Macmohan Holdings Limited

MAH Details

Appointed Mining Contractor for the Dawson South Operations: Macmohan Holdings Limited (ASX: MAH) is a mining contractor providing surface, underground, and civil mining services for projects to different locations and commodity sectors in Australia and Southeast Asia. As of 2 June 2021, the market capitalisation of MAH stood at ~$409.44 million. On 17 May 2021, MAH reported that Director Denise McComish has acquired 275,000 fully paid ordinary shares in the company for $56,375 in an on-market purchase transaction. On 30 March 2021, MAH announced that it has been selected as mining contractor to provide surface mining services to Anglo American’s Dawson mine in Queensland. It will provide services from July 2021 at the Dawson South operations. It is expected to sign the mining services contract shortly and estimate the agreement to generate ~$200 million in three years.

Key Takeaways from 1HFY21: The company reported a revenue of $652.5 million in 1HFY21, down by 5% on 1HFY20, due to an accounting treatment change on specific client provided consumable items at its Batu Hijau project. Its NPAT stood at $44.8 million, up 56% on 1HFY20. Its operating cash flows were up by 7% YoY to $96.7 million in 1HFY21. MAH declared an interim dividend of 0.30 cents per share, 20% franked for 1HFY21. Its gearing stood at 20%, with net debt of $129 million and a cash balance of $148.4 million as of 31 December 2020.

Net Income & Revenue Growth from FY2018-FY2020; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of exploration and mining, changes in commodity prices, and associated environmental hazards due to the nature of business. It is also exposed to the COVID-19 delays and disruptions in the execution of its ongoing projects. 

Outlook: For FY21, MAH estimates revenue in the range of $1.3-$1.4 billion and EBIT (A) between $90-$100 million. It has a Pro-forma order book of $4.21 billion (including the Warrawoona contract finalisation) as of 23 February 2021. It has a pipeline of over 20 tender opportunities of $7 billion, of which $3.8 billion tenders have been submitted and are under preparation. MAH expects further improvement in cash conversion in 2HFY21 in sync with its entire year target of 85%.

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: After correcting from the 52- week high of AUD 0.28 touched on January 2021, MAH stock prices are continuously taking support of the rising trend line on the weekly chart. This implies that the stock prices are still in an intermediate uptrend on the weekly chart. The momentum oscillator RSI (14-period) is trading at ~37.49 level near an oversold territory. A rebound from here may push the price higher towards the resistance zone. An important support level for the stock, is placed at AUD 0.151, while key resistance level is placed at AUD 0.221. The stock of MAH gave a negative return of 11.90% in the past three months and a negative return of 25.99% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.180-$0.287. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount than its peer median, considering its lower revenue and slightly lower net cash flows from operating activities for 1HFY21. For this purpose, we have taken peers like MACA Limited (ASX: MLD), Perenti Global Limited (ASX: PRN), and Monadelphous Group Limited (ASX: MND). Considering the current trading levels, increase in NPAT, Underlying EBITDA, and operating cash flows in 1HFY21, a tender pipeline of contracts, recent award of Dawson South operations and revenue expected from it, valuation, and associated risks of exploration, changes in the gold and copper prices, supply chain disruptions due to the pandemic, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.185, down by 2.632% on 2 June 2021.

Note: The green color line in the chart shows RSI (14-period) and the white color line represents trend line. The upper 2 yellow color lines denotes Resistance 1 and Resistance 2, while the lower 2 yellow color lines denotes support 1 and support 2.

MAH Daily Technical Chart, Data Source: REFINITIV

Douugh Limited

DOU Details

Formed Strategic Alliance with OFX: Douugh Limited (ASX: DOU) offers electronic international payment services to consumers and businesses. As of 2 June 2021, the market capitalisation of DOU stood at ~$72.96 million. On 2 June 2021, DOU announced entering a strategic partnership with OFX Limited (ASX: OFX) to provide foreign exchange services to DOU customers for three years initially. Its customers will seek benefits of OFX’s exchange rates better than banks and brokerage free investing in the US single stock & ETF trading. With this partnership, OFX becomes the sole forex partner for DOU’s Goodments by Douugh App. OFX will share a portion of the service fees paid by the DOU customers with DOU. The revenue impact is not assessable currently but expected to be material as a new revenue driver.

Partnership with Fiserv: On 27 May 2021, DOU announced its collaboration with Fiserv Inc (NASDAQ: FISV) initially for five-years. FISV will offer DOU customers access to its MoneyPass® to withdraw cash free surcharge from its network of over 37K ATMs in the US.   

Key Takeaways from the March Quarter (Q3FY21) Results: The completed a quarter of operations since the launch of its wellness App in November 2020. It registered a growth of 6.5x in the total debit card spend through its platform on a QoQ basis. Its total deposits increased by 5.5x, and customer acquisition was up by 2.6x on a compounded monthly growth rate (CMGR) basis. DOU expected higher customer acquisition during Q3FY21; however, it slowed down due to the COVID-19 impact. During Q3FY21, DOU launched an instant virtual card push provisioning in alliance with Mastercard. It received a Registered Investment Advisor (RIA) licence from the US SEC (Securities and Exchange Commission). DOU earned cash receipts of $5,000 from the customers. It held a cash and cash equivalents balance of $13.30 million as of 31 March 2021. Post the quarter-end, DOU completed the acquisition of Goodments App to fast-track the development of its Wealth Jars feature.

Earnings & Net Income from FY2018-FY2020; (Analysis by Kalkine Group)

Key Risks: The company is exposed to inventory (debit card) shortages due to the COVID-19 disruptions. It faces financial risks of liquidity and credit as it plans to grow and expand its products and markets.

Outlook: DOU plans to scale up its US customer base at its wellness platform. With an RIA licence, DOU can now launch its investing products (single stocks, managed portfolios) in the US. It plans to launch the Wealth Jars feature, an Android App version, and introduce a monthly subscription fee later. Subject to improvements in the Goodments App, DOU plans to relaunch the App in Australia shortly.

Stock Recommendation: DOU's prices recently started to move upside from the lower levels but now facing stiff resistance of AUD 0.140, indicating a probability of downside direction for the stock. On a daily chart, the leading indicator RSI (14-period) recovered from an oversold zone and now trading at ~51.46 level, indicating a sideways trend. An immediate resistance level for the stock appears at AUD 0.140 while support at AUD 0.090 level.

The stock of DOU gave a positive return of 21.05% in the past week and a return of 576% in the past nine months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.048-$0.490. The stock of DOU has a support level of ~$0.10 and a resistance level of $0.131. Considering the high trading levels, significant returns in the past nine months, associated risks of debit card shortages, we suggest investors book profit and give a ‘Sell’ rating on the stock at the market price of $0.12 as on 2 June 2021 (AEST 11:45 AM).

DOU Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the chart depicts RSI (14-period)

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.

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.

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