Stocks’ Details

Aeris Resources Limited

Quarterly Activities: Aeris Resources Limited (ASX: AIS) is a diversified mining and exploration company that is engaged in the production of copper and gold. As on 6 August 2020, the market capitalization of the company stood at ~$108.65 million. The company has recently reported the progress on its Cracow Gold Operations. The company produced 8,138 ounces of gold during the month of July. AIS has commenced near-mine exploration with an RC drilling program at the Klondyke and Roses Pride deposits. During FY20, the company produced 25,041 tonnes of copper. June quarter copper production of 6,672 tonnes increased by 10% compared to the previous quarter mainly because of higher tonnes and copper grade milled. During the quarter, the company retained ample liquidity position with cash and receivables of $69.4 million.

Quarterly Copper Production (Source: Company Reports)

Guidance: The company expects to produce 70koz to 75koz of gold in FY21 at C1 Cash Cost of $980/oz. It also expects to produce 23,500 tonnes - 24,500 tonnes of copper at a C1 Cash Cost in the range of $2.80/lb to $2.95/lb. The company is likely to schedule its shareholders’ meeting on 10 August 2020.

Key Risks: The current uncertainty due to COVID-19 has resulted in limited access to operational sites. The company is exposed to a variety of risks that could affect the Group’s financial position and performance. These include estimates and assumption which are required to calculate Ore Reserves. These estimates require a range of geological, technical, and economic factors and may involve complex and difficult geological judgements and calculations to interpret the data.

Stock Recommendation: The company is focused on operational excellence and is committed to build strong partnerships with the key stakeholders. As per ASX, the stock of AIS gave a return of 21.17% in the past six months and a return of 48.72% in the last one month. Currently, the stock is trading close to its 52-week high of $0.064. On a TTM basis, the stock of AIS is trading at a price to book value multiple of 2.2x, slightly higher than the industry median of 2.1x. Aforesaid facts, recent price movement in the stock, valuation on TTM basis suggest that most of the positives are factored in at the current juncture. Considering the current trading levels, decent returns in the past six months, softer market conditions due to COVID-19 and key risks, we suggest investors to book profits on the stock and recommend a ‘Sell’ rating on the stock at the current market price of $0.059, up 1.724% on 6 August 2020.

Indoor Skydive Australia Group Limited

Quarterly Update: Indoor Skydive Australia Group Limited (ASX: IDZ) is in the business of indoor skydiving facilities. As on 6 August 2020, the market capitalization of the company stood at ~$1.68 million. During the quarter ended 30 June 2020, the company launched a home delivery service of premium equipment and pre-paid games for customers. The company also reported positive cash flow for the quarter and generated receipts of $437k from customers. During the quarter, the company received $318k from the Government grants and incentives.

Quarterly Cash Flow Activities (Source: Company Reports)

Key Risks: The company is exposed to a variety of risks including credit risk, liquidity risk and market risk consisting of interest rate risk, foreign currency risk and commodity and equity price risk. The stock has a low trading volume and may pose difficulties for the investors to liquidate their position.

Stock Recommendation: The company expects operating restrictions to continue for the foreseeable future and is cautious and diligent in complying with emerging government and regulatory guidelines. As per ASX, the stock of IDZ gave a negative return of 50% in the last one year and a negative return of 37.5% in the past six months. On a Trailing Twelve Months (TTM) basis, the stock is trading at an EV/Sales multiple of 4.7x, higher than the industry median (Hotel Entertainment Services) of 2.4x and thus seems overvalued. Considering the current trading levels, low trading volumes, volatility in returns, and softer market conditions, we recommend a ‘Sell’ rating on the stock at the current market price of $0.005 on 6 August 2020.

Xped Limited

Xped Enters into Termination Agreement with Heuresy: Xped Limited (ASX: XPE) is in the business of developing and operating Internet of Things technology. As on 6 August 2020, the market capitalization of the company stood at ~$1.79 million. The company has entered into an agreement with Heuresy LLC and Heuresy Labs LLC to terminate the Technology Development Agreement. The company shall pay Heuresy ~$360,000 for terminating the Development Agreement. The parties will also enter into a technology licensing agreement wherein the company has the right to resell the products developed using the Technologies and access to the Auto Discovery Resource Control (ADRC) technology for future development.

Quarterly Update: A wholly-owned subsidiary of the company, JCT Healthcare, is expanding into delivering assistive technology solutions to independent living facilities. However, the COVID-19 crisis has limited some sales and services and has tempered the medium outlook for JCT Healthcare. During the quarter, XPE received $160k from its customers and used $100k of cash in operating activities.

Operating Cash Flow (Source: Company Reports)

Key Risks: The company is exposed to a variety of risks including market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk.

Stock Recommendation: Teko International Limited has asserted a potential claim against the company for misrepresenting its unrecorded liabilities, including the Heuresy liability and there could be no assurance as to the outcome or the costs required to defend any legal action. As per ASX, the stock gave a negative return of 33.33% on the YTD. On a Trailing Twelve Months (TTM) basis, the stock is trading at a price to book value multiple of 4.2x, higher than the industry median (Software & IT services) of 3.5x. Considering the current trading levels, negative returns, and impact of COVID-19 on operations, we recommend a ‘Sell’ rating on the stock at the current market price of $0.001 on 6 August 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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