Stocks’ Details

Newcrest Mining Limited

Approval of Funding: Newcrest Mining Limited (ASX: NCM) is involved in the exploration, development, mining and the sale of gold. The market capitalisation of the company stood at $21.57 billion as on 20^th January 2021.  Following the receipt of regulatory approvals to commence construction activities at Havieron Project in Western Australia, the company’s Board has approved A$146 million for the construction of the box cut, exploration decline and associated surface infrastructure. The company stated that its performance in September 2020 quarter was in-line with the expectation and the business is on the path to meet annual guidance. The company recorded gold and copper production of 503koz and 35kt as compared to 573koz and 40kt of June 2020 quarter. However, the company expects to increase in production during December 2020 quarter.

Gold Production (Source: Company Reports)

Guidance: For FY21, the company expects gold production in the range of 1,950-2,150koz and copper production of between 135-155kt.

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

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

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months 

Stock Recommendation: The company possesses an exceptional long-life, low-cost production and an exciting pipeline of expansion and exploration projects. With respect to its strategy of pursuing growth in the Americas, it got listed on the Toronto Stock Exchange in October 2020. During FY20, the company recorded a current ratio of 2.90x as compared to the industry median of 1.74x, which reflects that the company is well- placed to address its short-term obligations against the broader industry. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in percentage terms). For the purpose, we have taken peers such as Kirkland Lake Gold Ltd (ASX: KLA), Evolution Mining Ltd (ASX: EVN) and Perseus Mining Ltd (ASX: PRU), to name few. On a technical analysis front, the stock has a support level of ~$25.502 and a resistance level of ~$28.343. Thus, considering the recent funding approval, expected growth in production and decent liquidity position, we give a “Buy” recommendation on the stock at the current market price of $27.000 per share, up by 2.195% on 20^th January 2021.

Red 5 Limited

Debt-Financing for King of the Hills Project:  Red 5 Limited (ASX: RED) is engaged in the exploration and mining of gold. The market capitalisation of the company stood at $492.72 million as on 20^th January 2021. Recently, the company notified the market that it has taken a significant step towards the development of King of the Hills (KOTH) Gold Project in Western Australia. This follows the approval of the Western Australian Department of Mines, Industry Regulation and Safety (DMIRS) for mining. The company added that it is currently engaged with lenders for debt funding and expects to have the project debt finance in the March 2021 quarter. During the quarter ended 30^th September 2020, the company recorded gold production of 20,283 ounces as compared to 20,707 ounces of June 2020 quarter. In addition, gold sales for the quarter stood at 19,932 ounces against 20,929 ounces in the previous quarter. RED witnessed improvement in mine dilution performance from the Darlot mining operations, which was aided by operational changes implemented during the June 2020 quarter.

Production Summary (Source: Company Reports)

Guidance: For FY21, the company expects gold production in the range of 90,000oz – 98,000oz at an average AISC of A$1,830 – 2,030/oz.

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

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

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months 

Stock Recommendation: As on 30^th September 2020, the cash on hand and bullion of the company stood at $106.8 million. This follows the repayment of $4.0 million for the working capital facility and expenses of $9.1 million on KOTH construction activities and Final Feasibility Study. In the last one and three months, the stock of RED has corrected 5.55% and 14.99%, respectively. Currently, the stock is trading below its 52-week low-high average of $0.275, offering decent opportunity for accumulation. Considering this, we have valued the stock using the price to cash flow multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in percentage terms). For the purpose, we have taken peers such as Ramelius Resources Ltd (ASX: RMS), Silver Lake Resources Ltd (ASX: SLR) and Perseus Mining Ltd (ASX: PRU), to name few. On a technical analysis front, the stock has a support level of ~$0.23 and a resistance level of ~$0.30. Hence, in light of the progress on KOTH, decent production level, positive guidance, current trading level and key risks associated with the business, we give a “Buy” recommendation on the stock at the current market price of $0.255 per share, up by 2% on 20^th January 2021.

Respiri Limited

Partnership with Pharmacy 4 Less Group: Respiri Limited (ASX: RSH) is involved in the research, development and commercialisation of medical devices, and the development of mobile health applications. The market capitalisation of the company stood at $93.90 million as on 20^th January 2021. On 14^th January 2021, the company notified the market that SuperChem pharmacy network would commence sales of wheezo™ in 14 pharmacies Australia-wide. The company added that SuperChem is a trusted and respected pharmacy brand in Western Australia and has opened additional stores in NSW and South Australia. In the month of December 2020, the company reached a sales and marketing partnership with the Pharmacy 4 Less group for the sale of wheezo™ devices, which is likely to commence in early 2021 across their pharmacy network.

September 2020 Quarter Update: During the quarter ended 30^th September 2020, the was focused on advancing its manufacturing and clinical trials and inked numerous new partnerships. In addition, the company was also focused on the launch of wheezo, which was evident by expenditures made by the company. Gross operating cash outflows for the quarter stood at $2.0 million, which were $0.3m higher than Q2 2020.

Cash Flow (Source: Company Reports

Guidance: RSH is focused on expanding its footprint in the USA, and the launch for the same is expected in Q3 CY22. The company is expecting to report revenue in the ambit of $6-$8 million, and this would be aided by an attractive revenue model of the company.

Stock Recommendation: The company closed the September 2020 quarter with the cash and cash equivalents of $1.9 million. Current ratio of the company stood at 2.22x in FY20 as compared to 0.39x in FY19, which showcases that the company is well- placed to settle its short-term obligations. The stock of RSH has corrected by 36.58% and 10.34% in the last three and six months, respectively. Currently, the stock is trading below its 52-week low-high average of $0.154, offering decent opportunity for accumulation. On a technical analysis front, the stock has a support level of ~$0.111 and a resistance level of ~$0.151. Thus, in light of the partnership with Pharmacy 4 less group, decent liquidity position, expansion plans in the USA and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.130 per share on 20^th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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