GWA Group Limited

GWA Details

1HFY22 (Ended 31 December 2021) Insights: GWA Group Limited (ASX: GWA) designs and markets building fixtures and fittings to commercial and residential premises and distributes various products in the UK, Australia, New Zealand, and China.

• Australia posted ~6% Y-o-Y revenue growth in 1HFY22 as the market recovered from the COVID-19 disruptions, aided by the robust performance of its Commercial and Residential segments.
• Normalised EBITDA improved by ~8% Y-o-Y due to a rigorous cost control exercise in 1HFY22 and Australia’s performance.

Comparative Group Normalised Results; (Analysis by Kalkine Group)

Key Risks: GWA faces the risk of lockdowns and COVID-19 restrictions in New Zealand and other international markets. It also faces the risk of increased capex due to technological advancements and growth initiatives. 

Outlook:

• GWA expects normalised EBIT in 2HFY22 to be higher than 1HFY22 (given no adverse changes in the macro-environment) and further supply chain savings in FY22.
• It prioritises ERP implementation, refreshing customer and consumer initiatives, new product development, and expanding its digital presence in 2HFY22.

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

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of GWA gave a negative return of ~12.39% in the past three months and a negative return of ~22.34% in the past six months. The stock is currently close to its 52-weeks’ low level of $2.02. The stock has been valued using the Enterprise Value to EBITDA multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average EV/EBITDA multiple, considering the risk of COVID-19 restrictions, shortages of raw materials, and the risk of subdued new build commercial activity. For this purpose of valuation, a few peers like Reliance Worldwide Corporation Ltd (ASX: RWC), Adbri Ltd (ASX: ABC), James Hardie Industries PLC (ASX: JHX) have been considered. Considering the current trading levels, revenue growth in Australian market, rise in NPAT, robust cash conversion, an indicative upside in valuation, decent market outlook, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $2.050, down by ~0.485%, as of 27 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

GWA Daily Technical Chart, Data Source: REFINITIV 

Aeris Resources Limited

AIS Details

Material Developments: Aeris Resources Limited (ASX: AIS) engages in the production of copper (Cu) and gold (Au) at the Tritton copper project in New South Wales and the Cracow gold project in Queensland.

Q3FY22 (Ended 31 March 2022) Results: AIS is undertaking three mine life extension projects at the Budgerygar deposit, the Avoca Tank underground mine, and the Murrawombie Pit cut-back. It plans to incur ~$50 million on these growth projects in FY22.

Quarterly Trend of Growth Capital; (Analysis by Kalkine Group)

Key Risks: The company faces exploration risk, increased capex needs due to growth investments, lower production/ ore depletion, and COVID-19 disruptions risk.

Outlook:

• AIS plans to conduct an online Extraordinary General Meeting (EGM) on 24 June 2022 and complete the acquisition of ROM by 1 July 2022.
• AIS continues to develop the Roses Pride deposit and is on track to target the first production in the June 2022 quarter. It plans to report an updated Mineral Resource estimate from the ongoing exploration at the Constellation deposit in the June 2022 quarter.
• AIS expects to produce ~18.5K – ~19.5K tonnes Cu from its Tritton copper operations and ~ 56K - ~59K oz from the Cracow gold operations.

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

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of AIS gave a negative return of ~27.49% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.083 - $0.239. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average EV/Sales multiple, considering the decline in Q3FY22 copper and gold production vs Q2FY22, fall in profit margins, and continuing COVID-19 disruptions. For this purpose of valuation, a few peers like Sandfire Resources Ltd (ASX: SFR), Gascoyne Resources Ltd (ASX: GCY), Perenti Global Ltd (ASX: PRN) have been considered. Considering the current trading levels, ongoing growth investments and life mine extensions, expected scale benefits, an improved EBITDA in FY23 from the ROM acquisition, hedging contract for Cracow production, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.092, up by ~1.098%, as of 27 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

AIS Daily Technical Chart, Data Source: REFINITIV 

Tempus Resources Limited

TMR Details

Material Updates: Tempus Resources Limited (ASX: TMR) is engaged in the gold exploration with the Elizabeth-Blackdome project operations in Southern British Columbia.

• Recently, TMR got confirmation from the US-based Depository Trust Company (DTC) regarding the eligibility of its ordinary shares for electronic clearing and settlement via the DTC.
• TMR is listed on the US-based platform OTC Markets under the ticker TMRFF. This development helps DTC expand its shareholder base and market footprint in the US.

9MFYTD (9 months ended 31 March 2022) Results: TMR incurred ~$3.59 million in exploration expenditure on its Ecuador and Canadian projects and ~$1.51 million on corporate and administrative costs during the reporting period.

  Net Loss 9MFYTD22 Vs. 9MFYTD21; (Analysis by Kalkine Group)

Key Risks: TMR faces uncertain drilling results, a tight labour market, changes in the gold prices, commercialisation risk, and regulatory delays.

Outlook:

• TMR plans to hold an in-person General Meeting at its Perth office on 17 June 2022.
• TMR continues to undertake the development of its flagship project Elizabeth gold project, to expand the resource base. It focuses on delineating further and extending the Southwest Vein and exploring more such veins hosting gold mineralisation at the project.
• Based on the recent discovery of bonanza grade intersections at the Blue Vein, TMR continues to undertake drilling at the vein.

Stock Recommendation: The stock of TMR gave a negative return of ~19.76% in the past three months and a negative return of ~42.49% in the past six months. The stock is currently trading near to its 52-weeks’ low level of $0.067.  Considering the current trading levels, improved access to the US investor base, virtually debt free status, exploration upside potential at the project, technical levels mentioned below, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.069, down by ~4.166%, as of 27 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Technical Commentary: On the daily chart, TMR’s price is trading below the downward sloping trend line and facing the resistance of the same. Furthermore, the momentum oscillator RSI (14-period) is trading at ~40.40 level, reversing from higher levels. On the daily chart the stock trading below the trend-following indicators 21- period SMA, which may act as immediate resistance level for the stock. An important support level for the stock, is placed at ASX 0.063 while the key resistance level is placed at ASX 0.080. 

TMR Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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