Stocks’ Details

Stavely Minerals Limited

North-Western Extension at Cayley Lode: Stavely Minerals Limited (ASX: SVY) is engaged in the mining of minerals and operates wholly-owned Ararat and Stavely projects. As of 16 April 2021, the market capitalisation of the company stood at ~$157.88 million. On 31 March 2021, SVY announced the significant drilling results from the Cayley Lode discovery at the Gossan prospect at the Stavely Copper Gold (SCG) project in Victoria. Based on the positive results so far, the company has planned to extend the intensive resource drilling at the hole SMD134 to the north-west within the discovery zone at Cayley Lode. In a related key development, SVY has also discovered mineralisation at SMD127 and SMD121 holes as well.

Divestment of Ravenswood Project: On 24 March 2021, SVY announced the divestment from its Ravenswood Project situated in Queensland to Sunshine Gold Limited (ASX: SHN) to focus on its flagship project SCG project in Western Victoria. On 12 February 2021, SHN exercised the purchase option and met all the conditions to acquire the project.

A Look at the 1HFY21 Results: SVY incurred a net loss after tax of $8.008 million during 1HFY21. In 1HFY21, SVY reported results from its drilling program at the Thursday’s Gossan Prospect. It discovered significant copper and gold intercepts at the SMD104, SMD106, SMD093, SMD094, and various other diamond drill holes at Cayley Lode with the aim of accomplishing maiden JORC mineral resource. During 1HFY21, SVY disinvested its Fosterville East tenement in Victoria and Lefroy Goldfields and Mathinna/Alberton tenements in Tasmania to Nubian Resources Limited (TSX-V: NBR) for a $100k cash deposit and 4.19 million shares in NBR.

In December 2020, SVY undertook the planning for drill testing of the down-dip potential of its present Mt Ararat resource. SVY did not conduct any on-ground exploration at its Ararat Project during 1HFY21. During the reporting period, SVY raised $25 million via a Share Placement of ~41.67 million shares at 60 cents per share to institutional investors. It also raised another $2.8 million via a Share Purchase Plan (SPP) at 60 cents per share. It held $26.53 million as cash and cash equivalents on 31 December 2020.

1HFY21 Result Highlights (Source: Company Reports)

Key Risks: The company faces the risk of Stage 3 pandemic restrictions in Victoria at its SCG project area, risk of paddocks disturbance during the wet season, reduced drill rigs at the site, and the risk of estimating JORC mineral resource.

Outlook: The company is presently extending its mineral resource estimation to the north-west and plans to extend drilling to the south-east in early CY21 at the Cayley Lode discovery.

Stock Recommendation: The stock of SVY gave a positive return of 5.17% in the past six months and a positive return of 60.52% in the past one year. The stock is currently trading lower than the 52-weeks’ $0.345-$0.96. The stock of SVY has a support level of ~$0.561 and a resistance level of ~$0.649. Considering the current trading levels, significant results from the drilling at Cayley Lode and ongoing mineralisation extension, high current ratio signalling decent liquidity position, low debt levels, decent cash position and associated risks of the pandemic restrictions and resource estimation, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.610, up by 0.826% on 16 April 2021.

Ansarada Group Limited 

Change of Director’s Interest: Ansarada Group Limited (ASX: AND) is a cloud-based Software-as-a-Service (SaaS) information government solution provider. It serves corporates, public sector companies, advisory and investment banking firms, and financial companies. As of 16 April 2021, the market capitalisation of the company stood at ~$90.04 million. On 30 March 2021, AND announced that Stuart Clout, one of its Directors (and shareholder of SJSL Clout Holdings Pty Limited), held 45k fully paid ordinary shares and 1.03 million LTI options in an on-market transaction.

Restoration of Official Quotation: The TDY securities were placed under a trading halt on 17 August 2020, pending until the earlier of the announcement of a proposed acquisition or the start of trading on 19 August 2020. On 18 August, TDY shares were suspended from quotation pursuant to the news update regarding an ongoing acquisition transaction between thedocyard Limited (TDY) and Ansarada NewCo Pty Ltd (Ansarada) to form a SaaS technology company. On 18 August 2020, TDY and Ansarada entered in a Heads of Agreement under which TDY were to acquire 100% of the equity of Ansarada. AND reported the official reinstatement of its securities for quotation and trading on 9 December 2020.

A Look at the Half-Yearly Financials: The company reported a revenue of $15.30 million, down by 9% YoY in 1HFY21 and expected to approach pre-pandemic levels quickly. It recorded an NPAT of $3.40 million, up by 137% YoY. In December 2020, the company acquired 100% of the share capital in Ansarada NewCo Pty Limited and ‘Ansarada NewCo’ (AND’s controlled subsidiaries). This transaction was subject to raising $45 million via the issue of ~30.4 million shares and a share consolidation completion. Its platform subscription revenue increased to $12.3 million, 79% of the Group’s revenue in 1HFY21 vs 74% in 1HFY20. The gross margin was up to 92% YoY, and total customers grew to 3,020, up by 12% YoY in 1HFY21. The new e-commerce channel contributed to 5% of the total subscription customers in 1HFY21. It earned positive operating cash flows of $1.2 million in 1HFY21. AND held a cash and cash equivalents balance of $21.02 million as of 31 December 2020.

Half-Yearly Highlights (Source: Company Reports)

Key Risks: The company runs the risk of increasing revenue through its tech platform, add institutional customers on the network, technological disruptions, regulatory challenges, and cybersecurity issues dealing with confidential data.   

Outlook: The company is expecting revenue levels to return to pre-COVID levels soon. It has a growing deferred revenue of $10.8 million due to a subscription-based business model transition. AND expects this transition to drive overall revenue growth, profitability, recurring revenue, and customer retention.

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

Data Source: Refinitiv, Thomson Reuters, 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: The stock of AND gave a positive return of 452.63% in the past six months and a positive return of 412.19% in the past nine months. The stock is currently trading higher than the 52-weeks’ price band of $0.145-$1.68. The stock of AND has a support level of ~$0.992 and a resistance level of ~$1.139. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of high single-digit downside (in % terms). For this purpose, we have taken peers like Adacel Technologies Limited (ASX: ADA), Skyfii Limited (ASX: SKF), Damstra Holdings Limited (ASX: DTC) operating under the Software technology business. We believe that the company can trade at some discount than its peer median, considering its lower revenue, fall in subscription revenue and transactional revenue for 1HFY21 vs 1HFY20 and the risks associated with the pandemic spread. Considering the current trading levels, significant returns in the past six months and nine months, valuation, high ROE, and net margins, we believe that most of the positives have been factored in at the current juncture. Hence, we suggest investors wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $1.050, up by 3.448% on 16 April 2021.

ADX Energy Limited

80% Increase in Production Rate at Vienna Basin: ADX Energy Limited (ASX: ADX) is engaged in the production, exploration and development of oil and gas projects in Austria and Romania. As of 16 April 2021, the market capitalisation of the company stood at ~$27.75 million. On 13 April 2021, ADX informed issuance of 2.5 million ordinary fully paid shares without disclosure under Section 708A(5)(e). On 13 April 2021, ADX announced the completion of a well-work program at its wholly- owned Zistersdorf and Gaiselberg fields in the Vienna Basin. The company has restored work on the five wells and recovered significant oil production through an oil zone and pipe reserves. This discovery has led to a current production rate of 430 BOEPD versus 240 BOEPD average rates in the December 2020 quarter.

FY20 Financial Results: ADX reported operating revenue of $6.83 million in FY20 versus $1.11 million in FY19. It incurred a net loss after tax of $4.48 million for FY20 versus $1.08 million in FY19. It incurred an exploration expenditure of $1.23 million on new ventures in Tunisia, Italy, and Romania. The company sold 104k Boe (barrels) of oil equivalent in FY20 versus 9.49 Boe in FY19. The average production rate for FY20 was 285 Boepd versus 316 in FY19. In December 2020, ADX raised $1.3 million at $0.006 per share via an institutional placement to investors. It raised another $3 million via a Share Purchase Plan placement at $0.008 per share with one free unlisted option for every two shares held. The funds were raised to develop the company’s projects, working capital needs and tap growth avenues in Austria. It had 2.14 million cash and cash equivalents as of 31 December 2020.

FY20 Financial Highlights (Source: Company Reports)

Key Risks: The company faces the risk of discovering oil and gas from the wells, exploring new wells/sources of oil and gas, raising finance, increasing production from the wells, and seeking approvals from authorities for oil and gas extraction.

Outlook: For FY21, ADX plans to undertake operations mainly in Austria and has planned limited Romanian operations. It is currently undertaking the field technical review of Zistersdorf and Gaiselberg fields. It has planned well workover work on the oilfields to increase the production rates and finish the pre-feasibility studies. It plans to undertake a farmout deal for the Upper Austria AGS exploration and appraisal licenses to conduct a drilling exploration during 2HFY21. It is also looking for more partnership opportunities following the letter of intent (LOI) with RAG Exploration & Production GmbH (RAG E&P) for its other Upper Austria assets.

Stock Recommendation: The stock of ADX gave a positive return of 25% in the past three months and a positive return of 100% in the past six months. The stock is currently trading above the 52-weeks’ average price band of $0.004-$0.014. The stock of ADX has a support level of ~$0.009 and a resistance level of ~$0.011. Considering the current trading levels, low market capitalisation, high debt-levels including borrowings, negative bottom-line, we give an ‘Avoid’ rating on the stock at the current market price of $0.010, down by 9.091% on 16 April 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Note: 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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