Phoslock Environmental Technologies Limited

Record Cash Flow in 1HFY19: Phoslock Environmental Technologies Limited (ASX: PET) is engaged in providing design, engineering and project implementation solutions for water-related projects.

During the six months ended 30 June 2019, the company generated record operating net cash flow amounting to $10.7 million. Customer receipts during the period amounted to $18.6 million, $10 million pertaining to the first quarter and the remainder to the second quarter. Cash at the bank as at 30 June 2019 stood at $18 million.

In an announcement to the exchange, the company updated that the initial application of Phoslock® in the Xingyun Lake trial produced outstanding results and no adverse effects.

2HFY18 Highlights: During the six months period, the company generated revenue amounting to $9.0 million, up 50% Y-o-Y. Net profit reported a Y-o-Y growth of 61% at $1.6 million.


Operating Performance (Source: Company Reports)

FY19 Guidance: The company expects FY19 revenue to be in the range of $27 million - $30 million, up ~55% on FY18. Net profit for the period is expected to be between $6 million - $8 million, up ~100% on the prior year. The company has eight new projects in the pipeline for 2019. In addition, a growing pipeline of projects is likely to convert into sales by 2020.

Stock Recommendation:The stock of the company generated returns of 281.08% over a period of 6 months. After careful observation, it can be inferred that the stock trended in an upward direction due to favourable performance in FY18 along with a significant expected rise in FY19 revenue and profits. In addition, the company is producing growing cash flows from global operations and has significant financial flexibility to grow the business. Currently, the stock is trading slightly towards a 52-week higher level of $1.540 and therefore such a huge rise in the share price increase the probability of correction sooner or later. Hence, considering the aforesaid facts and current trading level, we give an “Expensive” recommendation on the stock at the current market price of $1.300 per share (down 5.674% on July 11, 2019) and suggesting that investor should wait for better entry levels.  
 

Jupiter Mines Limited

Mining Behind the Forecast in Q1FY20:Jupiter Mines Limited (ASX: JMS) is engaged in the operation of Tshipi Manganese Mine in South Africa and the sale of manganese ore. The companyrecently came up with an update regarding the agreement signed with South32 Limited for mining of the barrier pillar between the Tshipi Borwa and Mamatwan manganese mines with an expected ore extraction period of 24 months.
 
As per the quarterly activities report for Q1 FY2020, production from the Tshipi Borwa Manganese Mine was reported at 880,724 tonnes as compared to 915,011 tonnes in the prior corresponding period. Mining for the quarter was behind the forecast due to equipment issues and mining in difficult areas in the pit.

Financial Highlights: Sales for the quarter amounted to A$199.8 million as compared to A$249.6 million in the prior corresponding period. EBITDA amounted to $132.1 million in comparison to pcp EBITDA of $171.7 million. Net profit after tax during the period stood at A$87 million against pcp NPAT of $112.8 million. The company had A$143 million cash at bank at the end of the quarter as compared to $181 million in pcp.


Operational and Financial Highlights (Source: Company Reports)

Stock Recommendation: The company’s stock generated returns of -2.86% and 6.25% over a period of 1 month and 3 months, respectively. It was reported that mining in the June quarter was behind the forecast due to equipment issues and mining in difficult areas in the pit. Also, on the back of the mining agreement signed with South32 Limited, the company is preparing a revised mining plan and budget, which may have a material impact on the business. Given the backdrop of the above factors, we suggest investors to have a wait and watch stance on the stock at a current market price of $0.350, up 2.941% on 11 July 2019.
 

Cooper Energy Limited

New Gas Contracts to Drive Growth: Cooper Energy Limited (ASX: COE) is an upstream oil and gas exploration and production company.
 
In a recent announcement to the exchange, the company updated on the new gas supply agreement with Visy for the supply of 7.6 petajoules of gas from Sole. The agreement will continue for three years beginning from January 2020. Recently, the company has also signed new gas supply agreements with AGL Energy from its Sole (Gippsland Basin) and Casino Henry (Otway Basin) gas operations.

These agreements are expected to include coverage of 2019 Sole production that remains uncontracted and longer-term gas sales of uncontracted gas from Sole for the period 2020 to 2023.

Highlights of Q3FY19: Production during the quarter was reported at 0.33 million boe, up 14% on the prior quarter. Revenue for the quarter stood at $20.6 million, up 43% on the prior quarter revenue of $14.4 million. Year to date sales revenue increased by 21% from $47.1 million to $56.8 million.


Quarterly Results (Source: Company Reports)

Production Guidance: The company expects full-year production to be approximately 1.3 million boe which was earlier anticipated to be ~1.4 million boe.

Stock Recommendation: The stock of the company generated returns of -3.74% and 6.19% over a period of 1 month and 3 months, respectively. During the third quarter of FY19, the company witnessed an uplift in both production and revenue. The company is now set for an eventful final quarter after conclusion of the offshore Sole Gas Project and new gas contracts announced. In 1HFY19, the company had an EBITDA margin of 50.2%, which is higher than the industry median of 41.5%. Currently, the stock is priced close to a 52-week high of $0.575. Hence, considering the aforesaid factors and current trading level, we give a “Hold” recommendation on the stock at a current market price of $0.560, up 8.738% on 11 July 2019.

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