Stocks’ Details 

Alexium International Group Limited

Alexicool® Product Portfolio Expanded: Alexium International Group Limited (ASX: AJX) is engaged in the development of specialty chemicals and eco-friendly flame retardants for usage in packaging, electronics, and building materials. It markets products under Alexiflam® and Alexicool®. As on 19^th January 2021, the market capitalisation of the company stood at ~$39.65 million. The company recently announced that one of its Director, Rosheen Garnon, has acquired 317,086 ordinary shares of the company at $0.1374 per share. He will now hold interest equivalent to 705k shares in AJX which will be issued in equal proportions on 31 March 2021 and 30 September 2021 subject to his services as a Director in the firm at that time. On 2^nd December 2020, AJX announced the launch of a new line of its exclusive bio-based and biodegradable active materials for applications in thermal management. These products are nature-friendly and are applicable for wider market segments of Alexicool® portfolio.

A Look at the Q1FY21 Results: During the September 2020 quarter, AJX earned cash receipts of US$1.7 million, up by US$0.5 million from the last quarter. It was due to continued consumer demand for the Aelxicool® products. During Q1FY21, AJX launched New Phonon™ technology for the total mattress cooling systems (TMCS), top-of-bed applications, upholstery, medical products, and other markets. It commercialised Alexiflam with full marketing efforts for the cotton FR socks manufacturers. The company ended the quarter with a cash balance of US$4.18 million. 

FY20 Result Highlights: The company reported an increase of 20.2% YoY in the sales revenue to US$6.07 million in FY20. This was due to new customers of Alexicool® products gained spanning foam, Top of Bed and textile product categories and higher revenue earned from existing customers. Its cost of sales reduced by 9% YoY, leading to higher gross margin to 38.1% in FY20 from 31.7% in FY19.

December 2020, Highlights (Source: Company Reports) 

Outlook: The management expects demand for the bedding market to remain at increased level during Q2FY21 despite market seasonality. AJX expects to see the full impact of operational efficiencies, especially margin improvements on its products cumulating till 2H21.

Stock Recommendation: The stock of AJX gave a negative return of 1.63% in the past three months and a positive return of 13.20% in the past six months. The stock is currently trading below its 52-weeks’ average price level band of $0.028 and $0.100. On the technical analysis front, the stock of AJX has a support level of ~$0.036 and a resistance level of ~$0.092. Considering the current trading levels, decent FY20 performance, roll out of new product line, and decent outlook for FY21, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.060, down by 3.226% on 19^th January 2021.

Prodigy Gold NL

Bedrock Gold intersected at Goldbug Prospect: Prodigy Gold NL (ASX: PRX) is engaged in the mining and exploration of gold at its Tanami and North Arunta projects. As on 19^th January 2021, the market capitalisation of the company stood at ~$25.54 million. On 18^th January 2021, PRX announced that it has completed 65 drill holes (1,944m) across Goldbug gold Prospect, Grimlock nickel-cobalt Prospect, Grimlock nickel-cobalt Prospect, Grapple Prospect. It also finished first drilling at the Swoop nickel-cobalt target. It discovered a bedrock gold at Goldbug Prospect and cobalt at the Swoop Prospect. It will undertake diamond drilling at Raw, Phreaker, and Customisable targets. It has also lined up further RC drilling at Goldbug, Raw, and Arcee for 1H21.

Q1FY21 Results: During the quarter, the company completed drilling at targets on its North Arunta and Tanami Projects. It is preparing for drilling at Eleanor, Harrison, PHD and Lennon targets and preparing to start work at Reynolds Range project. It has developed a steady pipeline of exploration work programs for the coming quarters on the projects. Prodigy Gold NL has discovered a strategic 15.7Mt @ 2.0g/t for 1.01Moz gold resource base within Hyperion, Old Pirate and Buccaneer projects. For Lake Mackay (LM) project (a joint venture between IGO, 70% and PRX, 30%), the company finished a drilling program exploring multiple nickel-cobalt, copper-gold, and gold targets for September 2020. It drilled 65 drill holes across 6 targets – including Grimlock and Goldbug gold targets and completed first drilling at the Swoop target for LM project. Cash outflow for operating activities stood at $0.64 million. The company had zero debt and held a cash balance of $9.9 million as on 30 September 2020.

Cash Flows from Operations, Q1FY21 (Source: Company Reports)

Outlook: Looking ahead, the company is focused on undertaking exploration activities on the individual targets on North Arunta, Tanami Projects, and Lake Mackay projects. It has plans to drill long (multi-kms) soil anomalies in FY21, and it will focus on drilling the Scimitar (Reynolds Range Project) and PHD & Tregony targets (Tanami Project) over the coming months.

Stock Recommendation: The stock of PRX gave a negative return of 6.38% in the past three months and a negative return of 40.54% in the past six months. The stock is currently trading below its 52-weeks price level band. The stock of PRX has a support level of ~$0.04 and a resistance level of ~$0.053. Considering the negative ROE, track record of incurring net loss during FY16-FY20, and negative net margins, we give an ‘Avoid’ rating on the stock at the current market price of $0.044 on 19^th January 2021.  

Krakatoa Resources Limited

Start of IP Surveys and Fast-Tracking of Exploration on Rand Project in December: Krakatoa Resources Limited (ASX: KTA) is engaged in the exploration and extraction of gold deposits in Lanchlan Fold Belt and is operating Belgravia, Turon and Rand projects. As on 19^th January 2021, the market capitalisation of the company stood at ~$20.92 million. The company recently announced that it has started IP surveys for 2 different 600m magnetic bullseye priority holes discovered on Rand Project. These surveys will help in determining the design of the drill expedition. The IP surveys have been started post completion of a detailed aeromagnetic survey undertaken which exhibited several priority explorations targets.

Q1FY21 Results: During the September 2020 quarter, the company reported deep ground penetrating radar (DGPR) results from the drill at Bell Valley and Sugarloaf prospects under the Belgravia Project. It reflected many unexpected zones covering Bella, Lara 1 and 2 anomalies and a new zone in the southwest. KTA received the exploration licence for the Belgravia Project granting a six-year extension. On Turon Project, KTA drilled 6 diamond holes along the Quartz Ridge Prospect Line and for Rand project, the company has received the direct application and will commence the exploration work soon. The company raised $2.1 million in October 2020 from investors for the exploration programs and appointed Mark Major, a geologist, and an experienced professional as the new CEO during the quarter. KTA incurred $588k evaluation and exploration expenditure during Q1FY21. The company reported cash inflow of $2.31k cash from financing activities and held cash and cash equivalents amounting $2.22 million at the end of 30^th September 2020.

Cash Flows from Operations, Q1FY21 (Source: Company Reports)

Outlook: The company has been granted tenure on previously filed license applications and expecting to receive 7 more license applications till early FY21 for Mt Clere Project in Western Australia. On Rand Project, the company will commence exploration work on a 40km structural corridor, the Bulgandra Goldfield consisting several shallow mines and test the historical rock chip samples which have exhibited significant results. On Turon Project, the company expects to receive and analyse the assay results of the 6 drilled diamond holes around mid-November.

Stock Recommendation: The stock of KTA gave a negative return of 20.22% in the past three months and a negative return of 13.41% in the past six months. On the technical analysis front, the stock of KTA has a support level of ~$0.063 and a resistance level of ~$0.078. The stock of KTA is valued using price to book value multiple of ~43.7x as compared to industry (Metals & Mining) median of ~32.2x, thus seems overvalued. Considering negative stock returns in the past 3 month & 6 months, history of incurring losses during FY16-FY20, negative ROE, and valuation on TTM basis, we give an ‘Avoid’ rating on the stock at the current market price of $0.071, down by 5.334% on 19^th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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