Lithium Power International Limited (ASX: LPI)

LPI is a lithium exploration company holding assets in Western Australia and South America. The company holds about 400 sq kilometers of exploration tenements in the Greenbushes region of southern WA. LPI was listed in ASX on June 24, 2016.

Financial & Operational Update: The company updated its Definitive Feasibility Study for the Stage One Maricunga Lithium Brine Project. The updated study supports 15,200 tonnes per annum production of lithium carbonate. The project delivers a post-tax NPV of US$1.4bn and an IRR of 39.6% with a payback period of 2 years. The annual EBITDA is expected at US$324 million. As announced on January 12, 2022, LPI to spin off its Western Australian Greenbushes and Pilgangoora lithium assets in the next six months. LPI’s WA assets are likely to be held by a wholly-owned subsidiary of LPI which will get listed on the ASX.

In December 2021 quarter, LPI reported nil cash receipts from customers and recorded operating cash outflows of $580k. It had closed the period with a cash balance of $15.40 million. For the full-year FY21, the company was able to narrow down its losses reaching at $6.171 million as compared to $13.067 million in FY20.

Technical Analysis: LPI's prices witnessed a downside correction after making a new high of AUD 0.8450 on January 18, 2022, and recently started to move upward after taking the support of resistance turned support level AUD 0.5500 level, indicating the possibility of upside direction hereon. On the daily chart, the trend-following indicators 50-period SMA and 200-period SMA are placed below the CMP, further supporting a positive stance. The leading indicator RSI (14-period) is trading above the mid-point at ~56.24 levels. Now the next important support level for the stock is at AUD 0.5900, while resistance is at AUD 0.7500 level.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation (Illustrative)

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 the company has delivered returns of ~+142.86% in the past six months. Currently, the stock is trading above the average of its 52-week low and high levels of $0.175 and $0.845, respectively. The stock has been valued using the Price/Book Value multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company might trade at a slight premium than its peers, considering the demerger plans, updated feasibility study, etc. For the purpose of its valuation, peers like Liontown Resources Ltd. (ASX: LTR), Dominion Minerals Ltd. (ASX: DLM), Core Lithium Ltd. (ASX: CXO), and others have been considered. Considering the current trading levels, narrowed losses, adequate liquidity, modest outlook, and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.660, as of 31 January 2022, 11:30 AM (GMT+10), Sydney, Eastern Australia. However, the risk levels are extremely high considering the operating cash outflows and the risk of technological advancements.

Daily Technical Chart – LPI

Source: REFINITIV 

Note: The purple color line in the chart depicts RSI (14-period), while the yellow color line represents the trend line. The green and blue lines show 200-Period SMA and 50-Period SMA, respectively.

Green Technology Metals Limited (ASX: GT1)

GT1 is a lithium exploration and development company with a portfolio of assets in North America. It owns the Ontario Lithium project and Seymour mine. GT1 was listed in ASX on November 10, 2021.

Financial and Operational Updates: It is a recent debutant on ASX. GT1 raised $24 million in IPO proceeds and commenced trading on November 10, 2021. It had completed a geophysical survey at its Seymour project proving excellent alignment of identified anomalies. It had commenced the phase 1 drilling program at its Seymour during the quarter ending December 31, 2021. It had increased its landholding in Ontario, Canada. It had posted nil cash receipts from customers and closed the period with a cash balance of $19.302 million. Much of the outflows were related to exploration and evaluation activities. On the resources estimates, GT1 reported 4.8MT of indicated and inferred resources.

In FY21, the company posted a loss of $127.4k between March 2021 to June 2021 period.

Technical Analysis: On the daily chart, GT1 prices are sustaining above the horizontal trend line support zone and taking the support of the same. Moreover, the momentum oscillator RSI (14-period) is trading at ~64.48 level, indicating positive momentum for the stock. The prices are trading above the trend-following indicator 50-period SMA, which may act as a support level for the stock. An important support level for the stock, is placed at AUD 0.78 while the key resistance level is placed at AUD 1.10.

Considering the nil revenue-generating assets, lack of operating history, investing in this stock at such uncertain levels should be taken with a calculated approach, hence a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 0.915 per share as of 31^st January 2022.

Daily Technical Chart – GTI

Source: REFINITIV 

Note: The purple color line in the chart depicts RSI (14-period). The green and blue-color lines show 50-Period EMA and SMA, respectively

Kalamazoo Resources Limited (ASX: KZR)

KZR operates as a gold and copper exploration company with projects in WA. It owns Wattle Gully Gold Project, Pilbara Gold and Base Metal Project, and the Cork Tree Copper Project. KZR was listed in ASX on January 16, 2017.

Financial and Operational Updates: KZR completed phase 2 drilling at the Ashburton gold project. It had received assays from 43 holes out of 55 holes drilled. The drilling shows significant shallow oxide gold mineralization discovered. KZR plans to conduct phase 3 drilling. It had posted nil cash receipts during the quarter ending December 31, 2021. It had closed the period with a cash balance of $4.68 million. The company entered into at a JV with SQM for exploration and earn-in arrangement for two of KZR’s Pilbara lithium projects in WA. It had completed geochemical soil sampling at DOM’s Hill Lithium Project. At Marble Bar Lithium Project, KZR commenced a soil sampling program.

Technical Analysis: KZR's prices are trading around the crucial support level AUD 0.3200 with a negative bias, indicating the possibility of a further downward trend. On the weekly chart, the trend-following indicators 50-period SMA and 20-period SMA are placed above the CMP, supporting a negative stance. The leading indicator RSI (14-period) is trading below mid-point at ~44.582 levels. Now the next important support level for the stock is at AUD 0.2900, while resistance is at AUD 0.3600 level.

Considering the early-stage exploration asset with no history of operating revenues, high cash outflows, investing in this stock at such uncertain levels should be taken with a calculated approach, hence a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 0.340 per share as of 31^st January 2022.

Daily Technical Chart – GTI

Source: REFINITIV 

Note: The purple color line in the chart depicts RSI (14-period). The green and blue-color lines show 21-Period and 50-Period SMA, respectively

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

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

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 the 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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