Z Energy Limited (ASX: ZEL)

ZEL is engaged in selling transport fuel in New Zealand. It supplies fuel to retail customers, as well as commercial customers, such as airlines, trucking companies, shipping companies, and vehicle fleet operators, as well as supplies bitumen to roading contractors. The company also offers Z Business Plus, a fuel card for businesses to buy fuels along with Z biodiesel, Mevo, and Z Electric. The company was incorporated in 1999 and is based in North Ryde, Australia. The market capitalization stood at $1.72 billion at $3.30 per share.

Financial & Operational Update – on 23^rd August 2021, the company shared the update on the non-binding indicative acquisition proposal from Ampol Limited (ASX: ALD) for $3.78 per share, which is at a premium of 22% from the closing price of 12^th August 2021. For full-year ending March 31, 2021, the company posted net profit after tax of $57 million, an increase of 168% from the loss of $88 million in the prior corresponding period basis. The company improved on its expenditure front by saving close to $49 million, which exceeded initial estimates. The company worked to deleverage its books, using the fund raised in the form of Equity Capital to $347 million. To cheer up its shareholders, the final dividend of 14 cents per share for FY21 was declared and the guidance for the FY22 dividends were raised from 19 to 23 cents. The company expects EBITDA for FY22 to be range of $270-310 million.

Technical Analysis- The stock showed an overall downtrend forming lower highs and lower lows, with few spikes in between and recovered from the multi-year lows of $2.40 levels. The relative strength index is at 77.195, which is already in the overbought zone, and is prone to reversal post entering into the overbought territory crossing the 80 mark. The 21 days simple moving average is hovering close to the stock price and placed below at $2.888, giving some more bullish signal to the stock price. The stock price is inching upwards from the multi-year lows, hence the support levels are similar to those lows at $2.40, preventing the prices to fall further. For the prices to regain the uptrend, a resistance of $4.05 needs to be taken off with strong volumes.  

Increasing revenues, improving profitability and increased dividend payout, gives the strong rationale towards investing but the offer made to acquire the company brings uncertainty. Hence, considering the sudden spike in the stock price and acquisition uncertainty, we give the stock the rating of ‘Avoid’ at the closing price of $3.30, down by ~0.30%, as of 24^th August 2021.

Daily Technical Chart – ZEL

Source: REFINITIV

Environmental Clean Technologies Limited (ASX: ECT)

ECT is an Australia-based company engaged in research & development and commercialization of technologies in the environmental and energy industries. Its technologies include Coldry, a method to dewater brown coal and transform this resource into a black coal equivalent; and HydroMOR, a process for producing an iron product from low-rank coal with brown coal and iron oxide bearing material, such as mill scale, nickel tailings, and high or low-grade iron ore. The company was incorporated in 1985 and is headquartered in South Yarra, Australia. The market capitalization stood at $13.01 million at $0.011 per share.

Financial & Operational Updates – As per the exchange update on 5^th August 2021, the company reported the arrival of Rotary Kiln as Coldry Small Scale project, which was acquired domestically, which provides operational savings close to $0.50 million. Besides, the company commenced phase-2 activities, aiming to deliver the project in the first half of 2021. On 27^th July 2021, the company released its activities report for the quarter ending 30^th June 2021, stating the exection of 5-year coal supply agreement with EnergyAustralia, the owner of  Yallourn Lignite Station, to access up to 50,000 tonnes of lignite per annum. The company adopted the Environmental, Social and Governance framework, which will enable the company to gain traction among its peers. To carry out the projects and expansionary activities, the group raised $3.5 million of equity capital. On the financial front, the cash receipts from customers declined to $6K million for the quarter ending June 2021 as compared to the $23K for the quarter ending on 31^st March 2021. To fund the declining operating revenues and increasing expenses, the company maintained its cash balances to $1.01 million in-line with the preceding quarer.

Technical Analysis- The stock showed a gradual downtrend with various spikes, which eventually sold off and entered into the low volatile trading zone. The relative strength index is at 41.054, which is sinking towards the oversold levels as it crawls towards the 30s mark, indicating a high probability of some more downside remaining from current levels. The 21 days simple moving average is hovering closer to the stock price at $0.011, which implies the lack of strong trend continuation from current levels. Since the prices are in a very narrow range hence the support is placed at $0.010 and resistance at $0.020. Breaking either side of the range will give a clear picture of the trend formation. 

Due to declining operating revenues, accompanied by lower volatile stock prices, which are prone to a sudden breakout, we give the stock the rating of ‘Avoid’ at the closing price of $0.011, as of 24^th August 2021.

Daily Technical Chart – ECT

Source: REFINITIV

Nexus Minerals Limited (ASX: NXM)

NXM is engaged in the exploration of mineral properties in Western Australia. The key projects are Wallbrook, Pinnacles JV, Pinnacles, and Mt Celia gold projects located to the northeast of Kalgoorlie in the Eastern Goldfields. The company is based in West Perth, Australia and having the market capitalization stood at $34.18 million at $0.135 per share.

Financial & Operational Highlights – On 16^th August 2021, the company shared an update on its Crusader project’s drilling activities, stating the presence of high-grade gold mineralisation across the three reverse circulation holes drilled, encouraged the company to further carry out exploration activities. On 23^rd July 2021 company released its activities report for the quarter ending 30^th June 2021, stating it got an option to acquire the Bethanga Porphyry Copper-Gold Project in northeast Victoria. On the financial front, the company did not receive any operating revenues for the period ending 30^th June 2021 as compared to $42k posted in the preceding quarter. The declining operating revenues and increasing expenses, drained its cash balances to $9.0 million for the quarter ending 30^th June 2021, from $10.23 million in the previous quarter ended on 31^st March 2021.

Technical Analysis- The stock showed a strong uptrend with a sudden spike printing the recent high of $0.215, and eventually sold off, entering into the downward trajectory, forming lower highs and lower lows. The relative strength index is at 69.815 which is drifting towards the oversold of the range, indicating that the carnage is not yet done with the stock prices, and bears are still in control. The 21 days simple moving average is hovering below the stock price at $0.098, which implies the further bullish trend continuation from current levels. For the prices to find stable grounds, the support of $0.095 should be well respected and held firmly. Since the stock prices spiked lately and might see profit booking, hence the resistance can be plotted at higher levels of $0.175.

Due to the declining operating revenues, declining cash balance and declining stock prices, we give the stock the rating of ‘Avoid’ at the closing price of $0.135, down by ~3.57%, as of 24^th August 2021.

Daily Technical Chart – NXM

Source: REFINITIV

Sipa Resources Limited - (ASX: SRI)

SRI is engaged in the exploration of nickel, copper, gold, silver, zinc, lead, and other mineral deposits. The key projects of the company are Warralong project and the Wolfe Basin base metal projects located in Western Australia. In addition, the company holds an agreement to acquire the Garden Gully project located in the Murchison district of Western Australia, and the Murchison gold project,  situated in the Murchison area of Western Australia. The company was incorporated in 1990 and is based in Subiaco, Australia, with a current market capitalization is $11.13 million, and a current price of $0.067 per share.

Financial & Operational Highlights – As per the exchange announcements shared on 18^th August 2021, the company shared that the drilling commenced at its 100% owned Wrralong Gold project and the results from such tests will follow soon. On 29^th July 2021 company released its activities report for the quarter ending 30^th June 2021, stating the update of its Murchison Gold Project, WA. that it completed the acquisition of Miramar Resources Ltd’s Garden Gully project tenements. On its Paterson North (Rio Tinto Exploration JV, WA) the Heritage survey was completed ahead of the large scale IP survey. The cash receipts from its customers declined to $4k for the period ending 30^th June 2021 from the $7k for the quarter ending on 31^st March 2021. The declining operating revenues and increasing expenses, drained its cash balances to $3.57 million for the quarter ending 30^th June 2021, from $4.33 million in the previous quarter ended on 31^st March 2021.

Technical Analysis- The stock showed a gradual downtrend and entered into a narrow trading range, with few spikes and giving up on the gains eventually.  The relative strength index is at 64.611, which is heading towards the overbought region, indicating further upsides from current levels. The 21 days simple moving average is placed below the stock price at $0.060, indicating a further downward movement from the current level.  The support is placed at $0.052, from where we can witness bargain hunting, whereas the resistance is placed at $0.080 levels. Breaking either side of the range will give a clear picture of the trend formation. 

Due to the decline in cash receipts from customers, exploration risks, volatile commodity prices, and declining cash balances along with sinking stock prices, we give the stock the rating of ‘Avoid’ at the closing price of $0.067, up by ~8.064% as of 24^th August 2021.

Daily Technical Chart – SRI

Source: REFINITIV

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

Note 2: Investment decisions should be made depending on the investors’ appetite for 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 the uptrend may take a pause due to profit booking or selling interest. 

The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

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