Stocks’ Details

Danakali Limited

Received Deliverables for EPCM Phase 2: Danakali Limited (ASX: DNK) is a Sulphate of Potash (SOP) focused crop-nutrient company. As on 2 July 2020, the market capitalization of the company stood at ~$159.37 million. The company recently stated that it had received EPCM Phase 2 deliverables from DRA Global, providing contemporary information that allows advancement to the next phase of Project Development and identifies focus areas to manage the design and process risks during the Detailed Design phase.

Operational Highlights: The company is amongst the highest-grade SOP deposits globally, which has mineral resources of 1.3Bt and ore reserves of 1.1Bt. For the quarter ended 31 March 2020, the company reported a cash balance of $8.3 million. DNK has low-cost mining of less than US$150/t and retains a healthy balance sheet with advanced funding of US$250 million.


Operational Highlights (Source: Company Reports)

What to Expect: Within the Water Treatment Area, the company is expecting several opportunities that are likely to improve the environmental outcomes. The key opportunities are identified as the use of filtered sea water in the processing plant and using beach wells as the water intake alternative. The company will have its AGM on 15 July 2020. 

Key Risks: The Group is reliant on the success of a single asset located in a remote region in Eritrea. Any adverse event affecting the Colluli Potash Project would have a material adverse effect on the value of the business. The rapid spread of COVID-19 and its impact on global financial markets may also affect the company’s performance.

Stock Recommendation: As per ASX, the stock of DNK has generated a return of 44.93% in the past three months and a return of 26.58% in the last one month. The stock is trading slightly below the average level of its 52-weeks’ trading band of $0.285-$0.760. On a TTM basis, the stock is trading at a price to book value multiple of 2.4x, lower than the industry average (Basic Materials) of 4.3x and thus seems undervalued. Considering the current trading levels, upcoming opportunities, and sufficient liquidity, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.485, down by 3% on 2 July 2020. 

Cue Energy Resources Limited

Quarterly Update: Cue Energy Resources Limited (ASX: CUE) is engaged in the exploration and production of oil and gas. As on 2 July 2020, the market capitalization of the company stood at ~$68.42 million. During the quarter ended 31 March 2020, the company witnessed increased production at Maari and Sampang. During the quarter, it produced 29,448 bbl of oil and 329 mmcf of gas. In the same time span, the company received $5.94 million cash which comprised of oil salesof32,949 bbls at an average price of $103.42/bbl and gas sales of 226 mmcf at an average price of $11.22 per thousand cubic feet.


Key Performance Metrics (Source: Company Reports)

What to Expect: The company continued to generate positive cash flow over the half-year and focused on controllable costs. Despite the recent dramatic fall in the oil price, the company is managing to weather the unprecedented effects on business. 

Key Risks: The group manages its exposure to key financial risks, including the interest rate and currency risk, commodity price risk, credit risk and liquidity risk. However, the company is monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate, foreign exchange, and commodity prices. The stock is also thinly traded and may pose some difficulties for investors in terms of liquidating their position. 

Stock Recommendation: CUE is in a healthy financial position with no debt and a cash balance of $33.7 million. As per ASX, the stock of CUE is inclined towards the 52-weeks’ low level of $0.06 and gave a return of 27.27% in the past three months. On a TTM basis, the stock is trading at an EV/Sales multiple of 1.9x, lower than the industry median (Oil & Gas) of 8.7x. Considering the attractive trading levels, decent returns in the past three months, lower EV/Sales multiple and increased production despite the COVID-19 pandemic, and key risks stated above, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.1, up by 2.041% on 2 July 2020.

Resapp Health Limited

ResAppDx-EU to be Launched on Phenix Health Telehealth App: Resapp Health Limited (ASX: RAP) is engaged in the research and development of digital healthcare solutions for respiratory disease. As on 2 July 2020, the market capitalization of the company stood at ~$128.65 million. The company has signed a two-year, non-exclusive software licensing agreement with Phenix to provide ResAppDx-EU in the Phenix Telehealth app. The company has recently announced that ResAppDx-EU is to be available on the Phenix Telehealth app on the 6 July 2020. With the integration with Phenix Telehealth app, doctors can remotely assess patients with confidence, and perform video consultation and deliver medications to their patient’s home. 

Service Agreement with Coviu: The company has also signed a two-year, non-exclusive commercial service agreement with Coviu Global Pty Ltd to make ResApp’s acute respiratory diagnostic test, ResAppDx-EU available through Coviu’s web-based telehealth platform. The per test license fee paid to ResApp is in the range of $5 to $10.

Quarterly Update: During the third quarter ended 31 March 2020, the company made great progress on the commercialization of its suite of products. The COVID-19 pandemic has shone a bright light on the telehealth industry, because of which there was an explosion in the number of telehealth consultations. At the end of the quarter, the company reported a net increase in cash of $3 million to $6.9 million. In the same time span, the company reported operating cash outflows of $1.6 million. These were mainly associated with research and development and staff costs.


Quarterly Cash Flow Activities (Source: Company Reports)

Key Risks: The financial instruments which primarily expose the company to interest rate risk are cash and cash equivalents. The company may be affected by the usage of its healthcare solutions, and surprises about the outcomes of the data can affect the stock price tremendously. 

Stock Recommendation: The company has recently launched mobile medical device software application- SleepCheck, which is validating algorithms and analyzing sounds to provide an accurate assessment of the user’s risk of sleep apnoea. As per ASX, the stock of RAP is inclined towards its 52-weeks’ low level of $0.055. On a TTM basis, the stock is trading at a price to book value multiple of 27x, higher than the industry median (Technology) 3x and, thus, seems overvalued. Considering the volatility in returns, limited upside potential and key risks, we suggest investors to keep an eye on the business activities and suggest a watch stance on the stock at the current market price of $0.165, down by 5.714% on 2 July 2020. 

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.