Stocks’ Details

XTEK Limited

First International Delivery Completed: XTEK Limited (ASX: XTE) is involved in the provisioning of products and services within the homeland security industry, with a market capitalisation of ~$41.44 Mn as on 23^rd November 2020. Recently, the company has appointed Brigadier Mark Smethurst DSC, AM (Ret’d) on the position of strategic advisor to the XTEK Board of Directors. During September 2020 quarter, the company has finished the delivery of the first lot of XTclave^TM manufactured plates to CPE Production OY in Finland and also wrapped up full delivery of plates to Tote Systems Australia. In addition, the company secured a new testing contract for validating the performance of hard armour plates from the US Department of Defense. During FY20, the company reported record revenue amounting to $42.7 million as compared to $37.9 million in FY19 and a net profit for the period amounted to $0.3 million against $0.2 million in FY19. These results were supported by a strong performance in 2H FY20.

Key Financials (Source: Company Reports)

Outlook: Going forward, the company continues to engage in a number of commercial discussions for its XTclave™ manufactured products both locally and abroad. The company seems well placed to capture additional support revenue, underpinned by growing orders from the ADF for SUAS supply, spare parts and maintenance. The company is likely to conduct its Annual General Meeting on 27^th November 2020.

Stock Recommendation: XTE ended September 2020 quarter with a strong financial position, which was supported by capital raising $9.2 million via an oversubscribed placement and $2.9 million via a Share Purchase Plan (SPP), which was increased from the initial target of $2 million. The 52-week low-high range for the stock stands at $0.385 - $0.910, respectively. The stock of XTE is trading at a P/E multiple of 57.8x as compared to the industry median (Aerospace & Defense) of 14.3x on TTM basis. On a technical front, the stock of XTE has a support level of ~$0.552 and a resistance level of ~$0.610. Thus, we are of the view that most of the positive factors have been discounted at current trading levels. Hence, we give an “Expensive” rating on the stock at the current market price of $0.570 per share, down by 2.565% on 23^rd November 2020. We further suggest investors to wait for better entry levels.

Strike Resources Limited

Feasibility Study Results at Paulsens East Iron Ore Project:  Strike Resources Limited (ASX: SRK) is a resource company, engaged in the development of the Paulsens East Iron Ore Project in Western Australia. The market capitalisation of the company stood at ~$24.85 Mn as on 23^rd November 2020. Recently, the company notified the market that it is quickly progressing the marketing activities for its high-grade Lump and Fines products from its Paulsens East Iron Ore Project. In the past 12 months, the company has been actively engaged with several potential customers and off-take partners for securing the best possible terms for the sale of its Paulsens East products.

During the quarter ended September 2020, the company finished Feasibility Study at its Paulsens East Iron Ore Project. The result from the study affirmed strong project economics with net cashflow of $167 million and an NPV of $140 Million in the initial four-year mine life. In addition, the company has scheduled 1.5 Mtpa production for 4 years (6.0 Mt total), with an estimated 75% of production as direct shipping ore (DSO) Lump at 62% Fe which attracts premium pricing. During the quarter, the company recorded net cash outflow from operating activities of $232K. For the year ended 30^th June 2020, the company recorded total revenue and other income of $74,016 as compared to $306,461 in FY19. Loss for the period amounted to $1,409,853 against $1,797,749 in FY19.

Cash Flow (Source: Company Reports)

Outlook: With respect to Paulsens East Iron Ore Project, the company is planning to finish metallurgical testing and beneficiation testwork on three-tonne test pit bulk sample collected in August 2020. In addition, the company plans to advance offtake agreements in December quarter.

Stock Details: The company closed September 2020 quarter with cash & cash equivalents of $2.14 Mn. On 23^rd November 2020, the securities of the company were placed into a trading halt, as the company is likely to release an announcement in relation to capital raising. The securities of the company will be in trading halt until the earlier of the commencement of normal trading on 27 November 2020 or when the announcement is released to the market. The stock of SRK last traded at $0.120.

Harris Technology Group Limited

 Record Revenue in Q1 FY21: Harris Technology Group Limited (ASX: HT8) is engaged in technology distribution and online retailing. The market capitalisation of the company stood at ~$34.42 Mn as on 23rd November 2020. The company stated that it can pivot to new growth areas of demand faster than its peers on the back of well-established business contacts and years of experience.  During Q1 FY21, the company reported a record revenue of $9.8 million, reflecting a rise of 44% over June 2020 quarter. Net profit for the quarter amounted to $835,425 as compared to $703,171 in June 2020 quarter. In the month of August 2020, the company undertook a private placement and SPP of $4.9 million to fast track its future growth.

Key Financials (Source: Company Reports)

Outlook: The long-term strategy of the company revolves around becoming a leading global e-commerce business by international expansion. In addition, the company remains vigilant and would continue to capitalise on future growth areas.

Stock Recommendation: As on 10^th November 2020, the cash balance of the company stood at $1.298 million, and debt balance was $3.819 million. In the last three months, the stock has provided a positive return of 3.57%. HT8 has an EV/Sales multiple of 2.6x against the industry median (Technology) of 5.9x on TTM basis. Thus, it seems that the stock is undervalued at current trading levels. On a technical front, the stock of HT8 has a support level of ~$0.13 and a resistance level of ~$0.16. Hence, considering the returns in the past months, growth in revenue and net profit and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.145 per share, up by 7.407% on 23^rd November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.