Stocks' Details

Ainsworth Game Technology Limited

Business Update: Ainsworth Game Technology Limited (ASX: AGI) is part of the gaming industry and designs, develops, and manufactures gaming machines, software and related equipment supplies. As on 20 August 2020, the market capitalization of the company stood at ~$129.67 million. The company has recently released a business update wherein it stated that the unaudited results for FY20 will be released on 27 August 2020. The company is anticipating a decline of 36% in revenue to $149 million and a positive adjusted EBITDA of $2.9 million. The company also expects to report a net debt of $17.5 million. During the year, the company reported 67 redundancies at an annualized cost saving of $6.4 million.

Half Year Results: During 1H20, revenue of the company stood at $107.3 million and reported EBITDA of the company was $14.6 million. In the same time span, it repaid $26.8 million of debt and reported a healthy balance sheet with a cash balance of $42.3 million.

1H20 Financial Highlights (Source: Company Reports)

Key Risks: The Group has exposure to Credit risk, Liquidity risk and Market risk. The outbreak of COVID-19 has hit the industry hard. With the social distancing measures and the lockdown, the gaming industry took a dive. As a result, the company is likely to report a loss of $34 million.  

Stock Recommendation: The company is taking proactive measures to streamline its overheads and seems to be well-positioned across its major markets to recover from the effects of the pandemic. AGI is expecting to report its audited full-year results in September 2020. As per ASX, the stock of AGI gave a negative return of 8.33% in the past one month. The stock is trading close to its 52-weeks’ low level of $0.330, proffering a decent opportunity for accumulation. On a Trailing Twelve Months (TTM) basis, the stock of AGI is trading at an EV/Sales multiple of 0.8x, lower than the industry median (Consumer Cyclicals) of 1.3x and thus seems undervalued. On a Technical Analysis front, the stock of AGI has a support level of ~$0.33 and a resistance level at ~$0.663 and ~$0.918. Considering the attractive trading levels, lower EV/Sales multiple, and decent capital position, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.380, down by 1.299% on 20 August 2020.

Northern Minerals Limited

Quarterly Activities Report: Northern Minerals Limited (ASX: NTU) is focused on the delivery of the heavy rare earth element, dysprosium. As on 20 August 2020, the market capitalization of the company stood at ~$135.19 million. The company has appointed Mark Tory as the Chief Executive Officer with effect from 29 July 2020. During the quarter ended 30 June 2020, the company decided to partially restart operations at its Browns Range Heavy Rare Earths Pilot Plant Project. It also closed a share purchase plan with total funds of $9.98 million. In the same time span, NTU repaid $3 million of the outstanding amounts owing on to its $7.5 million convertible notes. The company exported and sold 114 tonnes of heavy rare earth carbonate by mid-March, with a further shipment of 27 tonnes of heavy rare earth carbonate sold in June. During the quarter, the company received $273k from its customers and used $7.93 million in operating activities.

Quarterly Cash Flow Report (Source: Company Reports)

Key Risks: The Group’s activities expose it to a variety of financial risks, including market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The company also had to suspend its operations as a result of COVID-19, which is likely to impact the future performance of the company.

Stock Recommendation: As per ASX, the stock of NTU gave a negative return of 27.27% in the past six months and a return of 68.42% in the last one month. The stock of NTU is trading at attractive levels but retains limited potential for growth. On a Trailing Twelve Months (TTM) basis, the stock of NTU is trading at a price to book value multiple of 14.6x, higher than the industry average (Basic Materials) of 5.8x. On the technical analysis front, the stock of NTU has a support level of ~$0.017 and a resistance level at ~ $0.043 and $0.058. Considering the current trading levels, volatility in returns and price, the impact of global pandemic on the company and softer market conditions, we suggest investors to keep an eye on the business activities and thus have a watch stance on the stock at the current market price of $0.034, up by 6.25% on 20 August 2020.

Greenland Minerals Limited

Quarterly Activities Report: Greenland Minerals Limited (ASX: GGG) is engaged in mineral exploration and project evaluation. As on 20 August 2020, the market capitalization of the company stood at ~$351.34 million. In the optimized study of 2019, the company reported a reduction in capital costs to US$505 million and reported rare earth production of 32,100t/a. During the quarter ended 30 June 2020, the company lodged all material with its Environmental Agency for Mineral Resource Activities and the review is well-advanced, with EAMRA advising GGG that the review process is scheduled to be completed by 26 August 2020. During the quarter, the company used $183k in operating activities.

Quarterly Cash Flow Report (Source: Company Reports)

Key Risks: The main risks arising from the Consolidated Group’s financial instruments are interest rate risk, credit risk and liquidity risk.

Stock Recommendation: GGG retains an internationally diverse shareholder base and seems to be well-positioned to become a significant global supplier of rare earth materials. Despite the impact of the pandemic on the demand, the long-term outlook for rare earths remains robust. As per ASX, the stock of GGG is trading very close to its 52-weeks high of $0.305. On a Trailing Twelve Months (TTM) basis, the stock of GGG is trading at a price to book value multiple of 3.7x, higher than the industry median (Basic Materials) of 2.2x and thus seems overvalued. On a Technical Analysis front, the stock of GGG has a support level of ~$0.196 and a resistance level at ~$0.305. Considering the current trading levels, higher price to book value multiple and softer market conditions due to the global pandemic, we suggest investors to wait for the better entry levels and have a watch stance on the stock at the current market price of $0.26, down by 11.864% on 20 August 2020. 

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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