Stocks’ Details

Advance Nanotek Limited

Strategy Update: Advance Nanotek Limited (ASX: ANO) is engaged in the manufacturing of aluminium oxide powder, zinc oxide dispersions and zinc oxide powder for the personal care sector. The market capitalisation of the company as on 21 January 2021, stood at ~$244.40 million. As per a recent update, the company has said that the new bulk intermediate manufacturing facility is expecting licence approval from the TGA, in February/March 2021 for manufacturing sunscreens.

COVID-19 Sales Update: As per the information from the distributors on 27 November 2020, over 50% of the company’s original 180T stock holdings in XP powder have been sold in the past four months.

FY20 Financial Update: ANO reported a decent increase in revenue to $17.96 million in FY20, compared to $12.26 million in FY19. Profit before tax stood at $7.46 million in FY20. It had a cash position of $259,793 as on 30 June 2020.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company expects a small profit for the first half FY21, considering the impact of the second and third wave of COVID-19 in its key markets. It is positive of delivering improved performance in the second half of FY21.

Stock Recommendation: The company has stock in US and Europe to meet the expected increase in demand for its products. ANO gave a positive return of 21.42% in the past three months and a positive return of 2.65% in the past one week. The stock of ANO is trading below its average 52-weeks’ trading range of $2.920-$6.800. On a technical front, the stock of ANO has a support level of $3.688 and a resistance level of $4.614. On a TTM basis, the stock of ANO is trading at a P/E multiple of 45.2x, lower than the industry average (Consumer Non-Cyclicals) of 88.9x. Considering the current trading, decent financial performance in FY20, expected license approval for its new facility, valuation on TTM basis, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $4.2, up by 2.439% as on January 21, 2021.

Aeris Environmental Ltd

Q1FY21 Quarterly Update: Aeris Environmental Ltd (ASX: AEI) is engaged in the research, development and commercialisation of proprietary technologies. The market capitalisation of the company as on 21 January 2021, stood at ~$82.46 million. The company reported a revenue of $2.92 million for the given quarter. It continued to witness strong margins from the business and delivered positive operating cash flow in Q1FY21. The cash position stood at $12.94 million as on 30 September 2020. Cash receipts during the quarter were at $4.75 million. The company submitted a documentation to the USA EPA for an emergency use application for Aeris Active. 

Q1FY21 Cash Flow from Operations (Source: Company Reports)

Outlook: The company is in the process of negotiating significant revenue opportunities across several international markets. AEI expects and strives for the Aeris brand to become a leader in environmental hygiene and HVAC technology. The company is also in the process of establishing its own foreign entity in China. It is in the middle of a late stage of negotiations to appoint a reputed HVAC- focussed distributor in North America, to expand its product range in several key locations.

Stock Recommendation:  AEI is running several public relations programmes to accelerate the sale and adoption of its products. The net assets of the company, including net of creditors stood at $18.8 million as on 30 September 2020. AEI gave a positive return of 9.37% in the past one month and a positive return of 14.75% in the past one week. The stock of AEI is trading below its average 52-weeks’ trading range of $0.280-$0.870. On a technical front, the stock of AEI has a support level of $0.281 and a resistance level of $0.394. Considering the current trading levels, decent margin, impressive financial performance and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.350, up by 2.941% as on January 21, 2021.

Southern Gold Limited

Q1FY21 Update: Southern Gold Limited (ASX: SAU) is engaged in the mining of gold, silver and other mineral deposits. The market capitalisation of the company as on 21 January 2021, stood at ~$23.46 million. During the quarter, the company completed a $10.2 million equity raising with investor Crescat Capital LLC joining the funding round. It also executed an agreement with Ausino Drilling Services to provide drilling services into South Korea, valued at ~US$4.4 million. There was a net outflow of cash from operations at $380,000 during the given period.

Q1FY21 Cash Flow from Operations (Source: Company Reports)

Outlook: The company is positive about its drilling activities at the new greenfield target area of Dokcheon. SAU plans to move its drilling and field activities to the coastal regions with the onset of the winter season.

Sale of JV Interest: SAU is expecting a sale price of US$9,945,000 from BMV to buy out its 50% stake at the Gubong and Kochang projects in the Republic of Korea. BMV has 60 days from 27 November 2020 to pay the amount to SAU for acquiring the entire JV interests.

Stock Recommendation: The company is carrying out a combination of drilling, mapping, geophysical surveying, and soil sampling activities in seven different projects in South Korea. SAU gave a negative return of 18.51% in the past six months and a negative return of 11.99% in the past nine months. The stock of SAU is trading below its average 52-weeks’ trading range of $0.086-$0.185 On a technical front, the stock of SAU has a support level of $0.10 and a resistance level of $0.13. Considering the current trading levels, recent equity capital raise from notable investors and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.110, as on January 21, 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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