Panoramic Resources Limited

PAN Details

Pre-Requisites Fulfilled for Trafigura Loan Facility: Panoramic Resources Limited (ASX: PAN) is a base metal mining and exploration firm operating Savannah underground nickel sulphide mine and processing plant in Western Australia. As of 8 July 2021, the market capitalisation of PAN stood at ~$297.38 million. On 2 July 2021, PAN announced the completion of all pre-requisites associated with the Trafigura US$45 million loan seeking facility.

PAN estimates to undertake the first drawdown of the loan facility in the Q1FY22 (period ending September 2021). As a result, PAN reported that the company is now well-equipped to recommence its Savannah Nickel Project with the available funds.

Purchase of Remaining Interest in Panton: On 17 June 2021, PAN announced that GNP had exercised the option to purchase the residual 20% stake in Panton for $3 million. Panton held the Panton PGM project and its assets. Earlier on 18 December 2020, PAN had notified of divesting its 80% interest in Panton to GNP.

Key Takeaways from Q3FY21 (March quarter):

• Signed Long-Term Offtake Agreements: The company has entered a multi-year purchase contract to sell copper and nickel concentrate with Trafigura Pte Limited during Q3FY21.

• Updated Financial Estimates: Based on revised technical studies, PAN estimates average yearly production of copper (4,683 tonnes), nickel (9,072 tonnes), and cobalt (676 tonnes) concentrates.
• Loan Facility Secured: PAN has also obtained US$45 million of revolving credit loan facility (RCF) from Trafigura for the Savannah project.
• Decent Cash to Support Ongoing Project Development: PAN held a cash balance of $26.4 million as of 31 March 2021.

Total Revenue & Net Loss After Tax from FY16-FY20; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of exploration and mining on ongoing projects. PAN faces regulatory hurdles for seeking mining and exploration licences and the completion of various mandatory studies.

Outlook: The offtake agreement signed with Trafigura will commence from February 2023 to February 2028 and support operations at the Savannah project. PAN continues to liaise with the Canadian tax authorities for the release and certification of CAD$2.25 million proceeds (held back) from the divestment of its Thunder Bay assets. PAN had estimated to obtain these funds in Q4FY21 (period ending 30 June 2021). PAN intends to use the proceeds received from GNP to strengthen its working capital requirements on the Savannah nickel project.

Stock Recommendation: The stock of PAN gave a positive return of 42.85% in the past nine months and a positive return of 105.47% in the past year. The stock is currently trading higher than the 52-weeks’ average price level band of $0.064-$0.180. On a TTM basis, the stock of PAN is trading at a price to book value multiple of 1.8x, lower than the industry (Metals & Mining) median of 2.8x, thus seems undervalued. Considering the high current ratio, signed offtake agreements for concentrate sales, decent returns in the past nine months and past year, valuation on a TTM basis, and associated risks of project commercialisation and exploration, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.150, up by ~3.448% as on 8 July 2021.

PAN Daily Technical Chart, Data Source: REFINITIV 

IOUpay Limited

IOU Details

Signed Master Merchant Agreement with RMS: IOUpay Limited (ASX: IOU) is a financial technology and digital commerce software solutions and services firm in Australia. As of 8 July 2021, the market capitalisation of IOU stood at ~$137.85 million. On 15 June 2021, IOU announced that it had inked a master merchant agreement with Razer Merchant Services Sdn Bhd (RMS) for a year on a renewable basis. As per the contract, RMS will acquire merchants to join and use IOU’s BNPL (Buy Now Pay Later) payment services. The agreement will be operative in Malaysia with all participating merchants based in Malaysia. As agreed, IOU will pay RMS a low fixed fee to IOU per transaction. The deal will be applicable after four weeks of testing and system integration of the two companies.

Result Highlights of March 2021 Quarter (Q3FY21):

• Entered Partnerships: During Q3FY21, IOU announced partnerships with the Malaysian networks -EasyStore, iPay88 and MYP1 for merchant acquisition and referral.
• Soft App Launch: IOU also launched merchant App and consumer App services in a restricted environment for a limited merchant pool and BNPL platform’s offering completion in the reporting period.
• Capital Raise: IOU raised $50 million via a share placement to sophisticated investors and existing shareholders in February 2021. It issued 100 million shares to investors at $0.50 per share. IOU will use the proceeds to fund BNPL inventories and digital payments and BNPL product development.
• Improved Net Operating Cash Outgoings: IOU earned $1.94 million cash receipts from customers in Q3FY21. The net operating cash outflow improved to $617,000 in Q3FY21 versus a cash outflow of $834,000 in Q2FY21.

Key Financials from FY2016-FY2020 (Analysis by Kalkine Group)

Key Risks: It faces the risk of technical failures and technological upgrades as necessitated on its platform. The company is also exposed to foreign currency exchange rate fluctuations.

Outlook: IOU is planning and implementing its accelerated merchant customer acquisition strategy, focusing on high volume and premium merchants across industries. IOU is also planning to launch a Merchant App (to priority merchants) and myIOU consumer App for customer onboarding (online/in-store). Besides, BNPL product development, IOU plans to use the funds raised to expand its Malaysian and South-East Asian territories operations.

Stock Recommendation: The stock of IOU gave a positive return of 61.29% in the past six months and a positive return of 150% in the past nine months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.021 - $0.850. On a TTM basis, the stock of IOU is trading at a price to book value multiple of 9.5x, lower than the industry (Investment Banking & Investment Services) average of 15x, thus seems undervalued. Considering the low trading levels, the string of new partnerships with large scale merchant networks for BNPL services offering, launch plans for Merchant and Consumer App, expansion plans in South-East Asia, valuation on a TTM basis, and associated risks of expansion in new markets, we give a ‘Speculative Buy’ rating on the stock at the current market price of AUD 0.250 (as on 8 July 2021, 10: 43 AM (GMT+10), Sydney, Eastern Australia).

IOU 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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