Stocks’ Details

Argosy Minerals Limited

Delivery of 500kg High Purity Lithium:  Argosy Minerals Limited (ASX: AGY) is engaged in the development of the Rincon Lithium Project with a market capitalisation of ~$51.99 Mn as on 12^th November 2020. During Q3FY20, the company achieved significant milestones, which include delivery of a 500kg high purity (>99.5%) lithium carbonate product sample to battery cathode end-user customer of Japan. The company also worked on the growth of the industrial-scale pilot plant operations and production of >99.5% Li₂CO₃ product. However, market conditions of the lithium sector were challenging with stabilized lithium prices. The company recorded net cash outflow from operating activities of 551k and 215K from investing activities. During 1H FY20, the company recorded loss amounting to $1,386,499 as compared to $1,322,620 in 1H FY19.

Cash Flow (Source: Company Reports)

Outlook: The company believes that key upcoming milestones and achievements would reflect the long-term sustainability of the Rincon Lithium Project.

Stock Recommendation: AGY closed Q3 FY20 with a strong financial position supported by cash reserves of ~$3.63 million. In addition, the company is also likely to maintain a prudent approach to financial management. The stock of AGY is trading towards its 52-week low levels of $0.026, proffering decent opportunities for accumulation. On a technical analysis front, the stock of AGY has a support level of ~$0.034 and a resistance level of ~$0.082. Therefore, considering the achievement of key milestones in Q3 FY20, strong financial position, current trading levels and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.052 per share, down by 1.960% on 12^th November 2020.

Resources & Energy Group Limited

Commencement of Drilling: Resources & Energy Group Limited (ASX: REZ) is engaged in the exploration of energy and resources with a market capitalisation of ~$29.78 Mn as on 12^th November 2020. Recently, the company announced the commencement of drilling operations at the Gigante Grande prospect, which follows the success of the initial drill program to discover a large vein and shear hosted gold system. The company has planned six holes and two extensions for a total advance of 1170m.

A Look at Q1 FY21 Activities: In another update, the company notified the market with activities for the quarter ended 30^th September 2020 (Q1 FY21), wherein, it stated that the air core program at East Menzies Gold Project (EMGP) has resulted in the completion of 5684m of drilling, which was distributed over 208 boreholes. The air core program has affirmed several historic +100ppb gold in regolith anomalies distributed over the Gigante Grande and Chronos Prospect. The net cash outflow from the operating activities stood at $685k. Also, in the month of October 2020, the company has raised $3.3 million, and the funds would be ultilised for the current exploration program at its East Menzies Gold Field tenements. During FY20, the company recorded loss amounting to $3,128,112 as compared to $4,160,253 in FY19.

Cash Flow (Source: Company Reports)

Outlook: For the upcoming two quarters, the company plans to focus on its exploration activities and would continue to incur operating cash outflows during the same time span. The company has scheduled to conduct its 2020 Annual General Meeting on 30^th November 2020.

Stock Recommendation: As on 30^th September 2020, the cash balance of the company stood at $1,070,000. The 52-week low-high range for the stock stands at $0.006 - $0.115, respectively. In the past one and three months, the stock of REZ has moved up by 121.87% and 238.09%, respectively. On a technical analysis front, the stock of REZ has a support level of ~$0.067 and an immediate resistance level of ~$0.11. Thus, considering the absence of substantial revenue and steep price movement in the past months, we advise investors to avoid the stock at the current market price of $0.071 per share, up by 2.898% on 12^th November 2020.

Actinogen Medical Limited

Filing of Two New Patent Applications: Actinogen Medical Limited (ASX: ACW) is involved in the development and commercialisation of new therapeutic compounds. The market capitalisation of the company stood at $25.67 Mn as on 12^th November 2020. Recently, the company has submitted two new patent applications for its lead drug Xanamem in order to grow and extend its intellectual property (IP) estate. The company added that the first new patent application provides patent protection to a method of improving cognition or treating cognitive decline in cognitively healthy subjects, while second patent application provides protection to a novel commercial scale-up manufacturing process for Xanamem. The company added that these patent applications bolster the company’s IP portfolio and put the business in a decent position to commercialise and maximise the value of its lead drug, Xanamem. 

A Look at Q1FY21: During Q1 FY21, the company achieved significant progress with further plans for developing additional indications for Xanamem. Also, the company cemented its senior management team through the recent appointment of Mr. Jeff Carter for the role of Chief Financial Officer. After the end of Q1FY21, the company raised $6.0 million placement to new investors and existing shareholders. In addition, ACW also raised a further $4.9 million via 1 for 5 Entitlement Offer, which closed on 10^th November 2020. For the year ended 30^th June 2020, the company recorded total revenue & other income of $3,610,454 as compared to $5,067,301 in FY19. Loss for the year amounted to $5,330,529 against $9,887,682 in FY19.

Cash Flow from Operations (Source: Company Reports)

Outlook:  During 1H CY21, the company is planning to begin two new clinical trials for Xanamem™. In addition, the company’s strategy also revolves around cementing its IP portfolio through the development of the lead drug, Xanamem.

Key Risks: The company’s business growth is sensitive to the success of clinical trials, which the company has planned. In addition, the failure in getting patent may pose challenges for its growth.

Stock Recommendation: Current ratio of the company stood at 10.98x in FY20 as compared to the industry median of 5.23x, which indicates that the company is well-positioned to pay off its short-term obligations against the broader industry. The stock of ACW has corrected 18% and 2.30% in the last one and three months, respectively. As a result, the stock is inclined towards its 52-week low levels of $0.014, offering decent opportunities for accumulation. ACW has an EV/Sales multiple of 7.3x as compared to the industry median (Healthcare) 12.2x on TTM basis. In addition, the stock is trading at a price to book value multiple of 2.8x against the industry median (Healthcare) 3.9x on TTM basis. Hence, it can be said that the stock is undervalued at current trading levels. On a technical analysis front, the stock of ACW has a support level of ~$0.021 and an immediate resistance level of ~$0.024. Thus, in light of the current trading levels, filing of patent applications, capital raising and key risk associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.022 per share, down by 4.348% on 12^th November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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