Stocks’ Details

Estrella Resources Limited

Exploration Update: Estrella Resources Limited (ASX: ESR) is a mining company that is engaged in the exploration and development of nickel projects. At of 26 October 2020, the company’s market capitalisation stood at ~$129.97 million. The company recently announced that it has intersected massive nickel sulphide mineralisation in CBDD030 at the T5 Prospect located 1.1km NE of the historical Carr Boyd Nickel Mine. The company is now planning for the next round of holes to further test this zone. ESR will start Diamond core drilling surrounding CBDD030 at the completion of the final Stage 1 drill hole CBDD031 which is approaching its target depth.

Funds Raised through Options Exercise: On 13 October 2020, the company announced that Jason Peterson, major shareholder, and head of corporate of CPS Capital Group has exercised 20 million listed options exercisable at $0.02 to raise $400,000. These funds will allow the company to expand its drilling activities at its Carr Boyd Nickel Project without the need to raise funds through capital markets.

FY20 Highlights: For the year ended 30 June 2020, the company reported net loss of $609,676, slightly lower than the loss of $622,143 incurred in the previous year. During the year, the company incurred a net cash outflows from operating activities of $484,357 and from investing activities of $208,334. As at 30 June 2020, the company had cash of $36,479.

FY20 Results (Source: Company Reports)

Stock Recommendation: Looking ahead the company is focused on conducting its exploration activities at Carr Boyd Nickel Project and Spargoville Nickel Project. Over the last one month, the stock of ESR has provided a return of 1,191.6% and it is currently trading higher than its average 52-week’s price level band. On the technical analysis front, the stock has a support level of ~$0.10 and resistance of ~$0.17. For FY20, the company’s current ratio stood at 0.08x, lower than the industry median of 1.69x. Considering the company’s negative operating cash flow, its history of incurring losses, low liquidity levels, we suggest investors to ‘Avoid’ the stock at the current market price of $0.155, down by 6.061% on 26 October 2020.

Alcidion Group Limited

FY20 Results Highlights: Alcidion Group Limited (ASX: ALC) offers a set of software products and services that create a unique offering in the global healthcare market. For the year ended 30 June 2020, the company reported a total revenue of $18.6 million, up 10% on the previous year, despite experiencing delays of some contracts as a result of COVID-19 in 2HFY20. Over the year, the company’s recurring revenue grew by 35% to $10.5 million. Due to planned investments made in FY20 to accelerate growth, the company incurred a net operating cash outflow of ~$2.0 million and a net loss after tax of $3.1 million. As at 30 June 2020, the company had a decent cash balance of $15.9 million, providing enough capital to drive further growth in FY2021.

FY20 Results (Source: Company Reports)

Outlook: Looking ahead, the company is focussed on accelerating revenue growth and stabilising cost base. The company entered FY21 in a decent position, with a healthy sales pipeline and $12.8 million already contracted revenue to be recognised in FY21. The company intends to release its September quarter report on 27 October 2020.

Stock Recommendation: The stock of ALC has corrected by 19.99% in the last three months and is inclined towards its 52-weeks low price of 0.097, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$0.10 and resistance of ~$0.19. On a TTM basis, the stock is trading at a Price to Book multiple of 4.2x, lower than the industry median (Software & IT Services) of 5.2x. Considering the company’s decent FY21 outlook, decent balance sheet, healthy sales pipeline, current trading levels and key risks, we give a “Speculative Buy” recommendation for the stock at the current market price of $0.120, down by 4.001% on 26 October 2020.

AVZ Minerals Limited

Progressing Plans for Manono SEZ: AVZ Minerals Limited (ASX: AVZ) is a mineral exploration company, engaged in the development of its Manono Project situated in the south of the Democratic Republic of Congo (DRC) in central Africa. The company recently informed about its discussions and meetings with key Congolese Government agencies to progress Manono Special Economic Zone agreement. The files on the SEZ application have already been submitted to the Agency for Special Economic Zones. Now, the recommendations will be presented to the Prime Minister of the DRC for consideration and then execution. A Special Economic Zone in the Manono region will provide significant economic benefits for the Company and the Manono Territory.

Operation Update: On 9^th October 2020, the company announced that it has commenced planned drilling at its flagship project, the Manono Lithium and Tin Project. The company has started Pit floor drilling program to potentially upgrade some Inferred Resources to Indicated Resources. The company has also commenced Phase 2 hydrogeological modelling field program and expects to complete it within the next two months followed by validation and reporting.

FY20 Highlights: During the year ended 30 June 2020, the company completed all of the metallurgical work of the Manono Project and finished a ‘highly positive’ Definitive Feasibility Study which confirmed sound project metrics for the project. Over the year, the company also conducted advanced discussions with multiple, potential offtake partners for significant volumes of SC6, PLS and Tin. For the full year, the company incurred total administrative expense of $1,600,545 and posted a total comprehensive loss of $4.18 million. At the end of FY20, the company has total cash and cash equivalents of $14.2 million.

FY20 Key Highlights (Source: Company Reports)

Stock Recommendation: The stock of AVZ has provided a return of 37.28% in the past six months and 47.27% in the past three months. The stock is currently trading higher that its average 52-week’s price level band. On the technical analysis front, the stock has a support level of ~$0.059 and resistance of ~$0.086. On TTM basis, the stock has a price to book multiple of 3.0x, higher than the industry median of 2.7x, demonstrating that the stock might be overvalued. Considering the decent returns in the past three and six months period, current trading levels, and TTM valuation, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the current market price of $0.081, down by 5.814% on 26 October 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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