Stocks’ Details

Neometals Ltd

Pursuing Multiple Opportunities for Sustainable Future:Neometals Ltd (ASX: NMT) is engaged in advancing its minerals projects Mt Marion and Barrambie and developing its technology business unit. Recently, the company announced that it has entered into a memorandum of understanding with Chinese research organisation, the Institute of Multipurpose Utilization of Mineral Resources Chinese Academy of Geological Sciences, to jointly advance development of the company’s Barrambie Titanium-Vanadium project. China is the largest producer of titanium and vanadium chemical products in the world, with applications spanning titanium pigment, aerospace alloys and energy storage applications. This partnership would help the company in fast-tracking its development process at Barrambie with retaining a more material JV interest in operating the integrated project.

FY19 Key Highlights for the period ended June 30, 2019:Top-line for the continuing operations for the period was reported at $1,652,500 as compared to $1,417,210 in the previous period. Loss for the year from continuing operations was reported at $22,506,227 as compared to a profit of $4,578,590 in the previous year. Profit for the year from discontinuing operations was reported at $98,684,783 as compared to profit of $11,100,951 in the previous period. Combined profit from continuing and discontinuing operation for the period was reported at $76,178,556 as compared to $15,679,541 in the previous year.


FY19 Income Statement (Source: Company Reports)

What to expect:As per the release, the company’s indicative project timeline for Barrambie project includes production of high titanium concentrates for Hydromet test work in the September’19 Quarter; production of titanium and vanadium chemicals via hydrometallurgical at Lab scale in the December’19 Quarter; production of titanium and vanadium chemicals at pilot scale and completion of class 4 engineering cost study in CY20; and completion of class 3 engineering cost study by December 2020. Moreover, brownfield nickel and lithium exploration project at Mt Edwards has confirmed the presence of multiple fertile lithium-caesium-tantalum pegmatities. These developments are expected to help the company in delivering better return for its shareholders in the long run.

Stock Recommendation:NMT’s share generated positive a YTD return of 9.58%. Its current ratio for FY19 stood at 34.17x, better than the industry median of 1.75x, which implies the company’s better liquidity position than its peer group. The Company’s cash position as on June 30, 2019 was reported at $113.7 Mn with no debt. Currently, the stock is trading at a price to earnings multiple of 1.43x. It is trading above the average of 52-week high and low levels of $0.249 and $0.170, respectively. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.200 up 5.263% on October 4, 2019.
 

Mineral Resources Limited

Cash and Cash Equivalent on June 30, 2019 Reported At $265 Mn:Mineral Resources Limited (ASX: MIN) is involved in an integrated supply of goods and services to the resources sector. Recently, Airlie Funds Management Pty Ltd on its own behalf and on behalf of Magellan Financial Group Limited and its related bodies became a substantial holder in the company with 5.08% voting right, effective from October 1, 2019. In another update, the company notified Hexagon Resources Limited (ASX: HXG) that MIN is withdrawing from the McIntosh project in Northern Western Australia effective from October 31, 2019, which will lead to the write-off of its investment of less than $5 Mn in the project. The project was originally intended to increase MIN’s exposure to battery materials with the inclusion of graphite as well as to create additional Western Australia contracting opportunities.

FY19 Key Highlights for the year ended June 30, 2019:Revenue for the period was reported at $1,512 Mn, a decline of 7% on prior corresponding period. Normalised Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) for the period was reported at $433 Mn for FY19, which was above the guidance range provided for FY19 of $360 Mn to $390 Mn. This result can be attributed to strong iron ore pricing in the second half due to an increase in Platts pricing and a reduction in the company’s discounts.

Profit for the company after providing for income tax and non-controlling interest was reported at $165 Mn. The cash and cash equivalents held at the end of the period was reported at $265 Mn, an increase of $240 Mn on previous year.Moreover, the company had access to the substantial undrawn debt facilities to support business development activities at around $366 Mn as on June 30, 2019. The Board of Directors declared a fully franked final dividend of 31 cents per share, with record date and payment date on September 9, 2019 and October 4, 2019, respectively.


FY19 Key Financial Metrics (Source: Company Reports)

What to expect:FY19 witnessed various investments amounting to around $858 Mn, an increase of 140% on the previous corresponding period. The development of Wodgina from a Direct Shipping Ore (DSO) operation into a higher value lithium spodumene operation, involved ceasing of DSO sales from Wodgina during FY19 in order to preserve the value of the resource and the construction of a 750,000 dry tonne per annum spodumene concentrate plant along with significantly associated site infrastructure. Other development includes upgradation of the Mt Marion lithium project; and commencement of iron ore operations at Koolyanobbing. These developments are expected to help the company in delivering a sustainable return to its customers and shareholders in the coming times.

Stock Recommendation:MIN’s share generated a negative YTD return of 11.76%. Its gross margin for FY19 stood at 93%, better than the industry median of 42%. Its EBITDA margin for FY19 stood at 28.7%, slightly below the industry median of 29.1%. Its ROE for FY19 stood at 12.4%, better than the industry median of 12.3%, which implies that the company generated a better return for its shareholders than its peer group. Its current ratio for FY19 stood at 2.84x, better than the industry median of 1.75x, which implies the company’s better liquidity position than its peer group. Currently, the stock is trading close to its 52-week low level of $12.390. On valuation front, its EV/Sales multiple on NTM (Next Twelve Months) stands at 1.1x, lower than the industry median of 1.4x. Hence, considering the aforesaid facts and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $13.200, up 0.995% on October 4, 2019.
 

Otto Energy Limited

Decent set of Numbers for FY19:Otto Energy Limited (ASX: OEL) is involved in oil and gas exploration, development, production and sales in North America. Recently, the company provided updates on operational activities in the Gulf of Mexico region involving Green Canyon 21 (GC 21), the Gulf Coast well program including the Lightning gas/condensate producing field and the Mustang discovery and South Marsh Island 71 (SM 71). Completion of the GC21 “Bulleit” well is expected by mid-2020 with first production in late Q3 2020. The company is in the final stages of securing financing package which will fund the Green #2 development well, GC 21 and provide capacity for its current and future developments.

FY19 Key Highlights for the period ended June 30, 2019:Net revenue from production for the period was reported at US$31.2 Mn, as compared to US$9.5 Mn in 2018. Cash operating gross profit for the period was reported at US$28.4 Mn, as compared to US$8.8 Mn in 2018. EBITDAX (Earnings before interest, tax, depreciation, depletion, exploration, evaluation and impairment) for the period was reported at US$23.5 Mn, as compared to US$5 Mn in 2018. Cashflow from operating activities (before exploration costs) was reported at US$23.7 Mn. Proved reserves growth for the period was reported at 49% to 3.670 MMboe.


FY19 Key Financial Metrics (Source: Company Reports)

What to expect:Company’s core strategic goal is to grow production in the Gulf of Mexico to more than 5000 boepd by the end of 2020, which can be underpinned by exciting pipeline of up to four high-impact exploration opportunities as well as development wells taking place over the next six months. It is also progressing on finance facility for funding current and future developments, allowing the company to continue to look for further growth opportunities in the Gulf of Mexico.

Stock Recommendation:OEL’s share generated a positive YTD return of 23.39%. Its gross margin for FY19 stood at 64.6%, better than the industry median of 50.4%. Its current ratio for FY19 stood at 2.57x, better than the industry median of 1.23x, which implies the company’s better liquidity position than its peer group. Currently, the stock is trading close to its 52-week low level of $0.035. Hence, considering the aforesaid facts and current trading levels, we suggest investors to have a watch stance on stock at the current market price of $0.050, up 4.167% on October 4, 2019.
 

Comparative Price Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.