Adairs Limited (ASX: ADH)

Incorporated in 2010, ADH is into retailing of homewares, furniture and home furnishings in Australia and New Zealand. Its segments are Adairs & Mocka, running offline as well as online. Its market capitalization stood at $625.58 million as of 7^th October 2021.

Financial & Operational Updates – Vinva Investment Management Limited and MUFG ceased to be substantial shareholders as announced on 22^nd September and 27^th August 2021, respectively. On 20^th August it announced fully franked final dividend of $10.0 cents. As per the Preliminary Final Report released on 20^th August 2021, revenue from continuing activities was up by ~28.5% Y-o-Y and reported as $499.76 million in FY21 and the net profit after tax increased by ~80.7% Y-o-Y to $63.74 million as compared to $35.28 million in FY20. Cash at the end of FY21 was reported as $25.97 million versus $23.92 in PcP. There is no debt outstanding at the end of FY21. Introduction of a new DHL-operated distribution centre to be operational from September 2021, which will result in annual cost savings of ~$3.5 million.

Valuation: The stock of ADH is trading lower than the average 52-week price level band of $3.04 and $4.97. The stock has been valued using the Price/Earnings per share multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company can trade at some discount to its peers’ median Price/Earnings multiple. For the purpose of valuation, peers like JB Hi-Fi Ltd (ASX: JBH), Super Retail Group Ltd (ASX: SUL), Vita Group Ltd (ASX: VTG), and others have been considered.

Valuation Methodology: Price/Earnings per share Multiple Based Relative Valuation (Illustrative)

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.

Despite the COVID-19 Pandemic implications, Adairs not only managed to increase its revenue substantially, but also reported an increase in net profit for FY21, indicating continued growth. At the current price levels, investors with a high-risk appetite might consider a ‘Speculative Buy’ position, incorporating the support and resistance as one of the crucial tools while analysing the investment opportunity. The stock was analysed as per the current price of $3.730, as of 7^thOctober 2021, 12:20 PM (GMT+10), Sydney, Eastern Australia. However, the risk levels should be considered and are subject to increasing competition and constraints from supply chain dynamics.

Weekly Technical Chart – ADH

Source: REFINITIV

Alderan Resources Limited (ASX: AL8)

AL8 was incorporated in 2013, is an Australian company engaged in exploration activities of copper and gold. It has exploration assets in Detroit, Valley Crossroads, Frisco and White Mountain. Its market capitalization stood at $17.44 million as of 7^th October 2021, at the stock price of $0.042 per share.

Financial & Operational Updates – On 1^st October 2021, substantial ownership of Tolga Kumova has been changed from 18.07% to 16.05% of the voting interest. As per the announcement on 30^th September 2021, AL8 signed an option agreement with North Exploration LLC covering lode mining claims at its historic Drum Gold Mine project in Detroit. As per the Annual Report released on 29^th September 2021, AL8 reported an increase in Total Comprehensive Loss, stated as ~$2.94 million for FY21, as compared to loss of ~$1.48 in FY20. Cash at the end of FY21 was reported as ~$0.79 million as of 30^th June 2021 versus ~$2.13 million in PcP. On 22^nd September 2021, it got approval to proceed with its 10-holes (3,000m) diamond drilling program at its Drum Project in Utah for its copper-gold targets.

Technical Analysis: AL8's prices started to fall after making a high of $0.145 in January 2021 and currently trading near to the 52-week low at $0.040. On the weekly chart, the CMP is below the trend following indicators 21-period SMA and 50-period SMA and the momentum indicator RSI (14-period) is trading near the oversold zone at ~31.570 levels, indicating the possibility of further downside movement. The crucial levels of support and resistance are $0.038 and $0.046, respectively.

AL8 has a long way to go for realisation of its revenue from operations. On technical front, considering its low momentum, investing in this stock at current levels should be executed with a cautious approach, therefore a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of $0.042 per share, as of 7^th October 2021.

Weekly Technical Chart – AL8

Source: REFINITIV

Golden Deeps Limited (ASX: GED)

Incorporated in 1991, GED is an Australian company engaged in mineral deposits exploration like copper, vanadium, lead, zinc, silver, gold. It is mainly focused on producing vanadium products that are catered to the battery market and energy storage facilities. Its major projects include Abenab Vanadium-Lead-Zinc Project, Abenab Mineralisation, Abenab Mine History, Havilah and Tuckers Hill Gold Projects, Khusib Springs Copper-Silver Mine-Namibia, covering Australia, South Africa and Canada regions. Its market capitalization stood at $7.75 million as of 7^th October 2021, at the stock price of $0.0105 per share.

Financial & Operational Updates – As per the announcement on 7^th October 2021, diamond drilling of 8 holes (1,000m) high-grade copper, vanadium and lead commenced in Nosib prospects in Namibia, while the Khusib prospect drilling program is on the cards. As per the recent Full Year Statutory Accounts released on 1^st October 2021, total revenue from operations decreased from ~$39.62k in FY20 to ~$25.81k in FY21. On the other hand, Total Comprehensive Loss of ~$1.11 million in FY20 has decreased to ~$0.54 million in FY21. Cash at the end of FY21 was reported as ~$3.00 million as of 30^th June 2021 versus ~$0.67 million in PcP.

Technical Analysis: GED's prices are currently consolidating in a range of $0.009 and $0.017 from the past almost one year. On a weekly chart, the stock price is trading below the 21-period SMA and 50-period SMA indicating bearish momentum in the stock. and the RSI (14-period) is trading at ~43.807 level, indicating negative momentum for the stock. An immediate support level is $0.009, while immediate resistance is found at $0.012, respectively.

Considering its drop in total revenues, losses in FY21 and investment at its current indecisive levels won’t comfort the investors, therefore a ‘Watch’ stance is suggested. The stock was analyzed as per the closing market price of $0.0105 per share, up by ~5.00% as of 7^th October 2021.

Weekly Technical Chart – GED

Source: REFINITIV

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 for 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 the uptrend may take a pause due to profit booking or selling interest. 

The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Blue colour line reflects the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 50-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

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