Altech Chemicals Limited

ATC Details

Latest Updates: Altech Chemicals Limited (ASX: ATC) is engaged in the construction of a ~4,500 tonnes per annum high purity alumina (HPA) processing plant in Malaysia to produce ~99.99% (4N) HPA (AI2O2).

• Recently, ATC reported the expiry of all unexercised options with an exercise price of $0.08 and an expiry date of 31 May 2022.
• On 27 May 2022, ATC issued ~667,420 shares at $0.08 per share upon the exercise of ~667,420 listed options under the symbol ASX: ATCOB to raise additional working capital.

Q3FY22 (Ended 31 March 2022) Highlights:

• ATC estimates to generate ~US$63 million per annum (p.a.) net cash from the operation and ~US$185 million p.a. revenue in a payback timeframe of ~3.1 years based on the financial results of the PFS (Preliminary Feasibility Study) undertaken to develop a silicon/graphite alumina coating plant in Germany.
• ATC has partnered with SGL Carbon GmbH (SGL) and Ferroglobe Innovation S.L. (Ferroglobe), respectively, for graphite and silicon feedstock supply, respectively. ATC has signed Memorandum of Understanding (MoUs) with both the companies for the supply of lithiumion battery grade anode materials.

Comparative Key Metrics; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of funding, commercialisation, exploration & new target discovery, and delays in seeking necessary approvals at various project development stages.

Outlook:

• ATC has started the construction of a pilot plant in Germany to cater to the growing demand of electric vehicle automakers in Europe.
• ATC continues to prioritise financing of the HPA project at Johor with the prospect of developing the Silumina Anodes^TM project as a lucrative downstream opportunity and use the HPA coating technology in silicon/graphite battery materials.

Stock Recommendation: The stock of ATC gave a negative return of ~23.40% in the past three months and a negative return of ~48.57% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.041 - $0.150. On a TTM basis, the stock of ATC is trading at a price to book value multiple of 1.2x, lower than the industry (Basic Materials) median of 2.2x, thus seems undervalued. Considering the current trading levels, low debt levels, offtake agreements with automakers and a battery maker, encouraging results of the PFS, valuation on a TTM basis, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.072, down by ~7.692% as of 1 June 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

ATC Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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