Mp Materials Corp

Mp Materials Corp (NYSE: MP) is a producer of rare earth materials. The Company owns and operates Mountain Pass, the only integrated rare earth mining and processing site in the North American region.

Investment Highlights – Mp Materials Corp – Expensive at USD 42.35

• The Company remained in the development stage and did not generate any revenue, and profitability remained in the negative zone.
• The Company has a negative ROE (Return on Equity) of 0.9% in the third quarter of the financial year 2020 and was lower than the industry median of 1.8%.
• As per valuation metrics, EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow and Price/Book value multiples of the Mp Materials Corp are currently higher as compared to the corresponding multiples of the Metals & Mining industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and is supporting downward movement (around 75 level), which means the stock price could decline in the short term.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• The Company is exposed to several operational risks associated with geological and weather conditions.

Financial Highlights – Q3 FY2020 (30 September 2020) (released on 4 November 2020)

(Source: Quarterly Report, Company Website) 

• In the third quarter of the financial year 2020, the Company did not generate any revenue. The Company did not report any revenue since the date of inception.
• The profitability in Q3 FY2020 and since inception remained in the negative zone. The Company reported a net loss of $3,067,033 in the third quarter.
• The cash balance as on 30 September 2020 stood at $909,007, and total assets stood at $346,312,317.

Six Months Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company is in the development stage and hence rely on grants and cash balances to carry on all the business activities. The operations are financed by the sale of equity securities by private placements. MP did not generate any revenue, and profitability remained in the negative zone since its inception. The Company’s operational performance was impacted by the covid-19 as it leads to disruption in the supply chain. Presently, the company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of USD 9.78 and USD 44.00, respectively.

Based on the factors highlighted above, we believe the stock of Mp Materials Corp is “Expensive” at the closing price of USD 42.35 (as on 18 February 2021), with support from few catalysts needs to be evaluated at a later stage, such as actions taken to preserve cash to meet working capital needs.

Sos Ltd

Sos Ltd (NYSE: SOS) is a China-based financial services Company with AI blockchain technology. The Company provides digital asset management, trade, big data, rescue and other IT services to its customers through AI block technology.

Investment Highlights – Sos Ltd – Expensive at USD 10.65

• The Company needs to manage its operating expenses more effectively unless it will further deteriorate the financial performance in the near future.
• The Company has a negative ROE (return on Equity) of 234.7% in H1 FY2020, which is significantly lower than the industry median of 6.4%. The ROE remained in the negative zone for the last 4 years.
• As per valuation metrics, EV/Sales multiple of the Sos Ltd is currently higher as compared to the corresponding multiple of the Banking Services industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and is supporting downward movement (around 74 level), which means the stock price could decline in the short term.

Key Risks

• Failure in cybersecurity and a critical data breach could hamper the operation as well as the reputation of the company.
• The Company’s operations are impacted by risks related to market trends, political change and change in the regulatory authority.

Recent News

On 18 February 2021, SOS announced that it has entered into SPA (securities purchase agreement) with accredited investors to purchase its ADS (American Depositary Shares) and warrants worth $86,000,000.

Financial Highlights – H1 FY2020 (30 June 2020) (30 October 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2020, driven by higher revenue from services provided, the revenue increased to $9,917 thousand compared to $74 thousand in H1 FY2019.
• Due to higher operating expenses for the period, the profitability for the period declined. The Company reported a net loss of $8,768 thousand in H1 FY2020.
• The cash balance increased to $610 thousand as on 30 June 2020 (31 December 2019: $41 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the first half of the financial year 2020. Despite the higher revenue, the profitability for the period declined significantly and remained in the negative zone. SOS managed to increase its liquidity position and has a well-positioned balance sheet. The Company has strong data mining capabilities, which provide accurate solutions to clients. Despite the impact of covid-19 on the world economy, the Company is focused on driving growth across the platform and executing business objectives. The stock made a 52-week low and high of USD 0.5101 and USD 15.88, respectively.

Based on the factors highlighted above, we believe the stock of Sos Ltd is “Expensive” at the closing price of USD 10.65 (as on 18 February 2021), with support from few catalysts needs to be evaluated at a later stage such as the focus on core products and services to improve its capabilities.

Energy Fuels Inc

Energy Fuels Inc (NYSE: UUUU) is a US-based producer of vanadium and uranium. The Company is also into rare earth materials business for commercial use.

Investment Highlights – Energy Fuels Inc – Expensive at USD 5.17

• The profitability remained in the negative zone for the third quarter and for the nine months period of the financial year 2020.
• In the last week, the Company delivered a negative return of ~8.50% and delivered lower returns compared to the benchmark Index.
• As per valuation metrics, EV/Sales multiple of the Energy Fuels Inc is currently higher as compared to the corresponding multiple of the Uranium industry, reflecting overstretched valuations.
• From the technical standpoint, 90-day RSI is supporting downward movement (around 60 level), which means the stock price could decline in the short term.

Key Risks

• The Covid-19 pandemic can disrupt the supply chain, and planned production might not be achieved.
• The Company needs to comply with stringent regulatory policies, and failure to do so could result in penalties and fines.

Financial Highlights – Q3 and 9M FY2020 (30 September 2020) (released on 2 November 2020)

(Source: Quarterly Report, Company Website) 

• In the nine months period of the financial year 2020, due to lower revenue from uranium concentrates, vanadium concentrates and alternate feed materials processing and other, the total revenue declined to $1,274 thousand. The revenue in Q3 FY2020 improved to $486 thousand.
• The Company’s profitability remained in the negative zone in Q3 and 9M period of FY2020. The loss in Q3 FY2020 increased, while a loss for 9M FY2020 declined.
• The cash balance as on 30 September 2020 increased to $26,584 thousand (31 December 2019: $12,810 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

The Company has shown a decline in financial performance in the third quarter of the financial year 2020, while financial performance improved slightly in nine months period of FY2020. The profitability remained in negative zone in both the Q3 and 9M period. UUUU has a strong liquidity position and a well-positioned balance sheet. The Company’s performance is exposed to risks related to credit, foreign currency exchange rates, interest rates and commodity prices. Presently, the company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of USD 0.78 and USD 6.45, respectively.

Based on the factors as highlighted above, we believe the stock of Energy Fuels Inc is “Expensive” at the closing price of USD 5.17 (as on 18 February 2021), with support from few catalysts needs to be evaluated at a later stage such as actions taken to preserve liquidity and control costs. 

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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