Stocks’ Details

Resolute Mining Limited

Quarterly Highlights (For the Period Ended 30 September 2020): Resolute Mining Limited (ASX: RSG) is engaged in gold mining, development of resource projects, and prospecting and exploration for minerals. As on 18 November 2020, the market capitalization of the company stood at ~$883.11 million. During the quarter ended September 2020, the company reported a decline of 19% in the production of gold to 87,303 ounces at an AISC of US$1,284/oz. In the same time span, the company sold 90,900oz of gold at an average realized price of US$1,694/oz. During the quarter, the company reported total cash and bullion balance of US$187.4 million.

Operational Performance Summary (Source: Company Reports)

Outlook and Guidance: The company is focused on achieving a mining rate of 2.4Mtpa at its Syama Gold Mine. The company expects to produce 140,000oz annually at its Mako gold mine at an AISC of US$900/oz. It is aiming to maintain high productivity, low cost, and strong cash flow generative operations. With respect to its strategic investments in Africa, RSG aims to establish a portfolio of investments in emerging gold explorers to provide the potential for medium-term growth opportunities.

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

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: The company has a successful operational history of development and contribution to economy. As per ASX, the stock of RSG is inclined towards its 52-weeks’ low levels of $0.605, proffering a decent opportunity for investors. The stock of RSG gave a negative return of 27.02% in the past three months and a negative return of 14.73% in the last one month. On a technical front, the stock of RSG has a support level of ~$0.765 and a resistance level of ~$0.938. We have valued the stock using the P/E multiple based illustrative relative valuation and have arrived at a target price with an upside of lower double-digit (in % terms). Considering the current trading levels, modest long-term outlook, and decent quarterly performance, we recommend a ‘Buy’ rating on the stock at the current market price of $0.800 on 18 November 2020.

3P Learning Limited

Revised Non-Binding Indicative Proposal from BYJU’S: 3P Learning Limited (ASX: 3PL) operates within the education technology sector, and is engaged in the development, sales, and marketing of educational software to schools. As on 18 November 2020, the market capitalization of the company stood at ~$180.63 million. The company has recently received a revised non-binding indicative proposal from an Indian based private ed-tech company, Think and Learn Private Limited (BYJU’S), to acquire 100% of 3PL for a cash price of $1.50 per share. The revised proposal reflects an increase of $0.05 per share from the $1.45 per share in the previous indicative proposal. However, the proposal is subject to the completion of due diligence, unanimous recommendation of the 3PL Board, and a scheme implementation agreement.

FY20 Financial Highlights: Despite the COVID-19 pandemic, the company has witnessed an increased demand for its products and reported decent financial performance. During the year, licence revenue went up by 1% to $51.4 million and other revenue increased by 12% due to an increase in copyright revenue. In the same time span, NPAT of the company witnessed a substantial fall of 73% to $1.6 million. However, the company reported a healthy balance sheet with a cash balance of $27.4 million and no debt at the end of FY20.

FY20 Financial Highlights (Source: Company Reports)

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

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: The company is continuing to build digital automated customer journeys to improve its cost to serve. As per ASX, the stock of 3PL is inclined towards its 52-weeks’ high levels of $1.44 but retains potential for further growth. The stock of 3PL gave a return of 0.37% in the past three months and a return of 8.46% in the last one month. On a technical front, the stock of 3PL has a support level of ~$1.11 and a resistance level of ~$1.41. We have valued the stock using the P/E multiple based illustrative relative valuation and have arrived at a target price with an upside of higher single-digit (in % terms). Considering the current trading levels, decent returns in the past one month, and non-binding offer from BYJU’S, we recommend a ‘Hold’ rating on the stock at the current market price of $1.350, up by 4.247% on 18 November 2020.

Sky Network Television Limited

Sky and Spark Partner for Streamed Sport: Sky Network Television Limited (ASX: SKT) is a New Zealand based pre-eminent pay television company that provides satellite television and media streaming services. As on 18 November 2020, the market capitalization of the company stood at ~$270.67 million. The company has recently signed a 6-month agreement with Spark New Zealand Limited to offer Sky Sport Now in a bundle with Spark Sport from 16 November 2020. The partnership with Spark will enable the company to achieve its goal.

FY20 Financial Highlights: During FY20, the company reported revenue of NZ$747.6 million, towards its upper end of the revised guidance range and reported an increase of 35% in streaming revenue. The company closed the year with 990,000 customers. SKT also reported a healthy balance sheet and generated NZ$82.7 million in free cash flow.

FY20 Financial Highlights (Source: Company Reports)

Outlook and Guidance: The company has recently increased its guidance for FY21 and expects revenue in the range of NZ$680 million to NZ$710 million. It is also anticipating benefitting from cost savings and hence has increased its EBITDA guidance range to NZ$140 million - NZ$155 million and NPAT between NZ$20 million to NZ$30 million.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: Despite the volatile market conditions, the company reported a decent start to FY21 with a lower YTD annualized churn to 12.2%. The company is also witnessing pleasing growth from Neon streaming service. The stock of SKT gave a return of 28% in the past three months and a return of 18.51% in the last one month. On a technical front, the stock of SKT has a support level of ~A$0.128 and a resistance level of ~A$0.327. We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a target price with an upside of higher single-digit (in % terms). For the said purposes, we have considered Aspermont Ltd (ASX: ASP), GTN Ltd (ASX: GTN) and Prime Media Group Ltd (ASX: PRT) as peers. Considering the decent returns in the past three months, decent FY20 financial performance, improving footprint, and increased guidance for FY21, we recommend a ‘Hold’ rating on the stock at the current market price of A$0.155 on 18 November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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