MACA Limited 

MLD Details

Business Highlights: MACA Limited (ASX: MLD) is engaged in contracting of mining and civil services to the mining and resources industry. Its mining business specialises in providing mining and crushing services predominantly to mid-size mining projects across a range of commodities. MLD has been notified by Karara Mining Ltd (Karara) that MLD is not the favored bidder in the extension of the mining services contract at the Karara Magnetite project. The current contract with Karara is expiring in March 2022 and the performance of the contract has been in line with MLD’s expectation so far. 

Increase in Interest of a Substantial Holder: MLD has announced on 26 May 2021 regarding a change in substantial holder’s interest. Dimensional Entities has increased its interest in MLD to 6.01% on 19 May 2021 against 5.00% reported on 8 March 2019. 

1HFY21 Financial Highlights: MLD has registered an increase in revenue to $467.24mn in 1HFY21 against $353.26mn in 1HFY20. Despite an increase in revenue, the company has reported a decline in profit to $14.81mn in 1HFY21 against $18.55mn in 1HFY20 due to foreign exchange losses and an increase in operating costs. The cash balance has been increased to $122.80mn as on 31 December 2020 against $114.65mn as on 30 June 2020. In addition, the interest-bearing liabilities have been increased to $148.76mn as on 31 December 2020 against $132.94mn as on 30 June 2020.

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to foreign exchange prices. Therefore, any adverse change in foreign exchange prices may impact the financials of the company. In addition, the company holds interest-bearing liabilities. Therefore, severe interest rates may impact the financials of the company.  

Outlook: MLD expects top line and bottom line to remain with market consensus in FY22. MLD is likely to replace the Karara Project with other similar opportunities in the sector. Five-year extension was awarded to MLD’s current Kimberley Road Maintenance package for Main Roads. The project is expected to generate $74mn revenue over the five-year term.

Valuation Methodology: P/E based Relative Valuation Method (Illustrative)

Source: 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. 

Stock Recommendation: The stock of MLD gave a return of ~-4.40% in the last one month and a return of ~-27.96% in the last three months. The current market capitalisation of MLD stands at ~$257.99mn as of 01 July 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.710-~$1.515. We have valued the stock using the P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in % terms). We believe that the company can trade at a slight discount as compared to its peer median, considering the company has seen an increase in non-current liabilities as on 31 December 2020 and decline in profits in 1HFY21. For this purpose, we have taken peers Macmahon Holdings Ltd (ASX: MAH), Perenti Global Ltd (ASX: PRN), Emeco Holdings Ltd (ASX: EHL) to name a few. Considering increase in revenue in 1HFY21, increase in cash balance as on 31 December 2020, current trading levels, decent outlook, and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $0.76, as on July 1, 2021, 10:36 AM (GMT+10), Sydney, Eastern Australia.

MLD Daily Technical Chart, Data Source: REFINITIV 

Prospect Resources Limited 

PSC Details

Arcadia Plant to Contribute High Quality Product: Prospect Resources Limited (ASX: PSC) is principally engaged in the exploration and evaluation of mineral resources. The company's geographical segments include Australia and Zimbabwe. PSC has informed on 1 July 2021 that its Arcadia Pilot Plant has officially been opened now. The plant has delivered a ceremonial sample of product to offtake partner and shareholder, Sinomine Resources. The company is now focusing to generate high purity grade of petalite to the customers. Petalite is set to be utlilised by customers in the second half of 2021.

1HFY21 Financial Highlights: PSC has registered an increase in revenue to $351k in 1HFY21 against $136k in 1HFY20. The company has incurred a loss of $1.18mn in 1HFY21. The cash balance has been increased to $5.45mn as on 31 December 2020 against $1.69mn as on 30 June 2020.

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to foreign exchange prices. Therefore, any adverse change in foreign exchange prices may impact the financials of the company. In addition, the company is exposed to fluctuation in commodity prices, that may impact the financials of the company.  

Outlook: PSC expects to deliver the petalite output for customers through its Arcadia Plant in the 2HFY21. The company is under discussions to consider a development joint venture with a large corporate investor. 

Stock Recommendation: The stock of PSC gave a return of ~11.77% in the last one month and a return of ~22.66% in the last three months. The current market capitalisation of PSC stands at ~$78.40mn as of 01 July 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$0.062-~$0.275. On the technical analysis front, the stock has a support level of ~$0.18 and a resistance of ~$0.25. Considering the company has witnessed a loss in 1HFY21, decent stock price movement in the past few months and current trading levels, we suggest investors to book profits and recommend a “Sell” rating on the stock at the current market price of $0.225, up by ~7.142% as on Jul 1, 2021.

PSC Daily Technical Chart, Data Source: REFINITIV 

SI6 Metals Limited 

SI6 Details 

Update on Airstrip Project: SI6 Metals Limited (ASX: SI6) is an Australia-based exploration company operating in Southern Africa and Western Australia. It is engaged in the field exploration programs at its Maibele Project targeting nickel, copper, cobalt, platinum group elements (PGE) and silver mineralization. SI6 has announced the findings from Gradient Array Induced Polarisation (IP) survey across the Airstrip project. It has discovered numerous inconsistent chargeability zones and to facilitate the design for deeper drilling. The survey has confirmed about 2.5km long IP Gradient Array anomaly by Pole Dipole IP. 

Notice of Initial Substantial Holder: SI6 has informed that Trayburn Pty Ltd., Vermar Pty Ltd ATF P&T Superannuation, CAP Holdings Pty Ltd ATF Cap Trust, Patrick John Volpe and Maria Catina Volpe increased their voting power to 5.20% on 29 June 2021.

1HFY21 Financial Highlights: SI6 has reported an increase in other income to $10,716 in 1HFY21 against $2,455 in 1HFY20. The company has incurred a loss of $1.09mn in 1HFY21 due to higher exploration expenses and other operating costs. The cash balance has been increased significantly to $5.61mn as on 31 December 2020 against $799,695 as on 30 June 2020. Total Liabilities were reported higher to $352,316 as on 31 December 2020 against $100,952 as on 30 June 2020.

Loss after Income Tax (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to foreign exchange prices. Therefore, any adverse change in foreign exchange prices may impact the financials of the company. In addition, the company is exposed to fluctuation in commodity prices, that may impact the financials of the company.  

Outlook: SI6 expects significant upside through the first phase drilling at Korong and Waihi to delineate near-surface gold resources. 

Stock Recommendation: The stock of SI6 gave a return of ~7.69% in the last nine months and a return of ~180% in the last 12 months. The current market capitalisation of SI6 stands at ~$16.71mn as of 01 July 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.005-~$0.046. On the technical analysis front, the stock has a support level of ~$0.012 and a resistance of ~$0.02. On a TTM basis, the stock of SI6 is trading at a P/BV multiple of 3.1x higher than the industry (Metals & Mining) median of 2.8x, thus seems over-valued. Considering the company has witnessed a loss in 1HFY21, finding numerous anomalies on drilling at Airstrip Project, absence of operating income, and decent stock price movement in the past few days, we recommend a “Sell” rating on the stock at the current market price of $0.014, up by ~16.66% as on Jul 1, 2021.

SI6 Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on 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 uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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