Stocks’ Details

Selfwealth Limited

Launch of US Trading Platform: Selfwealth Limited (ASX: SWF) provides an online share trading platform, and the market capitalisation of the company stood at $111.92 million as on 17^th December 2020. The company has rolled out its US trading functionality on 14^th December 2020 and experienced beyond expectation response from SelfWealth trading community and received an addition request of US trading feature from over 7000 existing active traders. For the quarter ended 30^th September 2020 (Q1 FY21), the company experienced a record quarterly trade volume of 379k and operating revenue stood at $4.37 million. Q1 FY21 proved as a second consecutive quarter with positive cash flow from operating activities of $344k. At the end of the quarter, the number of active traders reached 57,816 with growth of 11,371 active traders during the quarter.  For FY20, the company reported operating revenue amounting to $8.08 million, reflecting a rise of 188%, which was fueled by the growth of 307% in trading revenue and came in at $5.12 million as the brand continues to grow in trust and recognition in the retail trading market.

Key Financials (Source: Company Reports)

Outlook: Looking forward, the company plans to become the home for direct equities trading. The is likely to be supported by the highly competitive fee structure as well as the ability of Australian investors to invest in the US and Australia, all in the once place.

Stock Recommendation: On the back of new client deposits, the company reported a total client cash held' on the platform of $409 million in spite of 65% of total transactions on the platform being buy transactions during the quarter. In the last six and nine months, the stock of SWF has surged 64.17% and 340%, respectively. Currently, the stock is trading towards its 52-week high of $0.820. In addition, SWF has an EV/Sales multiple of 13.3x as compared to the industry median (Investment Banking & Investment Services) of 8.0x on TTM basis. The stock is trading at a price to book value multiple of 27.2x against the industry average (Investment Banking & Investment Services) of 2.5x on TTM basis, and thus seems overvalued at the current trading level. On a technical analysis front, the stock has a support level of ~$0.503 and a resistance level of ~$0.621. Thus, considering the steep price movement in the past months, current trading level and higher valuation, we are of the view that most of the positive factors have been discounted. Hence, we give an "Expensive" rating on the stock at the current market price of $0.550 per share, up by 0.917% on 17th December 2020.

S2 Resources Ltd

Completed Second Drill Hole: S2 Resources Ltd (ASX: S2R) is engaged in the exploration and development of minerals. The market capitalisation of the company stood at $37.78 million as on 17^th December 2020. Recently, the company notified the market that it has finished a second drill hole in the Fraser Range. The company added that the hole has intercepted around 6.5 metres of semi-massive and net textured sulphides from 401 metres downhole, versus the modelled EM conductor depth of 370 to 390 metres downhole. During September 2020 quarter, the company received assay results from Aarni’ East drilling in Finland, and after the end of the quarter, the company commenced follow-up drilling at Aarnivalkea. The company incurred around $1.01 million in operating activities and made investments of $0.06 million during the quarter. For the year ended 30^th June 2020, the company recorded loss amounting to $7,475,048 as compared to $8,288,971 in FY19.

Key Financials (Source: Company Reports)

Outlook: Looking forward, the company would be focused on enhancing its exploration activities in Australia and Finland. In addition, the company would pursue other exploration opportunities, which would add value to its portfolio of assets.

Stock Recommendation: During the quarter, the company completed a placement of $7.75 million. S2R closed the quarter with decent financial position supported by a cash balance of $12.6 million. The stock of S2R has moved up by 33.33% in the last nine months. The 52-week low-high range for the stock stands at $0.066 - $0.315, respectively. In addition, the stock is trading at a price to book value multiple of 4.0x against the industry median (Basic Materials) of 2.7x on TTM basis. On a technical analysis front, the stock has a support level of ~$0.100 and a resistance level of ~$0.201. Hence, considering the current trading level and higher valuation, we are of the view that most of the positive factors have been discounted and give an “Expensive” rating on the stock at the current market price of $0.125 per share, up by 4.166% on 17^th December 2020.

Metalicity Limited

Completion of 86 Drilling Holes: Metalicity Limited (ASX: MCT) is engaged in mineral exploration and development of the Kookynie and Yundamindra Gold Projects. The market capitalisation of the company stood at ~$31.35 million as on 17^th December 2020. Recently, the company announced that it has finished 86 drill holes for 7,464m at the Kookynie Gold Project with assays pending for all holes and added that the drilling has been aiming high priority prospects within the extensive 25+ targets generated at Kookynie. During September 2020 quarter, the company reported net cash outflow from operating activities of $298k and $827k from investing activities. During the quarter, the company closed a strongly supported placement of $5 million, underpinned by existing and new professional and sophisticated investors. For the year ended 30^th June 2020, the company reported a loss amounting to $1,340,757 as compared to $4,410,376 in FY19.

Cash Flow (Source: Company Reports)

Outlook: Going forward, the company would continue its methodical approach on the Kookynie Gold Project. In addition, the company would also carry out other exploration in the foreseeable future, which are likely to support its business growth.

Stock Recommendation: As on 30^th September 2020, the cash balance of the company stood at $5.1 million. The stock of MCT has moved up by 50% and 592.28% in the last six and nine months, respectively. The 52-week low-high range for the stock stands at $0.001 - $0.045, respectively. In addition, the stock is trading at a price to book value multiple of 10.2x, against the industry median (Basic Materials) of 2.7x on TTM basis. On a technical analysis front, the stock has a support level of ~$0.011 and a resistance level of ~$0.022. Therefore, considering the steep price movement in the past months, and higher valuation, we give an “Expensive” rating on the stock at the current market price of $0.017 per share, down by 5.556% on 17^th December 2020. We further suggest investors to wait for better entry levels.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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