Stocks’ Details

Botanix Pharmaceuticals Ltd

Completion of Pre-IND Meeting: Botanix Pharmaceuticals Ltd (ASX: BOT) is a clinical-stage synthetic cannabinoid company, engaged in the development of pharmaceutical products. The market capitalisation of the company stood at $92.40 million as on 11^th November 2020. Recently, the company notified that it has finished a Pre-Investigational New Drug (Pre-IND) meeting with the US Food and Drug Administration’s (FDA) Office of Infectious Diseases for its lead antimicrobial program, BTX 1801. This allowed the company to commence clinical development in the US. During Q1 FY21, the company recorded a net cash outflow from operating activities of $2.56 million and made an investment of $2.13 million in research and development activities. For the year ended 30^th June 2020, the company recorded total revenue from continuing operations of $180,578 as compared to $194,808 in FY19. The loss for the year amounted to $16.73 million against $17.07 million in FY19.

Operating Cash Flow Statement (Source: Company Reports)

Outlook: Looking forward, the company would continue to explore opportunities for non-dilutive funding opportunities for therapeutics which treat bacterial infections. The company also continues to consider opportunities and partnerships in the development of new products. BOT is likely to conduct its 2020 Annual General Meeting on 23^rd November 2020.

Stock Recommendation: At the end of Q1 FY21, the cash balance of the company stood at $22.1 million. The stock of BOT has moved up by 107.54% and 161.90% in the last three and six months, respectively.  On a TTM basis, the stock is trading at a price to book value multiple of 3.9x as compared to the industry median (Pharmaceuticals) of 3.2x. We have considered 14-day RSI and default values have been used. After careful consideration, it was observed that the stock is currently in the overbought zone. On a technical analysis front, the stock of BOT has a support level of ~$0.092 and a resistance level of ~$0.12. Therefore,  considering the current trading level, steep price movement in the past few months and RSI levels, we advise investors to book profit and give a “Sell” rating on the stock at the current market price of $0.105 per share, up by 10.526% on 11^th November 2020, owing to the release of completion of Pre-Investigational New Drug (Pre-IND) meeting.

Primero Group Limited

Awarded with New Contracts: Primero Group Limited (ASX: PGX) provides engineering design and construction services to the minerals, energy and infrastructure sectors. The market capitalisation of the company stood at $77.25 million as on 11^th November 2020.  On 2^nd October 2020, the company announced that it has secured new contracts worth of $55 million from Fortescue Metals Group, Rio Tinto and Hazer Group. For FY20, the company reported total revenue of $205.6 million, reflecting a rise of 36% on a YoY basis. This was mainly supported by a broad base of global clients, projects, and minerals diversity. EBITDA (excluding one-off costs) for the year amounted to $9.5 million as compared to $11.7 million in FY19, impacted by the conservative approach for revenue recognition with respect to Wartsila contract.

Key Financials (Source: Company Reports)

Outlook: The company stated that FY21 contracted order book now stands at around $285 million, which may prove as a major contributor for revenue growth. The company is scheduled to conduct its 2020 Annual General Meeting on 25^th November 2020.

Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

P/CF Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As on 30^th June 2020, the cash balance of the company stood at $15.2 million and a debt balance of $5.7 million. We have valued the stock using the price to cash flow multiple based illustrative relative valuation method and arrived at a target price with the correction of high single-digit (in percentage terms). For the purpose, we have taken peers such as SRG Global Ltd (ASX: SRG), Intega Group Ltd (ASX: ITG) and NRW Holdings Ltd (ASX: NWH). In addition, we have considered 14-day RSI and default values have been used. After careful consideration, it was observed that the stock is currently at overbought zone. Hence, we expect a marginal fall in the stock price in the coming times. On a technical analysis front, the stock of PGX has a support level of ~$0.42 and a resistance level of ~$0.481. Thus, considering the valuation and RSI levels, we advise investors to book profit and give “Sell” rating on the stock at the current market price of $0.470 per share, up by 4.444% on 11^th November 2020.

Leigh Creek Energy Limited

Completion of Pre-Feasibility Study: Leigh Creek Energy Limited (ASX: LCK) is involved in the exploration and development of energy and minerals. Recently, the company notified the market with positive results of Leigh Creek Energy Project (LCEP) PFS (Pre-Feasibility Study), which affirms the positive project economics for the development of a urea production facility underpinned by syngas feedstock. In addition, PFS results also indicate and supports the chosen pathway to commercialise the 1,153PJ of in situ gas 2P reserves at the LCEP. During Q1 FY21, the company reported net cash used in operating activities of $1.22 million primarily after payment of $726k and $521K for staff costs and administration and corporate costs, respectively. As on 30^th September 2020, the cash balance of the company stood at $5.02 million.

Cash Flows (Source: Company Reports)

Outlook: The company is in a decent position to participate in the Federal Government’s Technology Investment Roadmap. With respect to urea production facility, the company plans to commence production in 2021 and 2022.

Stock Recommendation: The stock of LCK has moved up by 109.45% in the last three months, and as a result, the stock is inclined towards its 52-week high level of $0.195. We have considered 14-day RSI and default values have been used. After careful consideration, it was observed that the stock is currently at overbought zone. Hence, we expect a marginal fall in the stock price in the coming times. On a technical analysis front, the stock of LCK has a support level of ~$0.088 and a resistance level of ~$0.236. Thus, considering the current trading level, upside movement in the few months and RSI levels, we advise investors to book profit and give “Sell” rating on the stock at the current market price of $0.155 per share, up by 6.896% on 11^th November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer 

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.