Transurban Group

TCL Details

Award of Contract: Transurban Group (ASX: TCL) is engaged in building, operation and provision of retail services for toll roads. The market capitalisation of the company as on 31 March 2021, stood at ~$35.54 billion. As per a recent update, the company has announced that WestConnex Finance Company Pty Limited, the financing arm of the WestConnex Group (WCX), will issue $650 million of fixed rate 10—year secured medium term notes. TCL owns an interest of 25.5% in WCX. The company has announced that a consortium led by Transurban and Macquarie, has been selected as the developer for the American Legion Bridge I-270 to I-70 Relief Plan in the Greater Washington Region. The project is estimated to cost around US$3-4 billion.

H1FY21 Results Update: During the period, the company reported toll statutory revenue from continuing operations of ~$1,069 million, impacted by the restrictions in movement in response to the COVID-19 pandemic which impacted traffic volumes. Statutory EBITDA stood at ~$792 million during the period. It reported a statutory net loss of ~$448 million during the period. TCL distributed an interim dividend of 15 cents per share.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company seems to be well capitalised to participate in the opportunities in its core markets. Further, the easing of restrictions and traffic recovery to pre-COVID levels augurs well for the company, as it positions itself for growth going forward.

Key Risks: The onset of the COVID-19 pandemic has impacted the company’s operations and its future business performance depends on the level of traffic activity aided by the easing of Government restrictions.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company reported improved traffic levels at the Group level with Average daily traffic (ADT) of 2.1 million in December 2020, compared to 1.8 million in July 2020. As per ASX, the stock of TCL is trading above its average 52-weeks’ levels of $10.730-$15.635. The stock of TCL gave a positive return of ~2.23% in the past one month and a positive return of ~3.19% in the past one week. On a technical analysis front, the stock of TCL has a support level of ~$12.693 and a resistance level of ~$14.042. We have valued the stock using an EV/EBITDA multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company might trade at some discount to its peer average EV/EBITDA (NTM trading multiple), considering the muted financial performance and key risks associated with the impact of COVID-19 on its operations. For the purpose, have taken peers such as Qube Holdings Limited (ASX: QUB), Dalrymple Bay Infrastructure Limited (ASX: DBI), to name a few. Considering the indicative upside in valuation, current trading levels, improvement in traffic levels and the gradual ease of restrictions, we recommend a ‘Buy’ rating on the stock at the current market price of $13.320, up by 2.619% as on March 31, 2021.

TCL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Evolution Mining Limited

EVN Details

Significant Improvement in Resources & Reserves: Evolution Mining Limited (ASX: EVN) is engaged in the exploration, mine development, operations and sale of gold & copper concentrate in Australia and Canada. The market capitalisation of the company as on 31 March 2021, stood at ~$7.14 billion.  The company has reported a growth in its mineral and ore resources by 74% YoY to 26.4 million ounces and 49% YoY to 9.9 million ounces respectively, as of 31 December 2020. The growth in mineral resources can be seen with significant growth in Red Lake gold mineral resource to 11.00 million ounces and growth in Cowal gold mineral resource to 9.6 million ounces. The company has recently announced the acquisition of Battle North Gold Corporation through which, EVN can get access to the mineral reserves of Bateman Gold Project at Red lake.

1HFY21 Financial Highlights: EVN has posted an increase in its revenue to $982.21 million in 1HFY21 as compared with $898.1 million in 1HFY20. The company has posted higher statutory profits after tax of $228.69mn in 1HFY21 as compared to $147.21 million in 1HFY20. There was also a significant improvement in the EBITDA margin to 52% during the period. It declared an interim dividend of 7 cents per share.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company has provided guidance for its costs and production in FY21. The company is expecting a total gold production in the range of 670,000 to 730,000 oz through its various projects and expecting an all-in sustaining cost (AISC) at a range of $1,240-$1,300/oz. The sustaining capital is expected in a range of $112.5-$137.5 million and major capital in a range of $260.0-$290.0 million in FY21.

Key Risks: The company’s exploration projects involve a high degree of risk and at many times are not successful. It may also take several years for a site to come into production after its discovery. 

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

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: As per ASX, the stock of EVN is trading below its average 52-weeks’ levels of $3.760-$6.585. The stock of EVN gave a positive return of ~7.32% in the past one year and a positive return of ~0.244% in the past one month. On a technical analysis front, the stock of EVN has a support level of ~$3.791 and a resistance level of ~$4.413. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe the company can trade at a slight premium to its peer average P/E (NTM Trading multiple), considering the decent financial performance and positive guidance production estimates. For the purpose, have taken peers such as Northern Star Resources Limited (ASX: NST), Newcrest Mining Limited (ASX: NCM), OZ Minerals Limited (ASX: OZL), to name a few. Considering the indicative upside in valuation, current trading levels, impressive performance in H1FY21 and optimistic outlook, we recommend a ‘Buy’ rating on the stock at the current market price of $4.080, down by 2.393% as on March 31, 2021.

EVN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

EBOS Group Limited

EBO Details

H1FY21 Performance Update: EBOS Group Limited (ASX: EBO) is engaged in the wholesale and distribution of healthcare, medical and pharmaceutical products. The market capitalisation of the company as on 31 March 2021, stood at ~$4.38 billion. During H1FY21, the company reported resilient financial performance with revenue growth of 6.3% to $4.7 billion, when compared to the previous corresponding period. The increase in revenue was driven by the improved performance in both the Healthcare and Animal Care segments. Underlying NPAT grew by 14.2% to $94.3 million during the same period. There has been an improvement in the leverage ratio of the company with a reduction in Net Debt: EBITDA to 1.00x. It has no debt maturity obligations until H2FY23. EBO has declared an interim dividend of 42.5 NZ cents for the period.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company achieved double-digit earnings growth during the first half of FY21. It continued with its growth momentum and reported the growth in January 2021 at consistent levels with its H1FY21 growth. It has not experienced any material adverse impact on its business performance due to the onset of the COVID-19 pandemic and expects to navigate the challenge aided by a decent balance sheet.

Key Risks: The company is exposed to foreign currency risk arising from the procurement of goods and supplies denominated in foreign currencies. It uses forward foreign exchange contracts in order to mitigate the risk.

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

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company delivered a ~33% increase in the operating cash flow performance to $98.7 million during H1FY21, compared to the pcp. As per ASX, the stock of EBO is trading above its average 52-weeks’ levels of $19.760-$29.260. The stock of EBO gave a positive return of ~19.05% in the past six months and a positive return of ~1.69% in the past one month. On a technical analysis front, the stock of EBO has a support level of ~$25.784 and a resistance level of ~$28.529. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company might trade at a slight premium to its peer average P/E (NTM trading multiple), considering the robust financial performance and the continued growth momentum in H2FY21. For the purpose, have taken peers such as Sigma Healthcare Limited (ASX: SIG), Australian Pharmaceutical Industries Limited (ASX: API), Ansell Limited (ASX: ANN), to name a few. Considering the indicative upside in valuation, resilient financial performance in H1FY21 and continued momentum in the growth of the company, we recommend a ‘Buy’ rating on the stock at the current market price of $26.990, up by 0.972% as on March 31, 2021.

EBO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Western Areas Limited

WSA Details

Business Update: Western Areas Limited (ASX: WSA) is engaged in mining, processing and sale of nickel sulphide concentrate. The market capitalisation of the company as on 31 March 2021, stood at ~$641.91 million. As per a recent update, the company has successfully completed a placement of ~$85 million at a price of $2.15 per share on 10 March 2021. It will use the proceeds to complete the development of the Odysseus mine and advance the organic growth projects at Forrestania and Cosmos. WSA has extended the closing date for its share purchase plan by two weeks to 20 April 2021, due to mailing delays related to the impact of the COVID-19 pandemic on postal services, and potential timing issues with Easter public holidays.

H1FY21 Results Update: During the period, the company reported an EBITDA of ~$24 million and the operating cash flow of $27.5 million. It was impacted by a lower volume of nickel production and sales owing to operational challenges and lower realisation of nickel prices than the prior corresponding period. However, the cash position of WSA was at a decent ~$98 million during the period end, with the absence of debt on the balance sheet.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company has restated its FY21 guidance to 16,000 to 17,000 of Nickel Tonnes in production. The unit cash cost of production is estimated to be $3.75/lb to $4.25/lb.

Key Risks: The company is faced with the risk of employee attrition, as attraction and retention of skilled people remains a challenge in a period of increased natural resources projects.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company has incurred an expenditure of $34.2 million into the Odysseus mine development in H1FY21. As per ASX, the stock of WSA is trading below its average 52-weeks’ levels of $1.725-$3.100. The stock of WSA gave a negative return of ~22.05% in the past three months and a negative return of ~20.23% in the past one month. On a technical analysis front, the stock of WSA has a support level of ~$1.919 and a resistance level of ~$2.131. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe the company can trade at a slight discount to its peer average EV/Sales (NTM Trading multiple), considering the reduction in sales volume and lower realisation of nickel prices. For the purpose, have taken peers such as Mineral Resources Limited (ASX: MIN), Iluka Resources Limited (ASX: ILU), Imdex Limited (ASX: IMD), to name a few. Considering the indicative upside in valuation, current trading levels, decent balance sheet position and the positive long-term outlook for the usage of nickel in varied sectors, we recommend a ‘Buy’ rating on the stock at the current market price of $2.050, up by 0.490% as on March 31, 2021.

WSA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Whispir Limited

WSP Details

Capital Raise Through SPP: Whispir Limited (ASX: WSP) is a Software-as-a-Service (SaaS) provider and engaged in the development and provision of communications management systems via a cloud-based platform. The market capitalisation of the company as on 31 March 2021, stood at ~$378.72 million. As per a recent update, the company has raised $610,162.50 via a Share Purchase Plan (SPP) to eligible shareholders on 23 March 2021. Previously, WSP had announced the successful completion of $45.3 million placement to new and existing institutional investors at an offer price of $3.75 per share on 2 March 2021. It plans to use the proceeds to drive customer growth in ANZ and Asia, expand its market in North America and strengthen the balance sheet.

H1FY21 Performance Update: During the period, the company reported a decent increase in revenue by 27.3% to $23.1 million, from $18.2 million in the previous corresponding period. The gross margin stood at ~$14 million during the same period. There was an improvement in the EBITDA performance with a loss of $1.8 million in H1FY21, compared to a loss of $4.8 million in H1FY20. It ended the period with a cash position of $10.9 million.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: There has been a global trend for digital transformation, and it provides an opportunity to the company to expand its revenue base. The segment is expected to witness a growth of CAGR 22.5% through FY20 to FY27.

Key Risks: As the company expands its business into different geographies, it faces the risk of compliance with regards to the business values and cultures of that particular region.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: On 19 February 2021 the company's wholly-owned subsidiary, Whispir Australia Pty Ltd has renewed its business partner agreement with Telstra Corporation Limited for a further period of three years. As per ASX, the stock of WSP is trading above its average 52-weeks’ levels of $1.00-$5.240. The stock of WSP gave a positive return of ~62.5% in the past nine months and a negative return of ~13.11% in the past one month. On a technical analysis front, the stock of WSP has a support level of ~$3.16 and a resistance level of ~$4.144. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company might trade at a slight premium to its peer average EV/Sales (NTM trading multiple), considering the improved financial performance and demand for digitisation. For the purpose, have taken peers such as Class Limited (ASX: CL1), rhipe Limited (ASX: RHP), Nuix Limited (ASX: NXL), to name a few. Considering the indicative upside in valuation, improved financial performance in H1FY21, renewal of business partner agreement with Telstra and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $3.380, up by 4.320% as on March 31, 2021.

WSP Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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