Syrah Resources Limited

Increase in Total Assets: Syrah Resources Limited (ASX: SYR) had recently released its annual report for the period ended December 31, 2018 in which it stated that the loss after income tax stood at $29.0 million as compared to $12.3 million in the same period of previous year. In the financial year ended December 2018, the company’s revenues consisted interest income amounting to $1.2 million with the help of cash reserves placed on term deposits. The company’s total assets at the end of December 2018 stood at $473.8 million as compared to $418.5 million in the previous year. The rise in total assets was mainly due to completion of fully underwritten $68 million (A$94 million) institutional placement as well as subsequent Share Purchase Plan to the eligible shareholders which helped in raising additional $6 million (A$9 million) at A$2.23 per share.


FY18 Income Statement (Source: Company Reports)

Also, the company is possessing strong position when it comes to the liquidity levels as its current ratio stood at 5.02x at the end of December 2018 which is comfortably higher than the industry median of 1.57x reflecting that SYR is in a better position to meet its short-term obligations as compared to the broader industry. Also, the sound liquidity position can help it making deployments towards its business activities which might support its long-term growth aspects.

What to Expect From SYR: With respect to Balama Graphite Operation, the company is expected to witness production ramp up and optimisationand is targeting natural flake graphite production for 2019 of approximately 250,000 tonnes with the ramp up aided by market fundamentals, achieving appropriate pricing margins and ongoing production improvement plan. With regards to Battery Anode Material Project, the company stated that phase 1 commercial scale feasibility capital efficiency review is underway, and the company would continue the assessment of strategic relationship options in downstream production.

Stock Recommendation: From the valuations perspective, Syrah Resources is looking pretty much attractive as its P/B ratio stood at 0.6x as compared to the industry median (Metals & Mining) of 1.4x reflecting that the company is slightly undervalued. Also, the company is presently trading towards is 52-week lower level, thus, providing decent entry levels to the market players. However, the company is exposed to certain risks like market risk, operational risk and counterparty risk.

Considering the above factors, we maintain our “Speculative Buy” rating on the stock at the current market price of A$1.100 per share (up 8.911% on April 02, 2019).  
 

Appen Limited

Strategic Acquisitions Taking Place: Appen Limited (ASX: APX) stated that one of the directors of the company Mr. Mark Brayanwho held 165,908 ordinary sharesin his indirect capacity and 288,303 ordinary shares & 232,583 performance rights directly, disposed 95,535 Shares from his direct interests and simultaneously acquired 95,535 Shares in indirect capacity for a nil consideration as on 22 March 2019. Hence, after this development, Mr Mark Brayanholds 261,443 ordinary sharesin his indirect capacity and 192,768 ordinary shares as well as 232,583 performance rightsin a direct capacity.

Moreover, the management, via an investment presentation, stated that they have reached an agreement to acquire Figure Eight. Figure Eight represents a highly compelling strategic acquisition of a complementary competitor in the machine learning and artificial intelligence market. The upfront purchase consideration consists of US$175 million. However, there is also an additional contingent consideration of up to a maximum of US$125m payable in March 2020 on outperformance, based on achievement of incremental FY19 subscription software revenue targets. With respect to acquisition funding, APX is launching fully underwritten institutional placement of A$285 million and has entered arrangements for up to US$125m of new debt facilities expected to be drawn down in March 2020 for the earn-out payment.

For the FY2018, company reported that its Revenue increased by 119% to $364.3M. This growth was predominantly driven by the Content Relevance division, which witnessed a 148% increase in revenue over the prior year.

FY 2018 Highlights (Source: Company Reports)
 
What to Expect From APX: As regards the outlook, the management continues to be optimistic about the ongoing growth potential in the broader AI space, and consequently for the company.In addition to its established positions in the technology, automotive and government sectors, there are attractive opportunities in the medium term for machine learning applications in financial services and industrials.
 
Meanwhile, the share price of the company has risen 73.28% in the past three months and it can be said that this has pushed the stock slightly towards the 52-week higher levels. Therefore, it can be said that the company’s stock has discounted all the key growth catalysts. 
 
Hence, we give an “Expensive” recommendation on the stock at the current market price of $22.810 per share (up 2.84% on 2 April 2019).
 

Afterpay Touch Group Limited

Contraction in margins: Afterpay Touch Group Limited (ASX: APT) has stated that in arecent development, one of the directors of the company Mr Clifford ROSENBERG who held 800,574 ordinary shares in his indirect capacity and 700,000 & 200,000 unlisted options at exercise price of $0.20 & $1.00 per option, respectively in his direct interests had disposed 150,000 shares involving the consideration amounting to $2,969,439.97 via on-market trade. Hence, after this development, Mr Rosenberg holds 650,574 fully paid ordinary shares in his indirect capacity and 700,000 & 200,000 unlisted options at exercise price of $0.20 & $1.00 per option, respectively in a direct capacity.

For the half year ended 31 December 2018, pro forma total income for the Group was $116.1m, up 91% on the pcp. This was driven principally by strong growth in Afterpay income (income from merchant fees).

The underlying sales were $2.3 billion for the half year ended December 31, 2018, a growth of 147% on the pcp. This material growth in Afterpay underlying sales was driven by a more than doubling of active customers and active merchants, as well as increased usage of the Afterpay service by existing customers to pay for their purchases.


Financial Highlights (Source: Company Reports)
 
What to Expect From APT: As regards the outlook, the management believes that the immediate markets where Afterpayis present represents a A$6 trillion opportunity.The company’s success in the Australian region has shown the applicability of its product across the majority of retail categories.

The management envisages the great opportunities ahead as it will continue to grow in existing and new verticals in ANZ markets.The Board and Management is of the view that shareholder value would be maximised by adopting a more weighted approach towards merchant and customer growth.

Meanwhile, the stock price has risen by 86.58% in the past three months and is trading slightly towards the 52-week higher level. Hence, we maintain our “Expensive” recommendation on the stock at the current market price of A$23.400 per share (up 4.511% on 2 April 2019).   

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