Stocks’ Details 

Alexium International Group Limited

Expansion of Product Portfolio: Alexium International Group Limited (ASX: AJX) offers performance chemicals for usage in flame retardant and thermal management applications with its patent-protected technologies. It operates brands Alexicool® and Alexiflam® and primarily serves military uniforms, workwear, and bedding products markets. As on 15^th January 2021, the market capitalisation of the company stood at ~$37.73 million. On 23^rd December 2020, the company notified investors of the change of interest in Director Stephen Allen Cheney’s shareholding. The Director acquired 206,106 ordinary fully paid shares for $0.1374 per share and disposed 750k unquoted options at $0.75 upon expiry on 20 September 2020. Mr. Stephen now holds ~480k ordinary fully paid shares in AJX. In a recent announcement, AJX updated regarding its move to commercialise a new line of its indigenous bio-based and biodegradable active materials for usage in thermal management. These products offer performance improvements and widen the range of the company’s serviceable market segments for its Alexicool® portfolio.

A Look at the Q1FY21 Results: During the quarter, the company received cash receipts of US$1.7 million, up by US$0.5 million from Q420. The company witnessed increased consumer demand in the bedding market and won major accounts for both mattress and top of-bed markets for the quarter. Due to optimized usage of raw materials and processing criteria in manufacturing, the company has improved margins on its products. It also launched a new cooling technology- New Phonon™ for its consumer products. The company had cash outgoings from operating activities of US$2 million on account of purchase of raw materials, corporate and administrative expenses and production and staff costs. AJX re-structured its debt in FY20 to remove high-cost debt and make available funds for developing and commercialising the product initiatives. It has consistently reduced its operating expenses from US$3.16 million in 1H19 to US$1.95 million in 2H20. 

Financial Highlights (Source: Company Reports) 

Outlook: The management foresees increased demand for the bedding market flowing into Q2FY21 despite market seasonality. The company expects to witness the impact of operational efficiencies, especially margin improvements on its products in 2H21.

Stock Recommendation: The stock of AJX gave a positive return of 1.69% in the past three months and a positive return of 13.20% in the past six months. The stock is currently trading below its average 52-weeks price level band of $0.028-$0.10. The stock of AJX has a support level of ~$0.027 and a resistance level of ~$0.098. Considering the current trading levels, rise in revenue for FY20, decent Q1FY21 performance, roll out of new product line, and decent outlook for FY21, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.060, up by 1.694% on 15^th January 2021.

OAR Resources Limited

Exploration Update: OAR Resources Limited (ASX: OAR), previously known as Oakdale Resources Limited, is engaged in the exploration of minerals with projects the US (gold projects), Australia (a Copper & Nickel project, and a Kaolin/Halloysite project), and Peru (developing a gold processing plant). As on 15^th January 2021, the market capitalisation of the company stood at ~$35.83 million. OAR recently announced that it has submitted the samples for detailed test work from the maiden drilling campaign undertaken at Gibraltar Halloysite-Kaolin Project, South Australia. It is expecting the test results to arrive in January 2021. On Lambarson Canyon project in Nevada, OAR has received gold assay results from diamond drilling. It is waiting for the base metal, and spectral analysis results in January 2021.

September 2020 Results & Activities: During the quarter, OAR finalised the full acquisition of the Crown Project (PGE-Nickel-Copper) and reprocessed the regional geophysical magnetic data for the project. It has received the license EL6506 for Gibraltar to commence exploration and planned to commence the first air core drilling at the start of November 2020. The company acquired 3 gold projects- include Lambarson Canyon, Douglas Canyon and Tonopah North from Alpine Resources (USA) LLC in Nevada via an exercise of options under an Options agreement. Upon acquisition, it plans to start the drill test and site works at Lambarson Canyon in early September 2020. The company raised $2.20 million via a share placement to investors during Q1FY21 to complete drilling work at Lambarson Canyon, Douglas Canyon, Nevada, and explorations for the Crown Project. Cash outflow from operating activities stood at $596k. OAR ended the quarter cash in hand balance of $2.86 million.

Cash Flow from Operations, Q1FY21 (Source: Company Reports)

Outlook: The company aims to undertake further drilling on Lambarson Canyon project once it receives the processing results on the drill core samples from LCD02 and recommence field work in Spring. For Douglas Canyon in Nevada, the company expects to receive an exploration permit on the property to drill 2 diamond core holes (total 560m high-quality gold/silver quartz veins) and might have to undertake geophysical surveys, and detailed mapping activities.

Stock Recommendation: The stock of OAR gave a negative return of 4.16% in the past three months and a positive return of 557.14% in the past six months. The stock is currently inclined towards its 52-weeks’ high price of $0.033. The stock of OAR has a support level of ~$0.17 and a resistance level of ~$0.033. Considering the current trading levels, negative ROE, higher cash cycle, and associated key risk, we give an ‘Avoid’ rating on the stock at the current market price of $0.023, up by 4.545% on 15^th January 2021.

PharmAust Limited

Research with LUMC for Testing of Monepantel (MPL) for COVID-19: PharmAust Limited (ASX: PAA) is a clinical-stage company, engaged in the development of novel cancer therapeutics for animals and human beings. As on 15^th January 2021, the market capitalization of the company stood at ~$30.72 million. On 8^th January 2021, PAA updated about its further research going on with Leiden University Medical Centre (LUMC) to test and increase the solubility of MPL in highly specialised corona virus compatible environment. The research is being done despite the severe lockdown conditions in Netherlands. PAA has also confirmed its plans to manufacture MPL for R&D in phase 1/2 clinical trials.   

Partnership with ONJCRI to Continue Pre-Clinical Work: In a recent news update, PAA announced that it is continuing its work with Olivia Newton-John Cancer Research Institute (ONJCRI) to investigate MPL mechanism of action upon cancer cells. The pre-clinical work will involve focusing on anti-cancer activity and is expected to offer hints to monitor neurone disease and mechanisms of action against COVID-19. The work undertaken will be sponsored by PAA.

September 2020 Results: During the quarter, PAA received a grant of $881k from FightMND for conducting Phase I trial in humans with motor neurone disease. It also raised $1.5 million via exercise of options during September 2020. Epichem Pty Limited, a fully owned subsidiary of PAA reported revenue of $811k and opex of $790k for the given quarter. PAA incurred R&D expenses of $0.125 million due to the development of MPL and remuneration paid to Dr. Richard Mollard leading the R&D. The cash outgoings for Q1FY21 remained in line with the company’s expectations. The company reported cash outflow from operations of $0.29 million and a cash balance of $3.9 million.

Cash Flow from Operations, Q1FY21 (Source: Company Reports)

Outlook: As per a recent announcement of research with LUMC, PAA has confirmed that its clinical research plans are progressing well. PAA targets to manufacture of MPL tablet (smaller dose tablets) in Q3/Q4 2021.

Stock Recommendation: The stock of PAA gave a negative return of 31.72% in the past three months and a negative return of 51.70% in the past six months. The stock is trading at its 52-weeks’ low level of $0.057. The stock of PAA has a support level of ~$0.090 and a resistance level of ~$0.111. On a TTM basis, the stock of PAA is trading at an EV/Sales multiple of ~7.1x as compared to industry (Pharmaceuticals) median of ~18x. Considering the current trading levels, decent Q1FY21 results (Epichem Pty Limited booking profit for the quarter), on-track clinical trials and valuation on TTM basis, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.099, down by 2.061% on 15^th January 2021.

P2P Transport Limited

Entered Voluntary Administration: P2P Transport Limited (ASX: P2P) provides network services, fleet management, advertising services to the passenger transport market. The company recently announced the resignation of Ms Rebecca Weir of Boardroom Pty Limited from her services as Company Secretary. In an important announcement on 3^rd December, P2P informed investors of its entering voluntary administration due to the pandemic situation. Tracy Knight and Damien Lau of Bentleys Corporate Recovery have been assigned as the voluntary administrators for P2P and its subsidiaries, Taxi-Link Pty Limited (Taxi-Link) and TGT No 1 Pty Limited. However, its network division of Black and White cabs has been recapitalised and continues to function normally.

Look at Q420 Financial Results & Measures: The company’s Q420 performance has been adversely impacted due to COVID-19. During the quarter, it received $6.6 million in receipts from customers. It reported a net cash inflow from operations of $462k and ended the quarter with a cash balance of $1.2 million. Due to the significant fall in revenue since the onset of the pandemic, P2P started engaging with the lending bank and convertible noteholders and exercising tighter cost control measures. It has reduced Mr. Webb’s, Managing Director’s compensation to $240k for the next 2 years with a termination clause at either party’s will. Given the adverse impact of pandemic on its business, the company decided to become dormant until pandemic restrictions are softened.

Cash Flow Q4FY20, Highlights (Source: Company Reports)

Dispute with Telstra: In August 2020, Telstra Corporation Limited initiated proceedings in the Supreme Court of New South Wales against P2P and Tax-Link Pty Limited for their non-payment of $3.64 million dues to Telstra. Telstra has taken this step due to the ongoing dispute with P2P for the suspension of supply of Digital Taxi Top Advertising Units (DTTs) by P2P due to technical issues faced by the drivers and passengers.

Outlook: The company and its 2 subsidiaries have entered voluntary administration and appointed liquidators for the same. P2P has recapitalised its network division of Black and White cabs, and it will continue to function as regular.

Stock Update: On 30 March 2020, the company’s stock was placed in a trading halt at the request of P2P. Further, on 1 April 2020, the company announced voluntary suspension of its securities in response to the change in trading conditions caused by COVID-19 pandemic. As on 03 December 2020, the company informed that the scripts of the company have entered voluntary administration brought about by the Covid-19 crisis. The stock was last traded at $0.044.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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