QEM Limited

QEM Details

Q1FY22 Financial Summary: QEM Limited (ASX: QEM) is engaged in the exploration at the Julia Creek oil shale and vanadium project. During the quarter ended 30 September 2021, the company successfully raised around $2 million via placement to institutional, professional and sophisticated investors at $0.15 per share.

• The company would use the funds to sufficiently finance its oil and vanadium pilot plant development and operation at Julia Creek, as well as the next round of wind and solar power studies.
• QEM recorded net cash outflow from operating activities of $0.62 million and closed the quarter with cash and cash equivalents of $1.32 million.

Signing of Contract: Recently, the company has inked a contract for the provisioning of an environmental permitting pathway and assistance with related approvals with specialist environmental consultant Epic Environmental Pty Ltd.

• As per the terms of the contract, the scope of work for Epic Environmental Pty Ltd includes leading the development of an Environmental Impact Statement, undertaking extensive technical studies at Julia Creek, coordinating environmental approval applications, assisting with Government engagement through the Office of the Coordinator General as well as starting a Progressive Rehabilitation and Closure Plan.
• The company is ready to begin an operational activity at the bench-scale pilot plant during 2HFY22 in order to validate its proprietary extraction process.
• The company has appointed John Henderson as a Non-executive Director to the Board of Directors.

FY21 Financial Summary:

• Growth in Revenue: For the year ended 30 June 2021, the company recorded revenue amounting to ~$0.33 million as compared to ~$0.29 million in FY20. Loss for the year increased to ~$1.3 million against ~$1.08 million in FY20.
• Successful Capital Raising: After the end of FY21, the company successfully raised $2 million, which would help the company in the development of the oil and vanadium pilot plant and progress the next stage of the green hydrogen studies.

Revenue (Source: Analysis by Kalkine Group)

Key Risks:

• Price Risk: The company’s operational and financial performance could be impacted by any adverse movement in the global oil prices.
• Environmental Risk: QEM is also exposed to a risk arising from the change in environment, which could lead to the temporary suspension on exploration.

Outlook:

• During FY22, the company is planning to conduct further studies at the Julia Creek project to solidify and optimise the positive early results.
• The capital raising after FY21 has placed the company in a decent position to build on the positive momentum generated over the past year and deliver long-term shareholder value.
• QEM has scheduled to conduct the 2021 Annual General Meeting on 26 November 2021.

Stock Recommendation: As on 30 June 2021, the cash & cash equivalents of the company stood at ~$1.32 million as compared to ~$2.63 million as on 30 June 2020. The stock of QEM gave a positive return of ~58.62% and 39.39% in the past one and three months, respectively. The stock of QEM is trading at a P/BV multiple of 18.5x as compared to the industry average (Energy) of 3.9x on a TTM basis. Thus, it seems that the stock is overvalued at the current trading levels. Considering the valuation on a TTM basis, solid rally in stock price in the past few months, capital rising plans, and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $0.230, up by ~24.32% as on 08 November 2021.  

QEM Weekly Technical Chart, Data Source: REFINITIV 

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 for 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.

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 and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.