Liontown Resources Limited (ASX: LTR)

Incorporated in 2006, LTR is a metals exploration and development company having its flagship Kathleen Valley Lithium-Tantalum Project in WA. Its projects include Buldania Project, Moora Gold-PGE-Ni-Cu Project and Toolebuc Vanadium Project. Its market capitalization stood at AUD 3.53 billion as of 30^th November 2021.

Financial and Operational Updates: As announced on 29^th November 2021, LTR produced 6% spodumene concentrate and tantalum concentrate at its Flagship Project. In the recent class ruling by the Australian Taxation Office, capital gain tax triggered upon the demerger of Minerals 260 and subsequent transfer of shares to LTR shareholders. On 17^th November 2021, it had signed a landmark Native Title Agreement (2.5 years) for its flagship project with Tijwarl Native. During the quarter ended 30^th September 2021 (Q1FY22), Its sales receipts for 1QFY22 were reported as nil and closed the quarter with a cash balance of ~AUD 26.48 million at the end of 30^th September 2021 versus ~AUD 12.54 million at the end of 30^th June 2021. As per its Annual Report for FY21, the Net Losses reported were reduced from ~AUD 12.83 million in FY20 to ~AUD 10.57 million in FY21.

Technical Analysis: On the daily chart, LTR stock prices are trading in a rising channel pattern for the past 4 months and prices are sustaining above the lower band of the pattern and taking support of the same. Moreover, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, indicating a positive momentum. The momentum oscillator RSI (14-period) is at (~61.64 level), indicating bullish momentum in the stock. The crucial support level for the stock is placed at AUD 1.68, while the key resistance is at AUD 2.19.

After considering LTR’s recent agreement for its flagship project, update in findings and currently price trading at support level, the investors with a high-risk appetite can consider it as a ‘Speculative Buy’ along with incorporating the support and resistance as one of the tools while analysing the investment opportunity. The stock was analysed as per the current market price of AUD 1.87 per share, as of 30^th November 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia. However, the risk levels are extremely high in view of the future findings and its saleability.

Daily Technical Chart – LTR

Source: REFINITIV

Vulcan Steel Limited (ASX: VSL)

VSL is an Australian company involved in distribution of steel products, including carbon steel, stainless steel and engineering steel to a variety of customers in engineering, manufacturing, fabricating, transport, mining and a range of other market segments. Its market capitalization stood at AUD 1.00 billion as of 30^th November 2021.

Financial and Operational Updates: On 17^th October 2021 its Statutory Accounts for FY21 reported an increase in revenue from ~AUD 640.45 million in FY20 to ~AUD 731.55 million in FY21. It showed a substantial increase in Net Profit from ~AUD 28.68 million in FY20 to ~AUD 64.83 million in FY21. It closed its account with a cash balance of ~AUD 10.16 million at the end of 30^th June 2021 versus ~AUD 14.19 million at the end of 30^th June 2020. In the month of November 2021, Wide View Enterprises Limited, Vulcan Sale Company Limited, trustees from the Ellsar Trustees, the Moore Trustees and the Casey Trustees ceased to be substantial shareholder in VSL. While Takutai Limited as a trustee of Takutai Trust changed its substantial shareholding from 23.357% to 14.014%.

Technical Analysis:  As the share started trading on ASX from 9^th November 2021 onwards, it is difficult to provide technical analysis on the stock. The crucial support and resistance levels are to be incorporated while analysing the investment opportunity.

Investors can consider exiting from the stock if the Resistance levels mentioned as per the technical analysis have been achieved and are subject to the factors discussed above.

Valuation Methodology: Price to Sales 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.

Over the last week, the stock has provided a positive return of ~0.755% and is trading above the average 52-week price level band of AUD 7.08 and AUD 8.18. The stock has been valued using a Price to Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). For the purpose of valuation, peers like Mount Gibson Iron Ltd (ASX: MGX), Fortescue Metals Group Ltd (ASX: FMG), Champion Iron Ltd (ASX: CIA) and others have been considered. The company can trade at a slight discount to its peers, considering its risks associated with COVID-19 impact and fluctuating prices of steel commodity. After considering substantial improvement in VSL’s revenue and profitability, current trading levels, upside potential as per the relative valuation, we suggest a ‘Buy’ recommendation on the stock at the current market price of AUD 7.65 per share, as of 30th November 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

Daily Technical Chart – VSL

Source: REFINITIV

West Wits Mining Limited (ASX: WWI)

Found in 2007, WWI is a gold mining, exploration and development company mainly working in two segments South Africa and Australia. Its projects include Witwatersrand Basin Project (WBP) and Mt Cecelia Project. As on 30^th November 2021, the market capitalization of the company stood at AUD 53.46 million.

Financial and Operational Updates: As per the announcement on 30^th November 2021, it stated an intention of issuing Right Issue on pro-rata basis and give one new share in return of six ordinary shares held on record date at an issue price of AUD 0.03 (3 cents) per share in order to raise ~AUD 7.86 million before costs. As per the Quarterly Update on 29^th October 2021, a mining right was granted to Witwatersrand Basin Project (WBP), with Global JORC Mineral Resource Estimate (MRE) of 25.91Mt @4.26g/t for 3.55Moz Au (2g/t cut-off). With a view of becoming mid-tier gold producer, its scoping study results stated production target as 80,000oz AU per annum. It also stated its maiden ore reserve of 3Mt at 2.88g/t and confirmed the commencement of Qala Shallows Early Mining Initiative. Its sales receipts for 1QFY22 were reported as nil and closed the quarter with a cash balance of ~AUD 5.67 million at the end of 30^th September 2021 versus ~AUD 984k at the end of 30^th June 2021. As per the Annual Year Report released on 30^th September 2021, its total revenue was reported as nil in FY21 versus ~AUD 142k million in FY20. It reduced its net losses after taxes of ~AUD 1.91 million in FY20 to ~AUD 543k in FY21.

Technical Analysis: WWI stock prices are trading below the downward sloping trend line resistance level and facing the resistance of the same. Moreover, prices are trading below 21-period SMA and 50-period which may act as a crucial resistance level for the stock. However, the momentum oscillator RSI (14-period) is trading in an oversold zone at ~32.15 levels. The crucial support level for the stock is placed at AUD 0.029, while the key resistance is at AUD 0.039.

The current trading levels and nil operating revenues suggests the scrip as a ‘Watch’. The stock was analysed as per the closing price of AUD 0.033 per share, down by ~2.942% as of 30^th November 2021.

Weekly Technical Chart – WWI

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 Yellow colour line represents the Trendline.

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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