Stocks’ Details

Mastermyne Group Limited

Contract Extension at Anglo American’s Aquila (AAA) Project: Mastermyne Group Limited (ASX: MYE) is a contracting service provider to the underground longwall mining operations. It offers industrial services and products in the coalfields and related industries of New South Wales (NSW) and Queensland. It operates Mastermyne and Mastertec as its two business segments. As of 26 March 2021, the market capitalisation of the company stood at ~$61.54 million. On 19 March 2021, MYE announced the development and outbye services contract extension for its Anglo American’s project to March 2022. MYE will undertake an additional roadway development unit and mobilise an additional workforce at its Aquila mine till March 2021. It estimates to generate total revenue of ~$60 million from this extension and variation to the mining contract.

Suspension of Operations at Moranbah North Mine: On 18 March 2021, MYE has confirmed no monetary impact to the firm owing to the suspension of operations at the Moranbah North Mine project on 20 February 2021. MYE has prioritised the safety of its workforce post-suspension. The labour is awaiting management’s decision, independent expert’s risk assessment and possibly regulatory approval for re-entry to the mine.

1HFY21 Result Highlights: The company reported $110.87 million of revenue in H1FY21, down by 18.7% on pcp, due to softer coal pricing. During the period, MYE ramped up its AAA project to full run rate and has expanded the contract & work scope at it. MYE has secured contract extensions at Glencore’s Integra Mine, BMA’s Broadmeadow Mine and SIMEC’s Tahmoor Mine during 1HFY21. After-tax, net profit for 1HFY21 stood at $1.95 million, down by 55% YoY despite a stricter industry environment. MYE Board declared a fully franked interim dividend of 0.75 cents per share for 1HFY21 payable on 19 April 2021. The company held a cash and cash equivalents balance of $17.43 million as of 31 December 2021.

1HFY21 Financial Highlights (Source: Company Reports)

Key Risks: The company is exposed to the risk of government-mandated COVID-19 restrictions on the mobility of its people inter-states, risk of their safety and project delays. It also faces the risk of seeking and using the latest technology to reduce exposure to critical risks.

Outlook: The company has a decent and progressing order book and tender pipeline for 2HFY21 and the for the next few years. Besides contracted works, it forecasts another $30-40 million per year in purchase order and recurring work. MYE is investing in its “Diversify and Grow” strategy, focusing on the whole of mine (WoM) projects. It is working on signing a binding mining services agreement for the Dysart East (WoM) project in 2HFY21 to begin work late in CY21.

Stock Recommendation: The company had declared 26 March 2021 as the record date for the dividend distribution for 1HFY21. The stock of MYE gave a negative return of 5.18% in the past three months and a negative return of 27.27% in the past six months. The stock is trading lower than the average 52-week price level range of $0.550 and $0.995. The stock of MYE has a support level of ~$0.588 and a resistance level of ~$0.698. On a TTM basis, the stock is trading at a price to book value multiple of ~0.9x lower than the industry (Energy) median of ~2x, thus seems undervalued. Considering the current trading levels, contracted pipeline for 2HFY21, NPAT for 1HFY21 and positive net cash flows from operating activities for 1HFY21, valuation on a TTM basis, and associated key risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.640, up by 10.344% on 29 March 2021.

Raiden Resources Limited

A Look at the FY21 Interim Results: Raiden Resources Limited (ASX: RDN) is engaged in exploring gold and copper. It holds an exploration tenement portfolio in eight Bulgaria and Serbia projects. As of 29 March 2021, the market capitalisation of the company stood at ~$27.88 million. RDN earned an interest income of $300k, had no revenue from the core projects and recorded a net loss of $931k for 1HFY21. During 1HFY21, RDN completed its first drilling program at the Sbor and Belopoltsi targets on the Kalabak project. At Sbor target, the drilling results demonstrated the presence of a substantial alteration system, signalling a proximal porphyritic intrusion. At its Vuzel project RDN has begun an intensive Filed work program for its first drilling program.

RDN’s Donje Nevlje and Majdanpek West projects have been extended for a further 3-year exploration term. It undertook data reviews and target re-interpretations across these projects during 1HFY21. The company has also received another Project-Pirot in Serbia during 1HFY21.

During 1HFY21, RDN exercised its option agreement to acquire Pilbara Gold Corporation Pty Limited (“PGC”) and a portfolio of gold, nickel, and other projects under it. It paid CAD$500k consideration to Pacton Gold Corp. and issued 337.5 million vendor shares to fulfil the agreement obligations. During December 2020, RDN started the field exploration on the projects-Arrow, and Mt Sholl acquired from “PGC”. During 1HFY21, RDN completed a placement of $1 million through the issue of 142.85 fully paid ordinary shares at $0.007 per share. It held a cash and cash equivalents balance of $3.92 million as of 31 December 2020.

1HFY21 Financial Highlights (Source: Company Reports)

Key Risks: The company faces the risk of receiving desired drilling results, interpreting the results, raising adequate capital for exploration expenditure on the projects.

Outlook: RDN will start to follow up targeting work in FY21 to identify the target zones and plan future drilling campaigns. It will also advance on other project prospects FY21, including the Chal anomaly. Donje Nevlje, Majdanpek West and Pirot Projects, have been defined as target zones and prospects and RDN will undertake to follow up work programs in FY21.

Stock Recommendation: The stock of RDN gave a positive return of 53.33% in the past six months and a positive return of 283.33% in the past nine months. The stock currently trades slightly higher than the 52-weeks’ average price level of $0.004-$0.051. The stock of RDN has a support level of ~$0.022 and a resistance level of ~$0.025. Considering the high trading levels, absence of revenue from core operations, net loss for 1HFY21, negative ROE, we give an ‘Avoid’ rating on the stock at the current market price of $0.023 on 29^th March 2021.

Bass Oil Limited

New Oil Drilling Program Announced: Bass Oil Limited (ASX: BAS) is a petroleum producer in Indonesia with 55% interest in Tangai Sukananti KSO in Indonesia’s South Sumatra basin.  As of 29 March 2021, the market capitalisation of the company stood at ~$10.02 million. On 25 March 2021, BAS announced a development drilling program to double the Indonesian oil output in FY22. The company has also provided an updated review of oil reserves at its oil fields. The reserves identify potential drilling to the west of the limits of its existing oil field-Bunian. 

A Look at February 2021 Results: The company reported its total field production for February 2021 at 6,183 oil barrels of BAS share (11,242 barrels of oil JV share). For February 2021, BAS share of oil sales stood at 6,289 barrels (total 11,435 oil barrels of JV). BAS achieved a higher realised oil price for February at US$58.19, up 15% MoM. BAS exercised cost reduction measures due to COVID-19 and generated positive cash contributions keeping the operating costs at ~US$20 per barrel. Its monthly average daily oil production of February 2021 was at 402 bopd, down 12% MoM. This decrease was due to the well repair work carried out in the fields.

1HFY21 Financial Highlights (Source: Company Reports)

Key Risks: The company runs the risk of estimating the reserves and resources in the Indonesian basin. It faces the threat of achieving the desired output rate from the oil wells, volatility in the petroleum prices and demand from the user-industries.

Outlook: BAS will commence the planned drilling (one firm well and two contingent wells) later in FY21 at Bunian and Tangai oilfields. It aims to produce ~500 barrels of oil per day from the oil wells within its Tangai Sukananti KSO. BAS plans to hold the production steady through CY21 as it seeks to restart its next Indonesian drilling program later in FY21. 

Stock Recommendation: The stock of BAS gave a positive return of 33.33% in the past six months and a positive return of 100% in the past nine months. The stock is currently trading at its 52-week’ high level of $0.003. The stock of BAS has a support level of ~$0.0023 and a resistance level of ~$0.0018. On 25 March 2021, the stock was up by 100% due to the new drilling program’s news onshore in the Indonesian oil fields. On a TTM basis, the stock is trading at a price to book value multiple of ~3.2x higher than the industry (Oil & Gas) median of ~2.1x, thus seems overvalued. Considering the high trading levels, significant returns in the past one-month and the past three-months, and valuation on a TTM basis, we believe most of the company’s key catalysts have been factored in at the current juncture. Hence, we suggest investors to wait for better entry levels, and give an ‘Expensive’ rating on the stock at the current market price of $0.002, down by 33.334% on 29^th March 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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