AusCann Group Holdings Limited

AC8 Details

Market Update for June 2021 Quarter: AusCann Group Holdings Limited (ASX: AC8) is involved in the cultivation, manufacturing, and supply of medical cannabis products.

• During the quarter, the company received positive clinical outcomes for the Phase 2A pilot study for FDA veterinary drug candidate, CPAT-01.
• In June 2021 quarter, the company also proposed a PAA appeal with the APVMA for DermaCann®, a cannabinoid-centred veterinary product in advancement for anti-inflammatory and immune assistance in dogs suffering from dermatological conditions.
• The company inked a deal in June 2021 quarter for the supply of its proprietary Neuvis® THC/CBD 1:1 oral capsule to the Tasmanian Department of Health.
• The company exited the period with a cash balance of $13.7 million. During the quarter, net cash outflows stood at $1.6 million. Research and development costs for the June 2021 quarter stood at $930k.
• The company witnessed a corporate cost reduction of 49% as compared to the previous quarter, owing to operational efficacy and synergies from the merger of AusCann and CannPal.

Cash Balance; Analysis by Kalkine Group

Key Risks: The company is exposed to key financial risks such as interest rate, currency, and liquidity. The inability of the company to compete successfully in its markets may impact its business.  

Outlook: The company inked a deal to lease its Wangara facility to Source Certain International (‘SCI’). The agreement will aid AC8 to attain its revised growth strategy to lower operating expenses and boost the value of the company’s assets. Also, its strong capital position underpins the continued progress of its growth strategy.

Stock Recommendation: The stock of the company generated a negative return of ~13.91% in the past three months and is currently trading towards its 52-week lower level of $0.093. The stock of AC8 is trading at a price-to-book value multiple of 1.4x as compared to the industry median (Healthcare) of 3.9x on TTM basis. Thus, it can be said that the stock is proffering decent opportunities. Hence, considering the decent capital position, positive clinical outcomes for the Phase 2A pilot study, valuation on TTM basis, current trading levels, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.099, as on 12 August 2021, 1:30 PM (GMT+10), Sydney, Eastern Australia.

AC8 Daily Technical Chart, Data Source: REFINITIV 

Aeon Metals Limited

AML Details

Update on 2021 Geophysics Program: An Australian-based mineral exploration company, Aeon Metals Limited (ASX: AML), owns a 100% stake in the Walford Creek Polymetallic Project, situated in north-west Queensland. It offers Copper, Cobalt, Gold, Lead Zinc, Molybdenum, and Silver.

• In May and June 2021, the company completed two extensive geophysical surveys over the 400km² Walford Creek Project area.
• The company identified new conceptual target areas, which are now tested by drilling over the coming month. The company also achieved a robust correlation of existing Py1 and Py3 mineralised horizons with 3D inversion gravity modelling.
• The company has set the latest drilling goal based on gravity anomalies discovered below the Py3 horizon in the Vardy and Marley zones. This depicts large dense bodies within the Walford dolomites.
• The company has also identified targets in the vicinity of the westerly extension of the high-grade Amy mineralisation. Further, the company identifies new shallow drill targets over 15 km to the east of the Vardy zone.

Share Repurchase Program: On 28 July 2021, the company informed the market that the previously announced Share Purchase Plan (SPP) is now open. The SPP offers eligible shareholders new fully paid ordinary shares in Aeon (SPP Shares) valued at any amount in the range of $2,500 and up to $30,000. The SPP Shares are available at $0.058 per share to raise around up to $3.0 million.

Cash Balance; Analysis by Kalkine Group

Key Risks: The company is exposed to interest rate risk, credit risk, equity price risk, and liquidity risk. In addition, the fluctuation in commodity prices could impact the company’s financial condition. 

Outlook: The interpretation results for the high-resolution aerial magnetic and ground-based gravity surveys offers new and exciting insights for further extensions to the Walford Creek Mineral Resource to be significantly larger than currently delineated. In addition, the potential to considerably grow Mineral Resources at Walford Creek, in combination with the solid projected economics bolstered by the current Mineral Resources and revised flowsheet, has resulted in renewed optimism and improving confidence in the company’s future.

Stock Recommendation: The stock of the company generated a negative return of ~16.17% in the past three months and is currently trading towards its 52-week lower level of $0.054. The stock of AML is trading at a price-to-book value multiple of 0.7x, lower than the industry median (Metals & Mining) of 2,8x on TTM basis, thus seems undervalued. Hence, considering the aforesaid facts, renewed optimism and improving poise in AML’s future, valuation on TTM basis, current trading levels, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.056, 10.40 AM (GMT+10), as on 12 August 2021, Sydney, Eastern Australia.

AML Daily Technical Chart, Data Source: REFINITIV  

Byron Energy Limited 

BYE Details

Response to ASX Query: Byron Energy Limited (ASX: BYE) is involved in the exploration of oil and gas in the shallow waters and transition zone in the Gulf of Mexico, the United States. Today (12 August 2021), the company has responded to the ASX query and have confirmed that it is not aware of any justification for the recent trading in its securities. Also, BYE has confirmed that it is following the Listing Rules and continues to trade on ASX. The responses have been approved by the Board of Directors.

Company Update: On 5^th August 2021, the company provided an update relating to the drilling of the Byron operated, South Marsh Island 69 E2 well.

• The company stated that the Enterprise Offshore Drilling 351 (“EOD 351”) jack-up is ready to be towed to the South Marsh Island 69 E platform, as it has passed all US Coast Guard and Bureau of Safety and Environmental Enforcement (“BSEE”) examinations.
• Once the well reaches the location, it is expected to take 23 days to reach total depth of 8,194 feet Measured Depth /7,668 feet True Vertical Depth.

Q4FY21 Key Highlights for the Period Ended 30 June 2021:  

• Decline in Net Revenue:During the quarter, the company posted net revenue of US$9.7 million, down from US$11.8 million in Q3FY21, due to lower realised net prices of natural gas. Nevertheless, the company reported US$59.26 per barrel of oil for the June 2021 quarter versus US$ 53.71 per barrel of oil in the March 2021 quarter. 
• Reduction in Oil Production: BYE reported 109,680 bopd in Q4FY21 versus 132,621 bopd in Q3FY21. Also, the natural gas production was lower at 1.02 million mmbtu of gas in Q4FY21 compared to 1.30 million mmbtu of gas in Q3FY21.
• Cash Details: The company reported net cash inflow from operating activities of US$3.1 million in 4QFY21, compared to US$3.2 million reported in 3QFY21. The company exited the quarter with a cash balance of US$4.1 million, up from the previous quarter figure of US$3.1 million.

Cash Balance; Analysis by Kalkine Group 

Key Risks:  The company faces the risk of changes in the interest rate or unfavourable terms for borrowing adequate capital to undertake oil and gas production. BYE is exposed to the changes in the realised prices of oil and gas, which could have an adverse impact on its earnings and revenue.

Outlook: The company is looking forward to quickly and efficiently drilling the E2 well, with a positive conclusion marking the next step in further developing the SM58 project. BYE will finalise the drilling of SM58 G3 and G4 wells based on the SM69 E2 well results. 

Stock Recommendation: The stock of BYE gave a positive return of 12.5% in the past three months. The stock has a 52-week high and low level of $0.097 - $0.315. Considering the technical levels mentioned in the below para, the recent rally in the stock price, the pandemic impact on the oil and gas sector, and the key risks associated with the business, we suggest a 'Sell' rating on the stock at the current market price of $0.135, as on 12 August 2021, 1:05 PM (GMT+10), Sydney, Eastern Australia.

Technical Overview: BYE's prices witnessed a sharp upside movement and now trading around the major resistance level of AUD 0.130, indicating the possibility of a downside correction. On a daily chart, the leading indicator RSI (14-period) is trading in an overbought zone at ~72.57 levels, further supporting a downside stance. The next major resistance level for the stock appears at AUD 0.150 while support is at AUD 0.120 level.

BYE Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the charts indicates RSI (14-period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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