Stocks’ Details 

Bannerman Resources Limited

A Look at BMN’s Half-Yearly Results: Bannerman Resources Limited (ASX: BMN) is engaged in mining and exploring uranium at its Etango-8 Project (95% owned) Namibia, South Africa. As of 15 March 2021, the market capitalisation of the company stood at ~$154.58 million. The Group earned a revenue of $12k in 1H21 vs $60k in 1H20. It incurred a net loss of $1.08 million for 1H21, mainly due to administrative and corporate expenses and share-based compensation expenses (non-cash). During 1H21, BMN’s key activities comprised of the feasibility assessment at the project. In August 2020, it completed a scoping study for the Etango project. The study exhibits robust economic and technical viability of the mining pit and processing of the deposits at a throughput of 8Mtpa.

On 11 February 2021, BMN announced that it has received corporate commitments to raise $12 million via a share placement. On 18 February 2021, BMN issued 114.28 million fully paid ordinary shares at $0.105 per share to the institutional investors for the Pre-Feasibility Studies (PFS) and Definitive Feasibility Studies (DFS) at the project, corporate and working capital. BMN held a cash and cash equivalent balance of $3.02 million as of 31 December 2020. 

1H21 P&L Highlights (Source: Company Reports)

Key Risks: The company is affected by the volatility of uranium prices and its demand by Utilities. Due to COVID-19 pandemic, the Utilities companies had deferred their procurement strategies and reduced inventories further due to regulatory and operating challenges faced in nuclear power production. BMN faces the risk of supply chain disruption in the uranium due to COVID-19 government-mandated restrictions.

Outlook: The company will undertake and commence PFS at the Etango-8 uranium project. BMN’s current licences - Exclusive Prospecting Licence 3345 (EPL 3345) is valid until 25 April 2021, and Mineral Deposit Retention Licence 3345 (MDRL 3345) is valid until 6 August 2022. They will be due for renewal by the Namibian Ministry of Mines and Energy soon.

Stock Recommendation: The stock of BMN gave a positive return of 217.07% in the past six months and a positive return of 306.25% in the past nine months. The stock is currently trading towards its 52-weeks’ high level of $0.165. The stock of BMN has a support level of ~$0.125 and a resistance level of ~$0.136. On a TTM basis, the stock is trading at a price to book value multiple of ~3.0x higher than the industry (Energy) median of ~1.9x, thus seems overvalued. Considering the current trading levels, significant returns in the past six months and nine months, and valuation on a TTM basis, we believe that most of the key catalysts have been factored in at the current juncture. Hence, we suggest investors to wait for better entry levels, and give an ‘Expensive’ rating on the stock at the current market price of $0.130 on 15^th March 2021. 

MMA Offshore Limited

1H21 Results and Business Performance: MMA Offshore Limited (ASX: MRM) is involved in marine service operations, providing logistics and supply of base services to the offshore oil and gas industry. Its asset portfolio consists of slipway, vessels, and supply base. As of 15 March 2021, the market capitalisation of the company stood at ~$120.37 million. The company reported a revenue decrease of 8.4% YoY to $119.9 million on pcp. The company’s operations remain impacted due to COVID-19, and it saw reduced demand for its assets and services. Simultaneously, MRM has focussed on increasing the level of its offshore wind developments in Taiwan as a part of its growth and diversification strategy. During 1H21, MRM secured a few new vessel contracts, including a newly announced $20 million deal with TechnipFMC for a subsea installation project in Australia. MRM reported an increase of 102.6% in 1H21 YoY to $38.3 million on a pcp basis. Its NPAT stood at $15.5 million, up by 259.8% YoY on pcp. MMA has not announced an interim dividend for 1H21, given the current market conditions.

Post 1H21 results release, MMA undertook share consolidation for 1:10 to reduce the number of issued shares to derive an adequate capital structure. The company’s net debt to EBITDA has improved and declined to 2.2x as of 31 December 2020. In November 2020, MMA raised an $80 million equity and partly used the proceeds to reduce debt. As part of the debt restructuring, MMA reduced its total debt to ~$91.9 million. MRM held cash at a bank balance of $92.9 million, up by $6.3 million on 1H20.

1H21 P&L Financial Highlights (Source: Company Reports)

Key Risks: The company faces the risk of a slowdown in the oil and gas business activities, reduced fleet utilisation, impact on its subsea service business due to COVID-19. MRM faces the risk of seeking large tenders, key clients, volatility in demand from the user industries and project delays due to economic downturn.   

Outlook: For FY21, MRM is progressing well to meet its earnings outlook of $30-$35 million Underlying EBITDA. The company plans to diversify its revenue from non-oil and gas related activities. It plans to build its renewables division and secure business from government, defence, and infrastructure maintenance contracts. MRM intends to commence operations on the new subsea project around August 2021 and complete by the end of CY21 or early 2022.

Stock Recommendation: The stock of MRM gave a positive return of 8.06% in the past three months and a negative return of 31.10% in the past nine months. The stock is currently trading towards its 52-weeks’ low level of $0.2367. The stock of MRM has a support level of ~$0.263 and a resistance level of ~$0.435. On a TTM basis, the stock is trading at a price to book value multiple of ~0.4x lower than the industry (Oil & Gas Related Equipment) median of ~1.2x, thus seems undervalued. Considering the current trading levels, rise in earnings (EBITDA) and bottom line (NPAT), the pipeline of wind contracts in Taiwan and project prospects in Australia, valuation on a TTM basis, and associated key risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.335 on 15 March 2021.

Buru Energy Limited

Appointment of New Board Executives: Buru Energy Limited (ASX: BRU) is an oil and gas mining and exploration company in Perth. It has assets and tenements of petroleum in the Canning Basin in the Kimberley region of Western Australia. It owns 50% of the Ungani Oilfield project and operates a portfolio of exploration licences and permits for new and conventional resources ranging from 50- 100% working interests. As of 15 March 2021, the market capitalisation of the company stood at ~$56.16 million. The company notified investors regarding the appointment of three new Independent Non-Executive Directors on its Board.

IV Quarter (December 2020) Results: During Q4FY20, BRU signed a two farm-out deal with the Origin Energy Group (OEG) for undertaking an exploration program at two oil wells and seismic programs in the Canning Basin. OEG and BRU will hold a 50% interest in exploration permits (EP129, EP391, EP428, EP 431, and EP436- BRU Permits). OEG will also receive a 40% earn-in in the EP458 and EP457 permits jointly held by BRU and Rey Resources Limited. BRU will be the operator of all exploration permits.

BRU totalled a production of ~78k bbls from the Ungani Oilfield for Q4FY20 vs 93k bbls in Q3FY20. This decrease in production is due to wet weather/rainfall during December and the closure of the Ungani access road. The heavy rain has impacted the production in January as well. The company sold ~68k barrels of oil (gross) (50% share of BRU) as of 30 November 2020. BRU received cash sales of ~$3.5 million during Q4FY20 from oil shipments in September and November to BP Singapore Pte Limited.

During Q4FY20, BRU started negotiations with Sipa Resources Limited (SRL) for a Joint operating contract following the Heads of Agreement signed in Q3FY20. SRL will be the JV operator, and BRU will supply logistical support, and inputs for the exploration program planned to drill mineral holes in FY21 during the field season. BRU earned cash receipts of $3.47 million during 1H21. BRU paid off a $2 million instalment on its loan from Alcoa during the quarter and stands debt free now. It has ~$21.4 million of cash and cash equivalents as of 31 December 2020.

Q4FY20 Financial Highlights (Source: Company Reports)

Key Risks: The company meets the risk of declining production from its current oil wells sources, optimising oil recovery from the wells. It also faces the threat of COVID-19 interruptions in the workflow, loss of shareholder value, and chance of retaining employees and key Executives with reduced remuneration during the period of crisis.

Outlook: The company is planning to drill Kurrajong 1 and Rafael 1 wells on EP 391 and EP 428 and potential drilling at the Ungani oilfield. It is also preparing for a seismic program in FY21, for which contract negotiations with a seismic contractor (preferred), required environmental, and approvals are also underway. BRU is conducting a joint venture review for additional development drilling and operations at the Ungani oilfield to increase production and optimise oil recovery.

Stock Recommendation: The stock of BRU gave a positive return of 39.17% in the past three months and a positive return of 58.82% in the past six months. The stock is currently trading above 52-weeks’ average price level of $0.062-$0.175. The stock of BRU has a support level of ~$0.123 and a resistance level of ~$0.152. On a TTM basis, the stock is trading at a price to book value multiple of ~1.3x, lower than the industry (Oil & Gas) median of ~1.9x, thus seems undervalued. Considering the higher receipts for Q4FY20, new earn-in agreement with OEG, drilling plans for FY21 and JV review to increase production, decent cash balance, debt free balance sheet, and valuation on a TTM basis, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.135, up by 3.846% on 15 March 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.