Peninsula Energy Limited

PEN Details

Peninsula Energy Limited (ASX: PEN) wholly owns the Lance Uranium Projects in Wyoming, USA, transitioning from an alkaline in-situ recovery to a low pH in-situ recovery operation. This transition aims to achieve the operating performance and cost profile as per global uranium production projects.

Results Performance for the Year Ended 30 June 2021 (FY21)

• Of the US$13.3 million cash proceeds from the sale of 275,000 pounds of uranium, only US$9.8 million was generated as revenue for FY21. A balance of US$3.5 million was allocated to derivative fair value.
• The consolidated cash position, excluding security deposits and performance bonds, as of 30 June 2021 was US$6.7 million, and a cumulative of 309,507 pounds of uranium inventory was held in converter accounts with a book value of US$9.7 million as per the average uranium price of US$31.37 per pound.
• Cash receipts from customers in FY21 stood at US$3.4 million, while trade receivables current asset stood at US$9.9 million as of 30 June 2021

Source: Company Reports, Analysis by Kalkine Group

Quarterly Activities Report for the Period Ended 30 September 2021 (Released on 29 October 2021)

• The cash balance stood at US$7.4 million as of 30 September 2021
• Sold 200,000 pounds of U3O8 at an average price of US$50.35 per pound, earning a net cash margin of US$3.5 million in October 2021
• 310,000 pounds of uranium in converter accounts at 30 September 2021, with aggregate value at US$13.1 million
• Lance project, MU1A field demonstration has been operating successfully for over one year and operations yielding bettered uranium grades

Outlook

The company remains well funded to accelerate its goals. It utilized A$13.4 million share placement to deploy in purchase 300,000 pounds of uranium at US$31.35 per pound. Further, uranium sales from the contract book continue to earn net cash margins, which results in sufficient funds to strengthen the operations when added with cash holdings. On 30 September 2021, the company had 310,000 pounds of uranium held in converter accounts. The total market value of this uranium as of 30 September 2021 stood at US$13.1 million.

Key Risks

The company is exposed to risks associated with the existing mineral resource estimates, which could slightly deviate from actual findings. Further, the company must follow the conditions included within the prescribed low pH permit and use the common pH mining method across the entire Ross Permit Area.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The company has delivered 6-month and 1-year returns of ~+35.48% and ~+90.91%, respectively. In addition, the stock is trading below the average of the 52-week high price of $0.35 and the 52-week low price of $0.096.

The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). In addition, a slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering lower debt to equity at 0.01x in FY21 versus the industry median of 0.53x and an improved gross margin in FY21 versus FY20.

Considering the factors above, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.20 per share as of 17^th December 2021 (Time: 11:49 AM (GMT+10), Sydney, Australia). 

Eden Innovations Limited

EDE Details

Eden Innovations Limited (ASX: EDE) Eden is dedicated to clean technology solutions. It developed, manufactures, and markets EdenCrete, an innovative high-performance concrete admixture and OptiBlend.

Results Update for the Year Ended 30 June 2021 (FY21)

• The revenue stood at $3,282.82k in FY21 over $2,427.11k in FY20, primarily due to a rise in OptiBlend sales and services to $1,527.90k in FY21, followed by EdenCrete sales that stood at $1,754.92k in FY19.
• Total EdenCrete sales in Colorado stood at US$187,011 (A$257,053) in FY21, spread across seven different repeat customers for various applications.
• Total EdenCrete sales in Georgia stood at US$938,893 (A$1,209,452) in FY21, spread across eleven different customers for a range of applications.
• EdenCrete sales surged 17% in the US despite COVID-19 related circumstances.

Source: Company Reports, Analysis by Kalkine Group

Result Update for the First Quarter Ended 30 September 2021 (Q1FY22)

• The company reported an increase of 95% YoY in its total sales in Q1FY22, encouraging sales growth across all products.
• EdenCrete US Sales increased by 16% YoY to A$469,513 (US$345,103).
• Total OptiBlend sales grew significantly by 187% YoY to A$998,358 while USA OptiBlend sales stood at A$801,995 (US$589,485) and India OptiBlend sales were A$196,363 (INR 10.695 million).
• The non-renounceable pro-rata rights offer made to shareholders with respect to a prospectus dated 1 September 2021 (Offer Document) raised A$2,316,436 before costs.

Outlook

The company hopes to achieve considerable sales growth across all products as restrictions gradually ease and more normal activity returns. The group proposes to sustain developing and marketing its technologies, including EdenCrete and OptiBlend. Besides, on 29 October 2021, the company has agreed to make placements of shares for the entire shortfall of $1,507,235.99 from the recent non-renounceable Rights Issue. Further, it will undertake an additional placement of $1.1million to institutional and sophisticated investors to raise around A$2.607million (before the costs of the issue). The company will utilise the proceeds from the placement for general working capital purposes.

Key Risks

The main risks the group is exposed to through its financial instruments are liquidity and credit risk. It is also prone to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other than the companies’ functional currency.

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The company has delivered a 6-month and 1-year return of ~-13.04% and ~-16.67%, respectively. The stock is trading lower than the average of the 52-week high price of $0.045 and the 52-week low price of $0.015.

Considering the factors above, along with its healthy sales performance in Q1FY22, and decent liquidity position with cash and cash equivalents of A$2.035 million at the end of Q1FY22, a “Speculative Buy” recommendation has been assigned on the stock at the current market price of $0.019 per share as of 17^th December 2021 (Time: 10:38 AM (GMT+10), Sydney, Australia).

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

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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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