Stocks’ Details

Mirrabooka Investments Limited

Growth in Net Tangible Assets: Mirrabooka Investments Limited (ASX: MIR) invests in small and medium-sized companies in Australia and New Zealand. The market capitalisation of the company stood at ~$535.71 million as on 5^th January 2021. As on 30^th November 2020, the net tangible asset (NTA) backing per share of the company stood at $3.00 (Pre-Tax) and $2.57 (Post-Tax) as compared to $2.85 (Pre-Tax) and $2.46 (Post-Tax) as on 31^st October 2020, respectively. At the end of November 2020, the company’s portfolio size stood at $498.0 million.

Portfolio Performance (Source: Company Reports)

Financial Highlights: For the year ended 30^th June 2020, the company recorded revenue from operating activities of $7.8 million, down by 24.6% over FY19. Net profit attributable to members amounting to $6.4 million, reflecting a fall of 28.3% over pcp because of a fall in contribution from investment income as companies reduced or suspended dividend payments. The company declared a fully franked final dividend of 6.5 cents per share, which took the total dividend for FY20 to 10 cents per share.

Outlook: On the back of a sharp rebound in the market, the company is planning to remain patient and disciplined in the future. In addition, the company is optimistic about the quality of the portfolio.

Stock Recommendation: As on 30^th June 2020, the cash balance of the company stood at $20.2 million, reflecting 5.2% of the portfolio. The stock of MIR has moved up by 67.17% in the last nine months. As a result, the stock is trading towards its 52-week high level of $3.310. On a TTM basis, MIR has an EV/Sales multiple of 56.1x against the industry average (Investment Banking & Investment Services) of 16.5x. In addition, 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 ~$3.107 and a resistance level of ~$3.312. Considering the price movement in the few months, higher valuation, and RSI level, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $3.260 per share, down by 1.213% on 5^th January 2021.

Jervois Mining Limited

Acquisition of SMP Refinery: Jervois Mining Limited (ASX: JRV) is involved in mineral exploration, evaluation and mine construction. The market capitalisation of the company stood at ~$371.91 million as on 5^th January 2021. On 15^th December 2020, the company has announced that it has become a founding member of the Zero Emission Transportation Association (ZETA) in the United States. The company added that ZETA is encouraging 100% electric vehicles sales in the United States through all category of vehicles by 2030. During September 2020 quarter, the company announced the 100% acquisition of SMP Refinery in the Brazilian State of São Paulo from Companhia Brasileira de Alumínio for a cash consideration of R$125.0 million payable in tranches. In addition, the company finished an updated Bankable Feasibility Study at Idaho Cobalt Operations (ICO), which affirmed its potential to establish a near-term, low-cost cobalt-copper-gold mine, with significant opportunity to enhance the mineral resource and extend mine reserves once mining commences. During the quarter, the company recorded net cash inflow from operating activities of $817k and outflow from investing activities of $1.2 million. For the year ended 30^th June 2020, the company recorded a loss after income tax of $8.898 million as compared to $6.001 million in FY19.

Cash Flows (Source: Company Reports)

Outlook: With respect to the development of ICO, the company is planning to re-start construction in Q2-Q3 2021 and plans to commence production by 2022.

Stock Recommendation: The company closed September 2020 quarter with a cash balance of A$5.4 million. In the last three and six months, the stock of JRV has moved up by 62.50% and 175.75%, respectively. Due to this, the stock is inclined towards its 52-week high level of $0.470. 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 ~$0.264 and a resistance level of ~$0.516. Considering the price movement in the past few months, current trading level and RSI level, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $0.450 per share, down by 4.256% on 5^th January 2021.

Enero Group Limited

Strong Momentum in Q1 FY21: Enero Group Limited (ASX: EGG) provides integrated marketing and communication services. The market capitalisation of the company stood at ~$184.57 million as on 5^th January 2021. The company started FY21 with strong momentum supported by a rise of 11.0% (YoY) in net revenue to $37.2 million in Q1 FY21. During the same quarter, the company recorded operating EBITDA of $9.8 million, reflecting a rise of 81.4% on pcp. This growth resulted in the improvement of 10.1bps in Operating EBITDA margin to 26.3%. This growth was primarily generated by no material movement in global headcount, fall of 16% in operating costs relating to remote working arrangements and reduced travel expenses. During FY20, the company witnessed a rise of 4.9% and 17.7% in net revenue and operating EBITDA to $135.8 million and $24.4 million, respectively.

Key Financials (Source: Company Reports)

Outlook: The company is cautiously optimistic about its business growth in spite of the economic uncertainty in many of the operating markets. In addition, the company expects that the momentum created in Q1 FY21 along with the focus on building scale in the core brands can place the business for sustained growth.

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

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

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company closed FY20 in the net cash position of $22.1 million as compared to $9.5 million in FY19. In the last nine months, the stock of EGG has moved up by 135.02%. Considering this, we have valued the stock using the price to earnings multiple based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in percentage terms). In addition, 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 ~$1.526 and a resistance level of ~$2.154. Considering the price movement in the past few months, higher valuation, and RSI level, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $2.100 per share, down by 1.409% on 5^th January 2021.

Millennium Services Group Limited

Appointment of New Chairman: Millennium Services Group Limited (ASX: MIL) is involved in the provisioning of cleaning, security and integrated services to retail and commercial centres. The market capitalisation of the company stood at ~$26.17 million as on 5^th January 2021. Recently, the company has appointed Mr Stuart Grimshaw as Chairman of the group, which will be effective on the retirement of current Chairman Roger Smeed, which has been scheduled after the release of the 1H FY21 at the end of February 2021. For the year ended 30^th June 2020, the company recorded revenue amounting to $257.3 as compared to $294.7 million in FY19. Gross profit for the year amounted to $30.8 million against $30.1 in FY19. In addition, the company witnessed an improvement of $24.7 million in statutory EBITDA to $20.3 million.

Financial Summary (Source: Company Reports)

Outlook: For FY21, the company would be focused on cementing balance sheet, completing the Profit Improvement Plan, continued improvement in HSE and Public Liability.

Stock Recommendation: As on 30^th June 2020, the cash balance of the company stood at $1.8 million as compared to $2.7 million as on 30^th June 2019. The stock of MIL has moved up by 71.42% and 150% in the last three and six months, respectively. As a result, the stock is inclined towards its 52-week high level of $0.600. In addition, 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 ~$0.287 and a resistance level of ~$0.774. Considering the price movement in the few months, current trading level, and RSI level, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $0.590 per share, up by 3.508% on 5^th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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