Stocks’ Details

APN Property Group

Track Record of Sustainable Income: APN Property Group (ASX: APD) is an integrated property business which specializes in the management of property funds. As on 12 November 2020, the market capitalization of the company stood at ~$186.34 million. During FY20, the company reported funds under management of $2,665 million and co-investments and cash balance of $131 million. During the year, the company reported resilient performance despite the global pandemic with an increase of 12% in operating earnings to $10.4 million and reported a CAGR of 13.4% in recurring income over the span of 5 years from FY15 to FY20.

FY20 Financial Highlights (Source: Company Reports)

Outlook: APD seems well-positioned to grow the platform due to its external and internal growth drivers including strong ongoing investor demand, decent property acquisition opportunities, attractive product set etc. However, the company might witness uncertainty and volatility in its key markets. APD has provided guidance for FY21 and expects to distribute 2.50 – 2.80 cps.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last five years, the company gave a return of 17.9% to its shareholders and a return of 16.8% in the past one year. The company will hold its AGM on 24 November 2020. As per ASX, the stock is inclined towards its 52-weeks high level and seems to have reached its market potential. On a technical front, the stock of APD has a support level of ~$0.42 and a resistance level of ~$0.58. We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a downside of higher single-digit (in % terms). Considering the current trading levels, softer market conditions, key investment risks, and valuations, we suggest investors to book profits on the stock and give a ‘Sell’ rating at the current market price of $0.565 on 12 November 2020.

VEEM Ltd

VEEM Signs Gyro Supply Agreement with Damen Shipyards: Veem Ltd (ASX: VEE) is a high technology marine propulsion and stabilization company. As on 12 November 2020, the market capitalization of the company stood at ~$78 million. The company has recently signed a three-year agreement with Damen Shipyards for the supply of VEEM Gyros, wherein Damen will offer VEEM Gyros as an option on FCS vessels. The agreement is likely to increase the customer’s commercial return due to the ability of the VEEM Gyro to significantly increase the number of operating days per annum.

FY20 Financial Highlights: During FY20, the company reported revenue of $44.4 million, reflecting a slight decline from ~$45 million in FY19. In the same time span, the company delivered EBITDA of $4.4 million on a comparable normalized basis and reported NPAT was ~$2.5 million. VEEM is likely to witness a positive outlook with increasing orders for its gyros, with new orders of $4.1 million in the first six weeks of the FY21. The decent financial performance of the company enabled the Board to declare an unfranked ordinary dividend of $291.8k.

FY20 Financial Highlights (Source: Company Reports)

Stock Recommendation: The commercial market has been slower to adopt the technology and the wide use of gyro stabilization for defence vessels is expected to mature over a longer period due to the conservative nature of this industry. As per ASX, the stock of VEE has hit its 52-weeks’ high levels of $0.610 and seems to have reached its market potential. The stock of VEE gave a return of 23.23% in the past three months and a return of 15.09% in the last one month. On a technical front, the stock of VEE has a support level of ~$0.485 and a resistance level of ~$0.61. On a TTM basis, the stock of VEE is trading at an EV/Sales multiple of 2.2x, higher than the industry median (Industrials) of 1.9x, and thus seems overvalued. Considering the current trading levels, volatile and uncertain market conditions, key investment risks and higher EV/Sales multiple, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.610, up by 1.666% on 12 November 2020.

BCI Minerals Limited

Quarterly Activities Report: BCI Minerals Limited (ASX: BCI) is engaged in the production and exploration for iron ore and other minerals. As on 12 November 2020, the market capitalization of the company stood at ~$149.54 million. During the quarter ended 30 September 2020, the company reported EBITDA of $7.1 million from Iron Valley, which is inclusive of a positive prior period adjustment of $1.7 million. In the same time span, the company raised $47.9 million from entitlement offer to facilitate early construction works for the Mardie Project. At the end of the quarter, the company reported a healthy balance sheet with a cash balance of $80.8 million and zero debt. 

Iron Valley Quarterly EBITDA (Source: Company Reports)

Outlook: The company has entered FY21 with a decent momentum. It is targeting to secure environmental approvals and remaining project tenure and is aiming to achieve debt commitments from lenders. The company also plans to start early construction activities.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/ EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: BCI is aiming to secure additional MOUs with various large-scale industrial customers. As per ASX, the stock of BCI is trading close to its 52-weeks’ high level of $0.279. The stock of BCI gave a return of 16.23% in the past three months. On a technical front, the stock of BCI has a support level of ~$0.20 and a resistance level of ~$0.250. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation method and have arrived at a downside of lower double-digit (in % terms). Considering the current trading levels, softer market conditions due to the COVID-19 pandemic, valuations, and key risks of investment, we give a ‘Sell’ rating on the stock at the current market price of $0.245, down by 2.001% on 12 November 2020.

Daily Comparative Chart (Source: Refinitiv, Thomson Reuters)

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