Stocks’ Details

Cadence Capital Limited

Outperformed All Ordinary Accum. Index: Cadence Capital Limited (ASX: CDM) makes investments in securities listed both in Australia and internationally. The market capitalisation of the company stood at $262.48 million as on 16^th December 2020. As on 30^th November 2020, the company’s Pre-Tax Net Tangible Assets (NTA) stood at $0.975, and Post Tax NTA was $1.109. During FY20, the company experienced a fall of 4.9% in the fund’s gross performance. However, the company’s portfolio has outperformed All Ords. Accum. Index by 2.3%. Loss for the year amounted to $10.9 million. The company also declared a fully franked final dividend of 2.0 cents per share, which brought the full-year 2020 dividend to 4.0 cents per share.

Financial Summary (Source: Company Reports)

Outlook: Looking forward, the company is expecting to be benefited from the recovery in global financial markets from the lows in March 2020. In addition, the company expects significant market share opportunities in each sector on the back of recent recovery.

Stock Recommendation: The company has bought back 7,818,236 ordinary shares at the consideration of $5,570,030.17, with respect to on-market share buy-back of up to 10% of CDM shares. In the past six and nine months, the stock of CDM has surged 40.80% and 114.63%, respectively. As a result, the stock is inclined towards its 52-week high level of $0.885. In addition, we have also considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction going forward. On a technical analysis front, the stock has a support level of ~$0.767 and a resistance level of ~$0.920. Considering the steep returns in the past few months, current trading levels, and RSI level, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $0.880 per share, up by 0.571% on 16^th December 2020.

SRG Global Limited

Strong Demand for Services: SRG Global Limited (ASX: SRG) provides engineering-led specialist asset services, mining services and construction services across the entire asset lifecycle. The market capitalisation of the company stood at $182.77 million as on 16^th December 2020. Recently, the company stated that the significant level of new contract wins and the record work in hand of $1 billion as on 30^th November 2020, showcases the robust demand for its engineering-led, end-to-end solutions in the asset services, mining services and construction sectors. For FY20, the company recorded revenue and EBITDA amounting to ~ $545 million and $20.5 million, respectively. In addition, the company’s revenue in 2H FY20 decreased to $8.4 million.

Key Financials (Source: Company Reports)

Guidance: The company recently updated its guidance and expects EBITDA in the range of $19m - $20m for 1H FY21 and EBITDA of between $42m - $45m for FY21 as compared to previous guidance of $38m - $42m.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: Looking forward, the company expects to secure a near-term contract with repeat and targeted clients. The stock of SRG has moved up by 95.34% in the last six months. As a result, the stock is trading towards its 52-week high level of $0.435. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price with correction of low double-digit (in percentage terms). For the purpose, we have taken peers such as GR Engineering Services Ltd (ASX: GNG), Boral Ltd (ASX: BLD) and Fletcher Building Ltd (ASX: FBU). In addition, we have also considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction going forward. On a technical analysis front, the stock has a support level of ~$0.274 and a resistance level of ~$0.561. Considering the returns in the past few months, current trading levels, RSI levels, and valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $0.420 per share, up by 2.439% on 16 December 2020.

Peninsula Energy Limited

Signing of Binding Agreement with UG USA: Peninsula Energy Limited (ASX: PEN) is engaged in the development and mining of uranium. The market capitalisation of the company stood at $98.26 Mn as on 16^th December 2020. For the year ended 30^th June 2020, the company recorded revenue amounting to ~US$6.0 million as compared to ~US$6.5 million in FY19. Loss for the year amounted to ~US$7.0 million against ~US$ 43 million in FY19. In the month of July 2020, the company reached a binding purchase agreement with UG USA, which is a subsidiary company of ORANO. As per the terms of the agreement, the company will purchase 400,000 lbs U₃O₈ for delivery in CY21. This agreement is likely to support its forecast net cash margin of US$6 million to US$8 million in uranium sales for the upcoming year.

Financial Summary (Source: Company)

Outlook: PEN holds a portfolio of uranium concentrate sale agreements for up to 5.5 million pounds U3O8 as on 30^th September 2020. The company added that the delivery obligations under the contracts are expected to continue through to 2030 with a weighted average forthcoming sales price at the high end of the guided ambit of US$51-$53 per pound.

Stock Recommendation: As on 30^th June 2020, the cash and cash equivalents of the company stood at ~US$11.93 million as compared to ~US$5.2 million as on 30^th June 2019. In the last one and three months, the stock has moved up by 58.45% and 67.91%, respectively. The 52-week low-high range for the stock stands at $0.056 - $0.188, respectively. We have considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction going forward. On a technical analysis front, the stock has a support level of ~$0.0947 and a resistance level of ~$0.13. Considering the decent returns in the past few months, current trading levels, RSI levels, and key risks associated with the business, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $0.115 per share, up by 4.545% on 16^th December 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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