EVE Investments Limited

EVE Details

Business Update: EVE Investments Limited (ASX: EVE) produces natural organic products that have demonstrated medical benefits and can help enrich the lives of people across Australia, New Zealand, Asia Pacific and North America. The market capitalisation of the company as of 9 June 2021 stood at $19.21 million. As per a recent announcement, the company has received its first order from Whole Foods Market, Inc, popularly known for its organic selection. The initial order is for a mixture of Organic Raw Native Honey and Organic Raw Native Honey infused with Tea Tree (TTF24 strength) products and totals approximately US$21,000.

Appointment of Director: As per a recent announcement, the company has announced the appointment of Mr James Lin to the company’s board. It has also informed that Ms Joalin Chou has retired from the company's board. 

Q3FY21 Financial Performance: As per a recent update, the company has reported revenues at $1.7 million, an increase of 21% on the pcp. Additionally, EVE has recorded receivables of $0.4 million and creditors payable of $0.6 million. The cash position of the company stood at $4.1 million as of 31 March 2021. 

Q3FY21 Financial performance (Source: Company Reports)

Outlook: The company is focused on further augmenting its reach to the US, Canadian markets and further order from the Chinese market. Additionally, it expects first revenue from Japan once the sale commences on the Amazon.com Japan platform. EVE expects to commence Tea tree harvest operations in June 2021.

Key Risks: EVE is exposed to some challenges due to the impact of the COVID-19 pandemic, which can further impact the logistics and earnings of the company.

Stock Recommendation: During the period, the company has collaborated with an accredited dietician and nutritionist, Chloe McLeod, and has been appointed as the brand ambassador for the Meluka Australia product range. The stock of EVE is trading below its average 52-weeks’ levels of $0.004-$0.014. The stock of EVE gave a negative return of ~58.33% in the past six months and a negative return of ~16.66% in the past one month. On a TTM basis, the stock of EVE is trading at a P/B multiple of 1.5x, lower than the industry average (Specialty Retailers) of 5.1x. Considering the current trading levels and valuation on a TTM basis, the strategic collaboration, decent cash balance, optimistic outlook and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.005, as on 9 June 2021.

EVE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Metgasco Ltd

MEL Details

Vali-2 Exceeded Predrilling Expectation: Metgasco Ltd (ASX: MEL) is an energy company that engages in oil and gas exploration, development and investment in associated energy infrastructure. The market capitalisation of the company as of 9 June 2021 stood at $17.03 million. As per a recent announcement, the company has exceeded pre-drill expectations after witnessing Vali-2 net pay outcome. Wireline logging confirmed the presence of gas in the Toolachee and Patchawarra formations, as well as the Tirrawarra Sandstone. In addition, the company has confirmed potential reserves at fields site Vali-2 and Odin-1. 

Q3FY21 Financial Performance: During the period, the company was granted ACCC approval for Vali joint venture for the marketing and selling of gas from the field to customers. As of 31 March 2021, the top 20 shareholders held 275,421,369 shares or 50.11% of Metgasco's issued capital. Additionally, the company's cash position stood at ~$0.6 million as of 31 March 2021, with no debt on the balance sheet.

Cashflow from Operating Activities (Source: Company Reports)

Outlook: The company expects to assess the drilling of Vali-3 in late July 2021. The company is anticipating environmental and safety drilling approval from state government authorities in Q2 CY2021. Moreover, the company expects a return from appraisal/exploration drilling, which could be rewarding for shareholders going forward. MEL expects that there will be a continued trend of increasing gas and Brent oil prices going forward.

Key Risks: The company's lines of business expose it to environmental risk, production risk, capital risk and regulatory risk, which could impact the overall performance.  

Stock Recommendation: As per CEO Ken Aitkens, the company has completed major works across most of the assets in preparation for the upcoming drilling programs in the Cooper and Perth Basins. The stock of MEL is trading close to its average 52-weeks' high level of $0.023-$0.039. The stock of MEL gave a positive return of ~41.61% in the past nine months and a positive return of ~19.23% in the past three months. On a technical analysis front, the stock of MEL has a support level of ~$0.029 and a resistance level of ~$0.039. Considering the current trading levels, the recent rally in the stock price, negative margin performance and the key risks associated with the business, we suggest investors to book profits and give a 'Sell' rating on the stock at the current market price of $0.033, up by 6.451% as on 9 June 2021. 

MEL 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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