Champion Iron Limited

CIA Details

Q2FY21 Result Highlights: Champion Iron Limited (ASX: CIA) is an exploration company, involved in the mining and development of iron ore. As on 25^th January 2021, the market capitalisation of the company stood at ~$124.40 million. During September 2020 quarter, the company reported a record increase in revenue to $311 million, up 94% YoY and EBITDA of $197.8 million, up by 216%. The company incurred the lowest All-in Sustaining Cost (AISC)- $57.4/dmt and earned the highest gross average realised selling price of $162.8 for the September 2020 quarter since the close of Q2FY20.

Summary of AISC, COM, & Net ASP, Q3FY20-Q2FY21 (Source: Company Reports)

1H21 Results: The company sold iron ore amounting to 3,822k dmt for 1H21 as compared to 3,767k on pcp basis. This was due to higher volume of iron ore sold, higher net average realised price and lower AISC during 1H20. The total iron ore produced was 4,067k, 3% lower than 1H20. CIA earned a higher revenue of $555k for 1H21, up by 27% on 1H20. 

Outlook: The company has received final approval on Phase II expansion of Bloom Lake Mine project and will progress on its development. It plans to fund the project from cash on hand and increased senior secured credit provision available. It plans to double the project capacity to 15 metric tonnes per year and has increased the budget spend on the project to $120 million.

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

P/CF 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 had $425.8 million cash & cash equivalents reserve and recorded highest net cash flows from operations of $128.3 million as on 30 September 2020. The stock of CIA gave a positive return of 85.66% in the past three months and a positive return of 107.27% in the past six months. The stock is currently trading at its 52-weeks’ high level of $5.84. On the technical analysis front, the stock of CIA has a support level of ~$5.45 and a resistance level of ~$5.816. We have valued the stock using the price to cash flow multiple based illustrative relative valuation method and have arrived at a target price with a correction of low double-digit (in % terms).  For the purpose, we have taken peers like Fortescue Metals Group Ltd (ASX: FMG), BHP Group Ltd (ASX: BHP), BlueScope Steel Ltd (ASX: BSL), etc.  Considering the high trading levels, positive returns for 3 months and 6 months, decent results of 1H20, decent outlook for FY21 and valuation, we suggest investors to book profit on the stock and give a ‘Sell’ rating on the stock at the current market price of $5.690, up by 2.707% on 25^th January 2021.

CIA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Dubber Corporation Limited

DUB Details

Acquisition of Speik: Dubber Corporation Limited (ASX: DUB) is a provider of voice intelligence cloud and unified call recording service to telecommunication companies in Europe, APAC, and North America. As on 25^th January 2021, the market capitalisation of the company stood at ~$401.23 million. On 13^th January 2021, the company announced to issue 195k ordinary shares for exercise of options and 100k ordinary shares under an employee incentive scheme. In a key update to investors, the company announced acquisition of Speik, a call recording and PCI Compliance solutions provider for a performance driven consideration of $38 million payable in 2 parts. Speik will operate as a separate division in Dubber Corporation Limited. This acquisition will increase DUB’s UK presence, deepens its solution portfolio in secure voice data management.   

Q1FY21 Result Highlights: During September 2020 quarter, the company earned a revenue of $3.25 million, up by 51% on pcp basis. This was due to uptick in the contracted service providers by 26% (pcp basis), new 38k plus subscriptions and higher billing by 67% (pcp basis) from customers during the quarter. The company received $2.75 million cash from the customers, up by 64% on June 2020 quarter. The company raised $35 million via a placement of 31.8 million new fully paid ordinary shares to investors during the quarter. The company reported cash at bank of $55 million after the raise and placement of capital and anticipating $6 million via a share purchase plan opened from 22^nd October 2020-6^th November 2020.

Revenue Growth in Q1FY21 (Source: Company Reports)

Outlook: The company has a pipeline of booked sales orders for future business and subscribers’ growth. It plans to grow the number of user subscriptions QoQ, grow revenue from its platform users both new and existing, and increase its footprint amongst telecom service providers.

Stock Recommendation: The stock of DUB gave a positive return of 34.43% in the past three months and a positive return of 15.71% in the past six months. The stock is currently trading at its 52-weeks’ high level of $1.90. On the technical analysis front, the stock of DUB has a support level of ~$1.542 and a resistance level of ~$1.719. On TTM basis, the stock of DUB is trading at an EV/Sales multiple of ~21.9x as compared to industry (Software & IT Services) median of ~8.5x and thus seems overvalued. Considering the stock’s decent returns in the past few months, current trading level, and valuation on TTM basis, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $1.620, up by 3.184% on 25^th January 2021.

DUB Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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