Cardinal Resources Limited

CDV Details

Revised Takeover Bid: Cardinal Resources Limited (ASX: CDV) is a West African gold-focused exploration and development company that holds interests in tenements within Ghana, West Africa. The company recently advised not to take any action on the revised unconditional on-market takeover offer for Cardinal at $0.90 cash per share from Nord Gold S.E, as compared to the previous offer of $0.66. The bid will remain open for acceptance until the close of trading on 10 September 2020. As per the second supplementary bidders’ statement, Nordgold now holds voting power of approximately 28.5% in CDV. Earlier, the company had entered a Bid Implementation Agreement with Shandong Gold to sell 100% of the issued and outstanding ordinary shares at a price of $0.60 in the absence of a superior proposal, which was later increased to $0.70 per share.

Quarterly Highlights: During the quarter ended 30^th June 2020, the company continued strategic discussions with financial institutions, which are interested in bringing the Namdini Project into production with a view to bolster economic outcomes. Notably, CDV raised $11.96 million as a result of the issue of 26,000,000 fully paid ordinary shares to Shandong Gold. In response to COVID-19, the company reduced the workforce in Ghana to key management only. During the quarter, cash outflow from operating activities amounted to $5.92 million, including $3.07 million spent on exploration & evaluation.

Operating Cash Flow (Source: Company Reports)

Key Risks: The outbreak of COVID-19 has been rapid in Ghana and the company is keeping a close check on the health and safety standards on site. Operational delays due to the pandemic may lead to delayed performance. Other key risks may relate to the unavailability of financing, failure to identify commercially viable mineral reserves, fluctuations in the market valuation for commodities, and difficulties in obtaining required approvals for the development of a mineral project, to name a few. 

Stock Recommendation: The stock of the company gave positive returns of 29.58% and 119.05% in the last one and three months, respectively. Currently, the stock is trading very close to its 52-week high level of $0.935. As on 30^th June 2020, the company had cash and cash equivalents amounting to $3.71 million and total long-term debt amounting to $34.66 million. On the technical analysis front, the stock has a resistance level of ~$0.936 and a support level of ~$0.712. Considering the pending decision regarding the ongoing takeover process, volatile returns in the past few months, the potential impact of COVID-19 on the company’s operations, and current trading levels, we suggest investors to currently avoid the stock at the current market price of $0.930, up 1.087% on 3^rd September 2020.

CDV Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Oakdale Resources Limited

OAR Details

Drilling to Commence at Lambarson Canyon: Oakdale Resources Limited (ASX: OAR) is a precious metals explorer and aspiring producer. The company recently announced that earthworks have commenced at its now wholly-owned Lambarson Canyon Project in Nevada USA for the commencement of diamond drill testing of high-grade gold targets. Drilling of the first hole is expected to begin in the week starting 7^th September 2020 and is likely to finish within three weeks.

Acquisition Updates: The company recently signed an option agreement to acquire Alpine Resources, which controls three gold exploration projects in Nevada, USA, a region that hosts several multi-million-ounce gold deposits. Earlier in August, the company acquired 100% of Australian Precious Minerals Pty Ltd (APM), holder of the Crown PGE-NickelCopper Project (Crown, the Project) held within the exploration asset E70/5406. The acquisition is expected to have a major impact for shareholders with multiple targets to unravel. 

Quarterly Highlights: During the 3 months ended 30^th June 2020, the company completed the Entitlement Offer to raise $1.4 million, with shortfall placement closing oversubscribed. Funds from the offer will be utilised for exploration and drilling purposes. As on 30^th June 2020, the company had a cash balance of $1.34 million. Cash used in operating activities amounted to $220k.

Operating Cash Flow (Source: Company Reports)

Key Risks: The company’s operations are exposed to a number of financial risks, including credit risk, liquidity risk, interest rate risk, and foreign exchange risk. Moreover, the COVID-19 pandemic continued to be a potential headwind for the company. 

Stock Recommendation: In the last one month, the stock gave positive returns of 266.67%. In the last 6 months, the stock price gained 511.11%. Currently, the stock is trading very close to its 52-week high level of $0.16. As on 3^rd September 2020, the company has a market capitalization of $16.43 million and 1.49 billion outstanding shares. On the technical analysis front, the stock has a resistance level of ~$0.016 and a support level of ~$0.002. Considering the price movements in the last few months, current trading levels, and technical analysis, we are of the view that most of the positives have been discounted in the current market price. Hence, we give an “Expensive” rating on the stock at the current market price of $0.015, up 36.364% on 3^rd September 2020, due to the recent update on the commencement of drilling.

OAR Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Donaco International Limited

DNA Details

Significant Improvement in Losses: Donaco International Limited (ASX: DNA) is engaged in the operation of leisure and hospitality businesses across northern Vietnam and Cambodia. The company recently appointed Mr Lee Bug Huy as Chief Executive Officer (CEO), effective 3 September 2020. In addition, two independent directors, namely Mr Andrew Phillips and Mr Issaraya Intrapaiboon, have also been appointed to the Board.

FY20 Results: During the year, the company reported revenue amounting to $53.49 million, as compared to prior year revenue of $86.3 million, impacted due to the closure of the border between China and Vietnam limiting visitors to the casinos. After posting a strong result for 1H, the company’s operations were significantly impacted by the COVID-19 pandemic. EBITDA for the year came in at $10.34 million, against prior year EBITDA of $29.6 million. During the year, the company incurred a statutory loss of $58.95 million, representing an improvement of ~70% on FY19. In addition, the company also reported a substantial decline in operating costs, which adds to the positives. The company convinced its principal lender Mega Bank for deferral of main repayments and waiver on covenants to December 2020. During the year, the company completed the $14.41 million capital raising to provide immediate capital relief post-FY20 and reported a cash balance of $26.7 million pro forma post 30 June 2020.

Financial Summary (Source: Company Reports)

What to Expect: The company’s new board has executed a prudent cost control strategy to manage financial impacts from COVID-19. Aristo International is set to operate on a limited basis at management discretion for a short-term. The company has improved its cash balance after the rights issue to manage the impacts of the pandemic.

Key Risks: The company is exposed to the risks of exchange rate declines, cross-border disputes or terrorist attacks, and regulatory changes affecting casino operators. 

Stock Recommendation: The stock of the company corrected by 18.42% in the last one month. Currently, the stock is trading close to its 52-week low of $0.026. On a trailing twelve months (TTM) basis, the stock has an EV/Sales multiple of 0.5x, lower than the industry median of 2.7x. EV/EBITDA multiple on TTM basis stands at 2.1x, as compared to the industry median of 15.9x. On the technical analysis front, the stock has a resistance level of ~$0.083 and a support level of ~$0.026. Considering the improvements in losses, waiver on covenants, a gradual pick-up in activity levels, valuation on TTM basis, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.030, down 3.226% as on 3^rd September 2020. 

DNA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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