West African Resources Limited

 

WAF Details
 
Gold Production Continues without Disruptions:West African Resources Limited (ASX: WAF) is primarily engaged in the development of the Sanbrado Gold Project and mineral exploration in Burkina Faso. In a recent announcement to the exchange, the company updated that its Annual General Meeting will be held on 29^th May 2020, via an audio weblink facility.

Quarterly Update:During the quarter ended 31^st March 2020, the company achieved a number of significant milestones including completing commissioning of the Sanbrado processing plant, pouring first gold, mining first underground development ore and passing the 3 million hours worked mark LTI free. The company has received significant support from the site management team in ramping up the operation while dealing with the impact of the COVID-19 pandemic on the business. In the area of development, the period marked the completion of all construction works, 10 weeks ahead of schedule and US$20 million under budget. A 17MW power station was completed and was fully operational during the period. In the area of operations, 4,778 ounces of gold was poured during the month of March. Open pit and underground mining were on track, with the first underground ore mined during the period. At the end of the period, the company had cash amounting to $81.5 million and gold worth $12.5 million. Project expenditure and administration costs during the period amounted to $41.1 million and $0.5 million, respectively.

COVID-19 Update: The company recently updated that its mining activities and gold production are currently unaffected by the COVID-19 pandemic, with no cases reported across the organisation. The company is prioritising on the health and safety of its employees, contractors and shareholders and has introduced strict measures at the Sanbrado Gold Project to reduce the movement of people and increased sanitation to prevent the spread of virus. Gold production has been continuously supported by uninterrupted shipments of key consumables and fuel, as freight remains exempt from government lockdown measures. While the company has been dealing well with the challenges so far, it does not guarantee any performance estimates over the longer term.

During the year ended 31^st December 2019, the company reported a net loss of $4.33 million, as compared to a net loss of $3.55 million in the prior comparative six-month period. The increase in loss was due to higher corporate costs, higher exploration costs, forex losses, higher interest income and unrealised forex gains.


FY19 Income Statement (Source: Company Reports)

What to Expect:For the quarter ending 30^th June 2020, the company expects to execute the mining plan and maintain steady mill performance, carry on with underground ore development and advancing decline, and commence the sale of gold.

Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

P/CF Multiple Based Relative Valuation Approach (Source: Thomson Reuters)

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

Stock Recommendation: The stock of the company gave positive returns of 41.76% in the last six months. In the last one year, the stock has gone up by 115%. Currently, the stock is trading very close to its 52-week high level of $0.680. The company has achieved several operational milestones in the March quarter and has seen uninterrupted gold production during the challenging times. We have valued the stock using Price to Cash Flow based illustrative relative valuation method and arrived at a correction of lower double-digit (in percentage terms). Considering the decent performance in FY19 and Q1FY20, along with the price movement, current trading levels and valuation, we suggest investors to book profit at the current juncture. Hence, we give a “Sell” recommendation on the stock at the current market price of $0.640, down 0.775% on 28^th April 2020. 

 
WAF Daily Technical Chart (Source: Thomson Reuters)
 

Temple & Webster Group Limited

TPW Details
 
Significant Rise in Demand: Temple & Webster Group Limited (ASX: TPW) is the largest e-commerce company in the furniture and homewares market in Australia.

COVID-19 Update:In a recent announcement, the company updated that it is committed to the containment of coronavirus, with 95% of its team working from home since the beginning of March. As the crisis began, the company helped its customers in setting up their homes as multi-purpose spaces, including spaces for work and exercise. The company has recently witnessed a shift in demand into its core product categories across furniture and homewares. Demand increased significantly in April, with a record number of new and repeat customers. Second half revenue for the period covering 1^st January to 24^th April, went up by 74% on the prior corresponding period.

First Half Performance: During the half-year ended 31^st December 2019, the company reported revenue amounting to $74.1 million, up 50% on the pcp. Active customers for the period grew by 45% on pcp.


Growth in Active Customers (Source: Company Reports)

Outlook: While the demand has increased in Q4, the company is keeping an eye on the uncertainties in the current macroeconomic environment and has prioritised shorter-term operational initiatives to support growth during this period rather than investing into longer-term initiatives.

Stock Recommendation: The stock of the company gave positive returns of 64.42% in the last six months. In the last one year, the stock has gone up by 109.82%. Currently, the stock is trading very close to its 52-week high level of $4.340. On TTM basis, the stock has an EV/Sales multiple of 2.7x, as compared to the industry median (Speciality Retailers) of 0.9x. The multiple is also higher than the industry average (Speciality Retailers) of 1.1x. Considering the trading update, outlook, price movements, current trading level and valuation, we suggest investors to book profit and recommend a “Sell” rating on the stock at the current market price of $3.70, up 8.187% on 28^th April 2020, on account of the latest trading update.

 
TPW Daily Technical Chart (Source: Thomson Reuters)

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