production. Thus, any fluctuation in gold prices and other commodity prices may impact the financials of the company. In addition, the company is exposed to exploration risks, which may impact the business severely. 

Outlook: AMI has provided guidance on gold production for the group. The company expects gold production to be maintained at 100-113Koz at All-In Sustaining Costs (AISC) of A$1,425-A$1,575/oz for FY21.

Valuation Methodology: EV/Sales based Relative Valuation Method (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 AMI gave a return of ~-0.49% in the last one month and a return of ~3.09% in the last three months. The current market capitalisation of AMI stands at ~$456.85mn as of 21 June 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.345~$0.636. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some discount as compared to its peer median, considering a decline in production of all other metals except Gold in 3QFY21 and rise in AISC costs. For this purpose, we have taken peers like Aeris Resources Ltd (ASX: AIS), Sandfire Resources Ltd (ASX: SFR), Red 5 Ltd (ASX: RED). Considering the company has registered an increase in production and sales of Gold in 3QFY21, witnessed an increase in revenues for 1HFY21, current trading levels, and valuation, we recommend a “Buy” rating on the stock at the current market price of $0.365, down by ~1.352%, as on June 21, 2021.

AMI Daily Technical Chart, Data Source: REFINITIV

Cooper Energy Limited 

COE Details

Operational Performance Update: Cooper Energy Limited (ASX: COE) is engaged in oil and gas exploration and production, whose primary purpose is to secure, find, develop, produce, and sell hydrocarbons. COE has reported on 25 May 2021 regarding an increase in Sole Cash flows. The company has witnessed an average sales volume of 51 TJ/day since 1 April 2021. Orbost Gas Processing Plant (OGPP) has been restarted after the plant was closed for a brief period for scheduled maintenance. The plant is now producing 48TJ/day. The company has reported on its Athena Gas Plant to be on schedule and budget. The company has completed 70% of the work on the project. COE now expects first commissioning gas in 1QFY22 through Athena Plant. 

3QFY21 Performance Update:  COE has reported an increase in production to 0.77 MMboe in 3QFY21 against 0.53 MMboe in 2QFY21. Similarly, COE has increased sales volume to 0.82 MMboe in 3QFY21 against 0.53 MMboe in 2QFY21. COE has reported a decline in its cash balance to $109.1mn as on 31 March 2021 against $115.3mn as on 31 December 2020. The company has seen a higher net debt level at $115.9mn as on 31 March 2021 against $114.1mn as on 31 December 2020. 

1HFY21 Financial Highlights: COE has reported an increase in revenue to $48.62mn in 1HFY21 against $39.09mn in 1HFY20. COE has reported a loss of $23.05mn in 1HFY21 against a profit of $6.33mn in 1HFY20 on the back of higher operating costs. COE has seen a decline in its cash balance to $115.28mn as on 31 December 2020 against $131.58mn as on 30 June 2020. 

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company is engaged in Oil & Gas Segment. Thus, any fluctuation in oil & gas prices may impact the financials of the company. In addition, the company requires regulatory approvals to operate its business efficiently. Therefore, any delay in regulatory approvals may impact the business of the company. 

Outlook: COE plans to deliver 49TJ/day of gas in CY2021 under its sole Gas Sales Agreements (GSAs). COE has maintained its FY21 guidance and expects production in a range of 2.7-2.9 MMboe and sales volume to be in a range of 2.9-3.1 MMboe. COE expects better output through Orbost Gas Processing Plant (OGPP) during CY2021. 

Valuation Methodology: EV/Sales based Relative Valuation Method (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 COE gave a return of ~-5.66% in the last one month and a return of ~-12.28% in the last three months. The current market capitalisation of COE stands at ~$407.75mn as of 21 June 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.235~$0.425. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer median, considering an increase in net debt and decline in cash balance as on 31 March 2021. For this purpose, we have taken peers Karoon Energy Ltd (ASX: KAR), New Hope Corporation Ltd (ASX: NHC), Woodside Petroleum Ltd (ASX: WPL). Considering an increase in production volume and sales in 3QFY21, robust revenue growth in 1HFY21, current trading levels, and valuation, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.250 as on June 21, 2021.

COE Daily Technical Chart, Data Source: REFINITIV

Stanmore Resources Limited  

SMR Details

Appointment of a New CFO: Stanmore Resources Limited (ASX: SMR) is engaged in coal production. The company involves in operating and exploring projects in the Bowen and Surat Basins. SMR has announced the appointment of Shane Young for the position of Chief Financial Officer (CFO). Mr. Young is scheduled to start his tenure on 13 September 2021. The company has previously announced the resignation of Frederick Kotzee from his position of CFO in the company with effect from 12 August 2021. 

1QFY21 Performance Update: SMR has announced to change its financial year ending to 31 December from 30 June previously. SMR has reported a reduction in fleet capacity, resulting in lower ROM coal production to 514kt in 1QFY21 against 850kt in 4QFY20. Similarly, the company has reported a decline in total coal sales to 523kt in 1QFY21 against 582kt in 4QFY20. SMR has announced investing in infrastructure development at Isaac Downs to test for the bulk sample. 

FY20 Financial Highlights: SMR has reported a decline in revenue to $136.30mn in 6 months ending on 31 December 2020 against $364.48mn in 12 months ending on 30 June 2020. The company has incurred a loss of $16.12mn in 6 months ending 31 December 2020. SMR has seen a decline in its cash balance to $5.04mn as on 31 December 2020 against $32.24mn as on 30 June 2020.

Revenue and Gross Profit (Source: Analysis by Kalkine Group) 

Ventured into a Joint Agreement: SMR has announced a 50/50 Joint Venture (JV) with M Resources on 15 April 2021. The company intends to acquire the Millennium and Mavis Downs Mine from Peabody Energy Australia for a cash consideration of $1.25mn through the JV. The JV will allow coking coal assets with JORC Resources of 37mnt and combined reserves of 2.0mnt from the open cut. 

Key Risks: The company is exposed to foreign currency. Thus, any adverse price movement in foreign currency may impact the financials of the company. In addition, the company is engaged in coal exploration activities. Therefore, any fluctuation in related commodity prices may lead to impact the financials of the company.  

Outlook: SMR is undertaking the development of the Isaac Downs project. Further, the company has reported that the Queensland Government Department of Environment and Science has finished the EIS assessment report for the project. Isaac Downs project is now in the final stages of the approval process after which, it is likely to start the development process in 2H2021. 

Stock Recommendation: The stock of SMR gave a return of ~-0.71% in the last one month and a return of ~-6.08% in the last three months. The current market capitalisation of SMR stands at ~$200.10mn as of 21 June 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$0.50-~$0.88. On a TTM basis, the stock of SMR is trading at a P/BV multiple of 1.3x lower than the industry (Coal) average of 10.7x, thus seems under-valued. Considering the company has ventured into a JV to boost its production volume, witnessed a decline in its finance expenses, infrastructure development plans at Isaac Downs Project, and valuation, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.695, down by ~6.082%, as on June 21, 2021.

SMR 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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