Stocks’ Details
 

Clean TeQ Holdings Limited

Townsville Water Project Update: Clean TeQ Holdings Limited (ASX: CLQ) is an environmental and mining services group serving the air purification, resources recovery and water purification markets. As on 22 April 2020, the market capitalization of the company stood at $123.17 million. The company has recently reported decent progress towards EPC contract with Townsville City Council for a large-scale water recycling plant utilizing. 

During 1H20, revenue of the company stood at $666k and reported a cash balance of $58.0 million. The company continued to advance the development of the Clean TeQ Sunrise Battery Materials Complex.

 
1H20 Financial Highlights (Source: Company Reports)

What to Expect: The company is well-capitalized to navigate through this period of near-term uncertainty. Despite the significant impacts on capital markets and commodity prices, the market fundamentals for the longer term remain strong for nickel and cobalt. CLQ expects to conclude the Sunrise Project Execution Plan at the end of 2Q 2020.

Stock Recommendation: As per ASX, the stock of CLQ gave a return of 65.22% in the last one month and is trading close to its 52-week low of $0.17, proffering a decent opportunity for accumulation. During 1H20, current ratio of the company stood at 4.95x, higher than the industry median of 1.30x. On the TTM basis, the stock is trading at a price to book value multiple of 0.5x, lower than the industry median (Industrials) of 1.5x. Considering the significant returns in the past one month, trading levels and decent outlook despite the uncertain environment, we see a potential in the stock and recommend a ‘Speculative Buy’ rating at the current market price of $0.170, up by 3.03% on 22 April 2020.
 

Saunders International Limited

SND Secures $20M Major Contract for a Terminal Expansion: Saunders International Limited (ASX: SND) specializes in the design, construction and maintenance of steel bulk liquid storage tanks and services clients ranging from multinational oil, gas, and mining companies to water authorities. As on 22 April 2020, the market capitalization of the company stood at $46.08 million. The company has recently been awarded a $20 million design and construction contract for three tanks as part of the Sydney B4A Terminal Expansion project. Under the scope of the contract, the company will work on the design, ground improvements, civil foundation, and the construction of three 35 megalitre diesel tanks. 
During 1H20, the company reported positive financial performance with an increase of 5.5% in revenue to $29.64 million and a significant growth of 262.5% in EBITDA to $1.45 million. The reported earnings reflect the fix phase of the company’s strategic plan.

 
1H20 Financial Performance (Source: Company Reports)

Future Expectations: The company is well-positioned for growth and has a record order book and strengthened pipeline of new opportunities which will underpin future growth. SND has a strong focus on working capital management. The portfolio size of the project is increasing, and the company expects sustained revenue with current fixed overheads. The company might face some delays in projects and production due to the fallout of COVID-19 but is focusing on the preservation of cash by turning off all non-essential capital expenditure and discretionary spending.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation

Price to Earnings Multiple Based Approach (Source: Thomson Reuters)

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

Stock Recommendation: As per ASX, the stock of SND gave a return of 35.38% on the YTD basis and a return of 15.79% in the last one month. The stock is also trading close to its 52-weeks’ high level of $0.570. During 1H20, gross margin of the company stood at 44.9%, higher than the industry median of 12.9%. In the same time span, Assets/Equity Ratio of the company was 1.56x, lower than the industry median of 4.84x. The stock is fundamentally sound and has given decent returns in past six months. Considering the decent returns, trading levels and higher margins, we have valued the stock using the price to earnings multiple based illustrative relative valuation method and have arrived at an upside of middle-single digit (in percentage terms). Hence, we have a watch stance on the stock at the current market price of $0.460, up by 4.545% on 22 April 2020, owing to its recent release regarding a contract for terminal expansion.

PTB Group Limited

Decent Increase in Revenue and NPAT: PTB Group Limited (ASX: PTB) is engaged in turbine repair and overhaul services, aircraft leasing and parts sales. As on 22 April 2020, the market capitalization of the company stood at $58.35 million. The company announced the acquisition of Prime Turbines LLC, positioning the group to execute upon its growth strategies by providing increased capacity and capabilities while significantly expanding the customer base. During 1H20, revenue of the company witnessed an increase of 9.8% to $26.096 million, and NPAT, excluding foreign exchange gains/losses and acquisition related costs went up by 11.9% to $3.289 million. 


1H20 Financial Highlights (Source: Company Reports)

Future Expectations and Growth Opportunities: The company is well-positioned for the next phase of growth owing to its expanded geographic footprint, additional certifications and a greatly expanded workshop capacity, coupled with new clients and new products positions. PTB is prioritizing the growth of the leasing business and is focused on other potential leasing deals.Due to the changing risk profiles of investment markets, there may be short term uncertainty. However, the overall cash position allows the business to operate efficiently and take up opportunities as and when they arise.

Stock Recommendation: As per ASX, the stock of PTB gave a return of 36.43% in the past one month and is trading at attractive levels, close to its 52-weeks’ lower band of $0.270, proffering a decent opportunity for accumulation. During 1H20, gross margin of the company witnessed an increase over the previous half and stood at 41.9%, up from 34% in 2H19. In the same time span, EBITDA margin of the company went up to 19.2% from 14.2% in 2H19. On TTM basis, the stock is trading at an EV/Sales multiple of 1.3x, broadly in-line with the industry median (Industrials) of 1.2x. Considering the decent returns, current trading levels and decent outlook despite the global pandemic, we recommend a ‘Speculative Buy’ rating on the stock at the current market of $0.47, up by 1.075% on 22 April 2020. 

 
Comparative Chart (Source: Thomson Reuters)

Note: Saunders International Limited (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any related insights concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

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