Renergen Limited

RLT Details

Virginia Gas Project Update: Renergen Limited (ASX: RLT) is a producer and distributor of liquefied natural gas (LNG) and liquid helium. As on 1^st February 2021, the market capitalisation of the company stood at ~$239.55 million. On 27^th January 2021, RLT announced a contract with 3 companies in South Africa for the engineering studies of Phase 2 on the Virginia Gas (VG) project. Phase II of the project involves designing of the facilities that will allow RLT to produce considerably higher quantities of liquid helium and LNG. LNG produced will be supplied in South Africa as a cleaner source of energy, and liquid helium is planned to be supplied internationally.

Q3FY21 Result Highlights: During the quarter ending 30 November 2020 (Q3FY21), the company announced the development of Renergen Cyro-Vacc, a logistics solution for moving vaccines at temperatures of between -70 and -150 Celsius for periods of up to 30 days, not requiring any power supply. The company has applied for a patent for its device and is in talks with partners for large-scale manufacture of these devices for the deployment of ultra-low temperature vaccines. During the quarter, RLT was active on 2 drill rigs on the project – P2V2 and MDR1 well, and it discovered gas in the legacy hole. It has planned 3 more well programmes in the next 2 weeks. During November 2020 quarter, RLT has announced development of its first 0-carbon emission solution for the cold chain logistics industry with the use of liquid natural gas (LNG) and reduced running costs and gas emissions per truck. It also notified of a strategic partnership with Total South Africa for the distribution of LNG via N1, a key transport corridor between Johannesburg and Cape Town in 2021. On 14^th December 2020, 24.89 Chess Depository Interests (CDIs) were in issue on ASX out of 117.4 million shares in total across both exchanges RLT received R0.563 million cash from the customers and had net cash outgoings from financing activities of R6.59 million during Q3FY21. The company held cash and cash equivalents balance of R181.03 million as on 30 November 2020.

Net Cash Used in Financing Activities (Source: Company Reports)

Outlook: The company expects to produce an initial volume of approx. 350 kg of helium and 2,500GJ of LNG per day in the Phase 1 of Virginia Gas project. It estimates to finish development of Phase 2 on or around Q2FY21 followed by an investment decision by the management so on and so forth.

Stock Recommendation: The stock of RLT gave a positive return of 95.65% in the past three months and a positive return of 87.50% in the past six months. The stock is currently inclined towards its 52-weeks’ high level of $2.90. The stock of RLT has a support level of ~$2.17 and a resistance level of ~$2.399.  Considering the high trading levels, high debt to equity ratio, negative ROE, and history of incurring losses, we give an ‘Avoid’ rating on the stock at the current market price of $2.250, up by 10.294% on 1^st February 2021.

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

Peninsula Energy Limited

PEN Details

December 2020 Activities Update: Peninsular Energy Limited (ASX: PEN) is engaged in the exploration and mining of uranium. Presently, it is running in-situ recovery operations at its fully owned Lance Projects in Wyoming, USA since 2015. It also has Karoo Projects in South Africa and RakiRaki, a joint project in Fiji in its portfolio. As on 1^st February 2021, the market capitalisation of the company stood at ~$116.13 million. During the December 2020 quarter, the company continued with the low pH field demonstration on mine unit1 started since September 2020 and will provide advance updates on the test programme as results once available. It has submitted a license amendment in September 2020 to the Wyoming authorities for approval of a suite of oxidants and awaiting approval till next mind-year 2021. After the quarter, PEN announced its inclusion in the index composition for the Global X Uranium ETF (NYSE: URA) which tracks the Solactive Global Uranium & Nuclear Components Total Return Index.

Q2FY20 Financial Results: The company recorded sales of 75k pounds of uranium through long-term agreements at an average realised cash price of US$45.06 per pound during Q2FY20. The company generated a net cash margin of US$1.4 million during the purchase of uranium from the market. At the end of December 2020, PEN held a portfolio of purchase agreements with key utilities for up to 400k pounds of uranium concentrate with a forecasted net cash margin of US$6-$8 million on sales in CY21. PEN incurred US$0.024 million in evaluation and exploration payments for Q2FY20 for Karoo Project in South Africa, which is in the process of exiting. The company held a cash balance of US$8.4 million as on 31^st December 2020.

Cash Flows from Operating Activities (Source: Company Reports)

Outlook: The company estimates that the regulators will finish review on the licence amendment submitted on Lance Wyoming project and declare results from the review by mid-year 2021. PEN has provided a summary of sale contracts lined up for delivery for uranium from CY21-CY25. Its delivery commitments under the contracts continue till 2030 with a weighted average future sales price between US$51-$53 per pound guided band. The company also foresees substantial opportunity from the newly established Uranium Reserve by the government and hopes to seek new uranium offtake agreements with the US Department of Energy.

Stock Recommendation: The stock of PEN gave a positive return of 93.54% in the past three months and a positive return of 96.72% in the past six months. The stock of PEN is currently trading slightly higher than its 52-weeks’ average price band of $0.056-$0.188. On the technical analysis front, the stock of PEN has a support level of ~$0.093 and a resistance level of ~$0.16. Considering the current trading levels, price movements in the last 3 months, falling revenue during FY17 to FY20 and history of incurring losses, we give a ‘Expensive’ rating on the stock at the current market price of $0.120, down by 7.693% on 1^st February 2021.

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

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