Stocks’ Details
 

Galaxy Resources Limited

 
GXY Releases its December Quarter 2019 Key Highlights: Galaxy Resources Limited (ASX: GXY) is engaged in the production and manufacturing of lithium, exploration of minerals and brine assets in Argentina, Canada and Australia. For the quarter ended 31 December 2019, the company stated that production volume of lithium concentrate at Mt Cattlin came in at 43,222dry metric tonnes. This figure was at the upper end of the production guidance range of 35,000 – 45,000 dmt.During the quarter, sale of lithium concentrate stood at 29,778dmt. The figure was below the guided range of 30,000 - 45,000dmt. Out of the total sales, 14,778 dmt was shipped and 15,000 dmt was not shipped. The company delayed shipment of this product until Q1 2020, wherein 65% of the product was already paid for, by the customers.
 
Shareholding Updates: On 24 December 2019, the company announced that it has lowered its substantial holding in Lepidico Ltd from 9.35% to 8.095%, effective from December 23, 2019.
 

Shareholding Update (Source: Company Reports)
 
What to Expect: The company has also updated on its corporate strategy for 2020 and beyond. It is established to develop its projects to create a sustainable, large scale, worldwide lithium chemicals business through organic growth. It has also completed process test work for the Sal De Vida project and enhanced work has resulted in the increase of lithium recovery. For Mt Cattlin, the company is likely to implement a lower activity mine plan focused on reducing volumes and costs to maintain encouraging cash margins and preserving resource life.
 
Valuation Methodology:Price to Cash Flow Multiple Approach
 

Price to Cash Flow Based Valuation (Source: Thomson Reuters), *1 USD = 1.45 AUD

Note: All the forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock posted a positive return of 13.43% on a year-to-date basis and is currently trading below the average of its 52-week high and low of $2.415 and $0.815, respectively. Considering the corporate strategy for 2020, current trading levels and other factors, we have valued the stock using Price to Cash Flow based relative valuation method and for the purpose, we have taken the peer group - Orocobre Ltd (ASX: ORE), Pilbara Minerals Ltd (ASX: PLS)and Altura Mining Ltd (ASX: AJM). Therefore, we have arrived at a target price of lower double-digit growth (in % terms). The stock experienced a short interest of ~16.34% (as per the ASIC report of 06 January 2020). Hence, we recommend a “Speculative Buy” rating on the stock at the current market price of $1.16, up 1.754% on 10^th January 2020.

Inghams Group Limited

Poultry Demand on Rise Due to Cost Minimisation: Inghams Group Limited (ASX: ING) is engaged in the manufacturing and sale of chicken and turkey products. On 19^th December 2019, Inghams Group Limited announced that James Bruce Leighton, one of the Directors in the company, acquired 93,721 Ordinary Shares to be held in escrow until 15 December 2022, taking the final holdings to 93,721 Ordinary Shares and 556,777 Performance Rights. 

FY19 Highlights for the Period Ended June 30, 2019: The company’s core poultry volume for FY19 increased by 4.3% and came in at 414.9kt. Underlying gross profit stood at $480.2 million, up 3% year over year. Underlying EBITDA for FY19 rose by 2.9% and came in at $208.6 million. NPAT for the period stood at $126.2 million, up 10.1%. The company declared a fully franked final dividend of 10.5 cents per share in FY19.


FY19 Financial Highlights (Source: Company Reports)

Outlook:The company expects demand for poultry to rise as consumers are attracted by the cost-effective chicken as a healthy protein source. Consequently, EBITDA in FY2020 has been expected to be below underlying FY2019 with a return to growth anticipated in FY2021. The company also reported that performance in New Zealand is returning to yoy growth as the business entered into FY20.

Valuation Methodology:P/CF Multiple Approach
 

P/CF Based Valuation (Source: Thomson Reuters)
 
 Note: All the forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock posted a positive return of 18.58% in the past three months and is currently trading close to the average of its 52-week high and low of $4.860 and $2.890, respectively. Its ROE for FY19 stood at 59.3%, better than the industry median of 13.1%. Considering the performance in FY19, decent outlook and current trading levels, we have valued the stock using P/CF based relative valuation method and for the purpose, we have taken the peer group - Coca-Cola Amatil Ltd (ASX: CCL), Domino's Pizza Enterprises Ltd (ASX: DMP) and Costa Group Holdings Ltd (ASX: CGC), to name few. Therefore, we have arrived at a target price of lower double-digit growth (in % terms). The stock experienced a short interest of ~12.69% (as per the ASIC report of 06 January 2020).  Hence, we recommend a “Hold” rating on the stock at the current market price of $3.51 on 10^th January 2020.

Nearmap Ltd

FY19 Revenue Growth at 45% Year Over Year: Nearmap Ltd (ASX: NEA) is engaged in providing technology for integrated geospatial maps for governments, enterprises and businesses. On 30 December 2019, the company issued 2,000 fully paid ordinary shares on conversion of options. 
 
FY2019 Key Highlights for the Period Ended on 30 June 2019: The company reported revenue of $77.64 million, up 45% year over year. Subscriptions improved by 11% in FY19 and came in at 9,800.  The company stated a rise of 23% in group average revenue per subscription (ARPS) in FY19. Group customer churn came in at 5.3%, as compared to 7.5% reported in the year-ago period.
 

Financial Highlights for FY19 (Source: Company Reports)
 
What to Expect: The company added that Nearmap 3D and the beta release of its Artificial Intelligence (AI) matter reflect a positive time in the evolution of the company, and in FY20, it is planning to increase investment on technological advancement in order to offer improved content to the customers.
 
Stock Recommendation:As per ASX, the stock has gained ~63% in a year’s time. Currently, the stock is trading slightly below the average of its 52-week low and high of $1.545 and $4.290, respectively.The company considers North America to be a significant opportunity to promote its content and attract customer traffic. Moreover, it will continue to commercialise and expand upon new content introduced in FY19. The stock experienced a short interest of ~12.36% (as per the ASIC report of 06 January 2020). Considering the performance in FY19, new advancements in the business and anticipated developments in FY20, we recommend a “Buy” rating on the stock at the current market price of $2.60 as on 10^th January 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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