Stocks’ Details
 

Dacian Gold Limited

Capital Raising to Support Growth: Dacian Gold Limited (ASX: DCN) is engaged in the exploration of gold. The market capitalisation of the company stood at $162.14 Mn as on 4^th May 2020. Recently, the company released its results for March 2020 quarter, wherein it reported production of 31,695 ounces at Mt Morgans Gold Operation, which was in-line with guidance of 30,000-33,000 ounce at an AISC of $1,810/oz. It has suspended underground capital development at Westralia leads to reductions in overall spend. During April 2020, the company announced an institutional placement in order to raise to $98 million. It received proceeds from the institutional placement and accelerated entitlement totaling $70 million (before costs).


Use of Funds (Source: Company Reports) 

Future Aspects: The company stated that gold production would be increasingly exposed to spot prices and higher-priced hedges commencing in FY21.

Valuation Methodology:Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: As at 31^st March 2020, the total cash and unsold gold stood at $14.1 million. The company’s balance sheet has now strengthened to support its 3-year business plan. We have valued the stock using P/CF-based illustrative relative valuation method and arrived at a target price with an upside of lower double-digit (in percentage terms). Therefore, considering the recent capital raising, and decent performance in Q3FY20, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.380 per share, up by 8.571% on 4^th May 2020.

Cooper Energy Limited

March Quarter Highlights: Cooper Energy Limited (ASX: COE) is an upstream oil and gas exploration and production company with a market capitalisation of $642.53 Mn as on 4^th May 2020.  For the three months ended 31 March 2020, the company reported production of 0.28 million boe, reflecting a rise of 4% from 0.27 million boe in the previous quarter. Sales revenue for the period stood at $15.0 million, indicating a decline of 9% due to lower oil revenue. During the quarter, the company has achieved a key milestone by delivering first gas sales from Sole into the Eastern Gas Pipeline.


Key Metrics (Source: Company Reports)
Production Guidance: For FY20, the company expects total production of around 1.2 million boe from its existing operations in the Otway and Cooper basins. This guidance incorporates higher gas production and lower oil production.

Valuation Methodology:Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
Stock Recommendation: As at 31^st March 2020, the cash balance of the company stood at $142.5 million against $150.7 million at the beginning of the quarter. Its borrowings went up from $224.0 million to $226.9 million. Net margin of the company stood at 15.7% in 1H FY20 as compared to the industry median of 8.0%. This implies that COE has decent capabilities to convert its topline into the bottom line against the broader industry. We have valued the stock using P/E based illustrative relative valuation method, and for the purpose, we have taken peers such as Senex Energy Ltd (ASX: SXY), New Hope Corporation Ltd (ASX: NHC) and Z Energy Ltd (ASX: ZEL) and arrived at a target price with an upside of lower double-digit (in percentage terms).

Hence, in light of decent outlook and capabilities to convert its top-line into the bottom-line, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.400 per share, up by 1.266% on 4^th May 2020.

Troy Resources Limited

A Quick Look at Q3 FY20: Troy Resources Limited (ASX: TRY) is involved in the production and exploration of gold. The market capitalisation of the company stood at $49.3 Mn as on 4^th May 2020. The company reported gold production of 5,620 ounces for the March 2020 quarter. It added that the production was in line with expectations and the re-start of operations. Sales revenue for the quarter amounted to US$4.3 million from the sale of 2,712 ounces of gold. Gold sales would continue to lag production because of the bi-monthly shipments and minor disruptions on cargo flights from Guyana following the implementation of COVID 19 flight restrictions. The cash and equivalents stood at $13.7 million at the end of the March Quarter.


Quarterly Cash Movements (Source: Company Reports)

Gold Loan Facility: The company entered a gold loan facility of 5,200 ounces with Asian Investment Management Services Ltd in January 2020. This facility provides for a gold loan of 5,200 gold ounces, has a term of twelve months and is secured by a general security interest over the TRY’s assets.

Stock Recommendation: Debt to equity of the company stood at 0.09x in 1H FY20 against the industry median of 0.17x. The stock of Troy Resources is trading at a price to book multiple of 2.1x as compared to the industry average (Metals & Mining) of 2.8x on TTM basis. The stock has provided a return of 21.88% within the span of one month and is trading towards its 52-week low of $0.058. Thus, considering the performance of Q3FY20, gold loan facility and deleveraged balance sheet, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.074 per share, down by 5.128% on 4^th May 2020. 

Syrah Resources Limited

Restart of Operations: Syrah Resources Limited (ASX: SYR) is an industrial minerals and technology company with a market capitalisation of $97.42 Mn as on 4^th May 2020. The company has recently announced the restart of operations at the Battery Anode Material plant, which was temporarily closed from 23 March 2020 following the control measures implemented to mitigate the spread of the COVID-19. SYR targets to provide an alternate and complementary supply of anode material to existing China supply in order to address growing demand as well as to provide an option for geographic diversification for ex-China. During Q1 FY20, the company reported production of 12kt flake graphite, which is lower than the prior quarter production of 15kt because of China market conditions. At the end of the quarter, it finished product inventory of 19kt and retained the capability to dispatch sales orders from Balama during the temporary suspension of production.


Key Measures (Source: Company Reports)

Suspension of Guidance: Due to further operational and market uncertainty associated with the broader global impacts of COVID 19, the company has suspended its full-year production guidance.

Stock Recommendation: The current ratio of the company stood at 7.49x in FY19 as compared to the industry median of 1.70x. This implies that SYR is in a decent position to address its short-term obligations against the broader industry. The stock of Syrah is trading towards its 52-week lower levels of $0.150 and price to book value multiple of 0.2x against the industry median (Metals & Mining) of 1.3x on TTM basis. Thus, considering the decent liquidity position and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.225 per share, down by 4.255% on 4^th May 2020.

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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