WCM Global Growth Limited

WQG Details

Update on Net Tangible Asset Backing: WCM Global Growth Limited (ASX: WQG) is an investment company which invests in a portfolio of globally listed growth companies in developed and emerging markets. As on 7 October 2020, the market capitalization of the company stood at ~$239.61 million. WCM Global Growth Limited reported its estimated unaudited Net Tangible Asset backing (NTA) per share before tax of $1.521 and NTA after tax of $1.380 as on 25 September 2020.

Investment Update: During August 2020, the portfolio of WQG underperformed the benchmark MSCI All Country World Index (ex-Australia) return (2.66%) and delivered a return of 0.70%. However, the portfolio delivered returns more than the benchmark over the previous three months (4.0% as compared to 3.69% MSCI ACWI (ex-Australia)) and six months (12.96% as compared to 1.64% MSCI ACWI (ex-Australia)).

Investment Update (Source: Company Reports)

Financial Highlights: Despite a period of volatile performance in global share markets, due to the COVID-19 pandemic, the company reported a profit of $24.6 million in FY20, up from $16.98 million in FY19. This was mainly due to an increase in the value of the company’s investment portfolio. The decent financial performance enabled the Board to declare a final dividend of 2 cents per share, bringing its total dividend for FY20 to be around 4 cents per share.

Stock Recommendation: The company plans to pursue its operating strategy to enhance the shareholder value by investing in companies listed on the global stock exchanges. As per ASX, the stock of WQG gave a return of 30.48% in the past six months and a return of 6.61% in the past three months. The stock has reached its market potential and has hit its 52-weeks’ high level of $1.375, and thus retains limited potential for further upside. On a TTM basis, the stock of WQG is trading at a P/E multiple of 9.650x, higher than the industry average (financials) of 0.5x. On a technical analysis front, the stock of WQG has a support level of ~$1.295 and a resistance level of ~$1.375. Considering the current trading levels, decent returns in the past six months, higher P/E multiple, and the market spectrum, we suggest investors to book profits on the stock and recommend a ‘Sell’ rating on the stock at the current market price of $1.375, up by 0.365% on 7 October 2020.

WQG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

S2 Resources Limited

S2R Details

Strong Track Record of Discovering and Developing Mines: S2 Resources Limited (ASX: S2R) is engaged in the mineral exploration. As on 7 October 2020, the market capitalization of the company stood at ~$88.17 million. The company retains a decent track record of discovering and development of the Nova-Bollinger nickelcopper mine and discovered Thunderbox, Baloo & Wahgnion gold mines, and Waterloo and Lounge Lizard nickel mines. During FY20, the company incurred a loss of $7.45 million, however, it is well-funded with a cash balance of $13.8 million.

FY20 Financial Highlights (Source: Company Reports)

New West Australian Gold and Base Metals Project: The company has recently entered an agreement with Black Raven Mining Pty Ltd to take a majority interest in Jillewarra project. This project covers a strike length of 50km and an area of 790km² and is likely to increase the company’s footprint in Western Australia. It will complement its current nickel-copper-PGE focussed projects. S2R will spend $5 million in the next 5 years to earn an interest of 51%.

Outlook: The group will continue its exploration activities in Australia and Finland and will also seek other exploration opportunities which may add further value to its portfolio of assets. With the onset of COVID-19 pandemic, the company might face uncertainty on its financial condition, liquidity, and potential results in FY21.

Stock Recommendation: The COVID-19 pandemic has impacted exploration programs of the company due to slow down in operations in the global market. As per ASX, the stock of S2R gave a return of 166.67% in the past three months and a return of 43.59% in the last one month. The stock price of S2R is trading very close to its 52-weeks’ high level of $0.3 and retains the limited potential for further growth. On a TTM basis, the stock of S2R is trading at a price to book value multiple of 9.3x, higher than the industry median (basic materials) of 2.4x, and thus seems overvalued. On a technical analysis front, the stock of S2R has a support level of ~$0.26 and a resistance level of ~$0.3. Considering the current trading levels, attractive returns in the past three months, and higher P/BV multiple, we suggest investors to book the profits and recommend a ‘Sell’ rating on the stock at the current market price of $0.275, down by 1.786% on 7 October 2020.

S2R Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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