Stocks’ Details

Forbidden Foods Limited 

IPO to Accelerate Growth: Forbidden Foods Limited (ASX: FFF) is a multi-brand premium food, beverage and ingredients company focused on the baby food, wellness, and organic markets. The company’s products are marketed under three main brands, namely Forbidden, Sensory Mill and Funch. The company recently began trading on the ASX after completing an IPO of 30 million shares at $0.20, totalling $6 million. Proceeds from the IPO will help accelerate sales and development activities in Australia and international markets.

Financial Highlights: During the year ended 30^th June 2020, the company reported revenue amounting to $4.12 million, up ~20.1% on the previous year. The increase came on the back of rising orders from existing customers, intake of new customers, and new sales lines. Loss for the year came in at $2.35 million, against the prior year loss of $0.19 million. Cash and cash equivalents at the end of the period stood at $0.136 million, as compared to $14.6k in pcp.

Income Statement (Source: Company Reports)

Outlook: In FY21 and beyond, the company aims to launch new product lines, deepen market penetration, and expand its international focus. Notably, the baby food market is expected to grow at a rate of 5.4% p.a. from 2020 to 2025, with an estimated size of ~US$278 billion in 2025. The demand for plant-based foods is expected to grow substantially and the company seems to be well-positioned to take advantage of these industry trends.

Key Risks: Some of the threat to the business include supply chain disruptions due to heavy reliance on supply of raw materials and manufacturing items from third party, foreign exchange risk due to international exposure, revenue generation from uncontracted customer relationships, and intense competition in the consumer staples industry. 

Stock Recommendation: The stock of the company got listed on 31^st August 2020 and is currently trading at a market price of $0.385. The market capitalisation of the company currently stands at $27.38 million, with 75 million outstanding shares. As on 1^st September 2020, the stock price went up by 5.479%. Considering the positives factors, including business prospects supported by a growing baby food market, increase in revenues, outlook, along with key risks and limited available information, we suggest investors to keep an eye on the business activities and hence, give a watch stance on the stock at the current market price of $0.385, up 5.479% on 1^st September 2020.

Dark Horse Resources Limited 

Placement to Continue Exploration: Dark Horse Resources Limited (ASX: DHR) is a mineral resource company focused on Argentina. The company recently completed a placement worth $343k to institutional and sophisticated investors, issuing 196 million shares at a price of $0.00175 each. The company will use the funds for exploration and development of its suite of Gold projects in Finland and Argentina. In the June quarter, the company completed a private placement of $675k. Subsequent to the placement, the company raised $1,532k via a Share Purchase Plan.

Execution of Agreement: On 17^th August 2020, the company announced that it has executed the Finland Gold and Sweden Tungsten Permit Purchase Agreements with Sotkamo Silver AB. Under the agreement, the company will acquire interest in the Tampere Gold Project and Bergslagen Tungsten Project, for a consideration of €150,000. This represents a key milestone in the implementation of its new strategic business plan in complementing the highly prospective Argentina Gold properties, whilst diversifying into alternative, world class gold mining jurisdictions.

Quarterly Highlights: During the June quarter, the company reported promising results from the drilling of 54 shallow diamond holes (3,341m) at the Hopeavouri prospect. Some of the best drill hole intersections included, R305: 11.5m at  19.4 g/t Gold from 30.6m depth, R313: 10.7m at  14.4 g/t Gold from 4.0m depth, and R330: 3.0m at 106.7 g/t Gold from 22.0m depth. A diamond drilling program to extend the Hopeavouri high grade Gold prospect is expected to commence in the fourth quarter of 2020. As on 30^th June 2020, the company had a cash balance of $636k. Cash used in operating activities stood at $73k.

Operating Cash Flow (Source: Company Reports)

Plans in Pipeline: Going forward, the company remain focused on settling the transaction with Sotkamo and conclude a drilling contract. The company is also considering the acquisition of more mineral projects to develop its existing portfolio. With the recent capital raising, the company seems to be well-funded to implement these plans. 

Key Risks: The company’s financial instruments comprise of deposits with banks, receivables, and payables, which expose it to credit risk, liquidity risk, and interest rate risk. 

Stock Recommendation: The stock of the company corrected by 33.33% in the last three months. Over a period of 1 year, the price has corrected by 50%. The market capitalisation of the company currently stands at $8.07 million, with 4.04 billion outstanding shares. On a trailing twelve months (TTM) basis, the stock is trading at a Price to Book Value multiple of 4.9x, as compared to the industry average of 6.0x. On the technical analysis front, the stock has a resistance level of $0.003 and a support level of $0.001. Considering the current trading levels, price movements, capital raising for exploration and development, execution of agreement, and plans in pipeline, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.002 as on 1^st September 2020.

Classic Minerals Limited 

Preliminary Metallurgical Test Work Program Completed: Classic Minerals Limited (ASX: CLZ) is primarily engaged in the exploration of mineral resource-based projects, with a focus on gold and nickel. The company recently completed its preliminary metallurgical test work program on drill samples collected from drilling at Kat Gap, which delivered encouraging results. The material indicated that majority of the gold could be recovered by traditional gravity separation techniques. Toll treatment or self-processing of the material from Kat Gap can lead to early revenue generation for the company. The company expects to conduct more infill drilling to extend the resource and expanding the same via extensional drilling along strike as well as in the granite.

Capital Raising: The company recently closed the Share Purchase Plan announced on 15^th July 2020, raising $3.99 million.

Quarterly Highlights: During the quarter, the company drilled 43 RC holes for a total of 2715m, at Kat Gap, Van Uden West and Tangerine Tree’s. At Kat Gap, the company announced a maiden 2012 JORC-compliant Inferred Mineral Resource Estimate of 975,722t @ 2.96g/t for 92,856 oz. During the quarter, cash used in operating activities amounted to $1.945 million, with exploration and evaluation expenditure amounting to $1.298 million. Cash and cash equivalents at the end of the period amounted to $488k.

Operating Cash Flow (Source: Company Reports)

What to Expect: The company expects to continue the advancement of the Forrestania Gold Project in Q1 FY2021, with a focus on advancing all aspects of the mining plan at Kat Gap, acquisition of necessary mining equipment, continuing to raise capital & pay down debt & liabilities, etc.

Key Risks: The Company’s activities expose it to a variety of financial risks, including interest rate risk, credit risk and liquidity risk. In addition, any disruption to drilling programs due to COVID-19 can impact operations.

Stock Recommendation: In the last 3 months, the stock has given positive returns of 100%. Over the past 1 year, the price has corrected by 20%. The company has a market capitalisation of $26.08 million, with 13.04 billion outstanding shares. On the technical analysis front, the stock has a resistance level of $0.003 and a support level of $0.001. Considering the ongoing plans for drilling, exploration results, price movements in the last 3 months, and key risks, we suggest investors to keep an eye on the business developments and hence, have a wait and watch stance on the stock at the current market price of $0.002 as on 1^st September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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