Newcrest Mining Limited

NCM Details

December 2021 Quarterly Results: Newcrest Mining Limited (ASX: NCM) is engaged in the extraction, mining, and development of gold and gold/ copper concentrate projects.

• Operational Improvements: The gold production increased from ~396,214 ounces (oz) to ~436,085 oz in Q2FY22, up by ~10% QoQ due to higher mill throughput rates at Lihir, Telfer, and Cadia. The mill throughput rates improved due to the upgradation of the SAG mill motor at Cadia and the reduction in the shutdown activities at Lihir and Telfer undertaken during the quarter.
• Lower AISC: The AISC (All-In Sustaining Cost) stands lower at US$1,127/oz in Q2FY22 versus US$1,269/oz in Q1FY22 (September 2021 quarter).
• Improved Commodity Prices: The average realized price of gold improved to ~US$1,743/oz in Q2FY22 versus ~US$1,722/oz in Q1FY22.
• Acquisition of Tier 1 Brucejack Assets: In November 2021, NCM signed an agreement to acquire 100% share capital of Pretium Resources Inc. (Pretivm) under a Canadian plan of arrangement. NCM expects the gold production to increase by ~15% and above 2Moz per year with the addition of this Tier 1, low-cost mine to its portfolio.
• Continued Exploration at Red Chris & Havieron Projects: NCM continued drilling at Red Chris and Havieron to grow the presence and continuity of the higher-grade mineralisation. It notified significant exploration results since the Q1FY22 (the September 2021 quarter) report.
  

Quarterly Sales & Production Summary; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of volatility in commodity prices, production, continued COVID-19 uncertainty. The business is susceptible to labour shortages, accrual of acquisition synergies, and regulatory concerns.

Outlook:

• NCM believes to be well placed for 2HFY22 and expects further increase in the March 2022 quarter production. It is on track to meet the production guidance for gold in the range of 1,800 – 2,000koz and for copper between 125 – 130kt for FY22.
• The Pretivm acquisition is expected to be completed in the March 2022 quarter and is expected to result in immediate growth of production, earnings, and cash flows.

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

Source: 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 stock of NCM gave a positive return of ~14.18% in the past three months and a positive return of ~19.36% in the past six months. The stock is currently trading below the 52-weeks’ average price level band of $20.910 - $29.270. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median EV/Sales multiple, considering the decline in gross margin, the risk of acquisition synergies, the COVID-19 uncertainty, and forex changes. For this purpose of valuation, a few peers like Evolution Mining Ltd (ASX: EVN), OZ Minerals Ltd (ASX: OZL), Alkane Resources Ltd (ASX: ALK) have been considered. Considering the low trading levels, an increase in the production of gold & copper, an expected EBITDA, and cash flow accretive acquisition of Pretivm, operational improvements, an expected increase in the Q3FY22 production, a decent outlook, and indicative upside in valuation, we give a ‘Buy’ rating on the stock at the current market price of $21.360, as of 31 January 2022, 2:08 PM (GMT+10), Sydney, Eastern Australia.

NCM Daily Technical Chart, Data Source: REFINITIV  

CIMIC Group Limited

CIM Details

Award of New Contracts: CIMIC Group Limited (ASX: CIM) engages in construction, mining, services, and public private partnerships (PPPs) activities across resources, infrastructure, and property markets.

• $350 Mn Revenue Contract: Recently, CPB Contractors, one of the Group companies was awarded a contract to deliver tunnelling works for the construction of the WHT (Western Harbour Tunnel) for Sydney’s transport network. It will commence in 2022 and is anticipated to be completed in 2025.
• $100 Mn Project Award: BHP selected CPB Contractors to deliver greenfield and brownfield works for a port debottlenecking project at Nelson Point, Port Hedland in Western Australia in January 2022. It is expected to garner ~$100 million revenue to the company and begin in 2022.

Results & Key Initiatives of 9Months to 30 September 2021: CIM reported a positive outlook for its core markets led by public infrastructure spending:

• CIM finished the integration of Innovative Asset Solutions Pty Limited into UGL (the services business of CIM) during 9MFY21.
• The company was awarded new work of ~$16 billion during the 9MFY21, amounting to the work in hand (WIH) to ~$35.1 billion, up by ~17% from December 2020.
• During 9MFY21, CIM reduced the use of working capital instruments to a stable level and optimised its capital structure with an expanded debt maturity profile and diversified sources of funds. CIM had $4.0 billion liquidity and net debt of ~$754 million as of 30 September 2021. The net debt position is expected to improve in Q4FY21.

Finance & Interest Costs Summary, Highlights; (Analysis by Kalkine Group)

Key Risks: The company risks changes in macro-economic policy, forex rates, changes in the demand of global commodities from the resources sector, and COVID-19 uncertainty.

Outlook:

• The company declared to hold the Annual General Meeting (AGM) on 6 April 2022.
• CIM offers NPAT guidance between ~$400 - $430 million for FY21 depending upon the market conditions and excluding the potential impact of one-time events/ items. It remains confident about the outlook in the core markets on the back of multiple stimulus packages declared by the Government and additional avenues expected via a robust PPP pipeline.

Valuation Methodology: Price/ Earnings Multiple Based Relative Valuation (Illustrative)

Source: 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 stock of CIM gave a negative return of ~18.90% in the past three months and a negative return of ~21.61% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $15.280 - $26.480. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium than its peers’ average multiple, considering the positive outlook for core markets, work pipeline, and expected debt improvement in Q4FY21. For this purpose of valuation, a few peers like Monadelphous Group Ltd (ASX: MND), Downer EDI Ltd (ASX: DOW), Service Stream Ltd (ASX: SSM) have been considered. Considering the low trading levels, decent financial performance during 9MFY21, work pipeline, multiple new contracts awarded, an indicative upside in valuation, we give a ‘Buy’ rating on the stock at the current market price of $16.155, as of 31 January 2022, 1:09 PM (GMT+10), Sydney, Eastern Australia.

CIM Daily Technical Chart, Data Source: REFINITIV  

Codan Limited

CDA Details

Business Update for 1HFY22 (Ended 31 December 2021): Codan Limited (ASX: CDA) is a developer of robust technology solutions to address problems of safety, security, communications, and productivity. It operates the segments of communications and metal detection in the USA, Ireland, the UAE, and Brazil.  

• In a recent update, CDA reported an unaudited sales result of $257 million for 1HFY22, up by ~32% YoY.
• The company expects to deliver a record profit of around ~$50 million for the period ended 31 December 2021.
• The recently acquired businesses of Domo Tactical Communications (DTC) Limited and Zetron, both have been reported to surpass the profit expectations for 1HFY22.
• CDA has maintained its supply to customers despite the scarcity of electronic components globally and supply chain challenges. Its believes that the decision to increase the inventory holdings puts it in a robust position as it enters 2HFY22

On-Track Integration & Q1FY22 Highlights from the AGM 2021 Presentation:

• CDA has progressed substantially in its integration with the DTC business. The Covert Surveillance business of DTC is witnessing a demand resurgence and has recently secured multiple large projects/ orders worth ~$33 million in Q1FY22 (ended 30 September 2022) consistent with the acquisition assumptions.
• For the Zetron business, CDA plans to prioritise its restructuring in the first year of acquisition. It is on-track to garner the targeted savings of ~$8 million EBITDA.
• Besides the on-track business integration with the new business, the management reported that the current businesses are also tracking in sync with the profitability witnessed in 1HFY21.

Key Metrics, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces synergy risk from acquisitions, cyber security related risk, IP development issues, technological, and regulatory changes.

Outlook:

• CDA will provide detailed information on the financial results of 1HFY22 and the outlook for the 2HFY22 on 17 February 2022.
• CDA is on-track to deliver the targeted EBITDA of $14 million for its Cover Surveillance business (part of the acquired DTC business) in FY22.
• The company anticipates realising considerable sales synergies in FY23 and further from business integration. It expects the Communications segment to grow in FY22 underpinned by the growth in the newly acquired business of DTC and Zetron.
• CDA is in the process of searching for a Director in the USA as it plans to reshape the businesses of DTC and Zetron.
• The demand for metal detection products is expected to remain strong and uncertainty around Tactical Communications and supply chain will persist owing to COVID-19 still existing.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Source: 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 stock of CDA gave a negative return of ~13.51% in the past three months and a negative return of ~47.58% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $8.110 - $19.430. The stock has been valued using the P/E based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average EV/Sales multiple, considering the slight uptick in the debt-to-equity ratio, COVID-19 uncertainty on its Tactical Communications business, and supply chain. For this purpose of valuation, a few peers like Senetas Corp Ltd (ASX: SEN), Elsight Ltd (ASX: ELS), Ava Risk Group Ltd (ASX: AVA), and others have been considered. Considering the low trading levels, growth in sales, and profit for 1HY22, on-track business integrations, anticipated synergies in FY22 & beyond, and indicative upside in valuation, we give a ‘Buy’ rating on the stock at the closing market price of $9.020, down by ~3.219% as on 31 January 2022.

CDA Daily Technical Chart, Data Source: REFINITIV  

Bendigo and Adelaide Bank Limited

BEN Details

Upcoming Event Update: Bendigo and Adelaide Bank Limited (ASX: BEN) operates financial services sector and working through two segments: Consumer, Business and Agribusiness. It provides services consumer, residential, wealth management and superannuation, deposit-taking, payments services, treasury, and foreign exchange services. As per the 27^thJanuary release, the company is all set to release its 1HFY22 financials on 14^th February 2022.

FY21 Group’s Top & Bottom line & Other Updates:

• On 25^th January 2022, Ms Victoria Weekes was appointed as a non-executive director, effective from 15^th February 2022.
• Customers Growth: The customers grew by ~9.6% to ~2 million in numbers.
• Net Interest Income: Due to the growth in lending portfolios the company recorded an increase of ~6.3% Y-o-Y in its net interest income to ~$1,422.5 million in FY21 versus ~$1,33.8 million in FY20.
• Profitability/Loss: The company was pleased to increase its net profitability attributable to the owners of the parent by ~171.8% Y-o-Y to ~$524 million in FY21 versus ~$192.8 million in FY20. One of the reasons for the growth is because of ~2.5% reduction in operating costs (excluding transformation costs).
• Net Interest Margin: A Reduction in net interest in margin was seen from ~2.33% in FY20 to ~2.26% in FY21, which marginally offset the increase in NIM.
• Balance Sheet: The group closed its balance sheet with an increase in net loans and advances ~$86,577.2 million at the end of 30^th June 2021 versus ~$64,980.4 million at the end of 30^th June 2020. Its deposits also increased from ~$64,182.6 million at the end of 30^th June 2020 to ~$74,355.6 million at the end of 30^th June 2021.

Balance Sheet Items Highlight (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19: The company is vulnerable to the risks associated with the impacts of COVID-19 and the new variant Omicron and affects the employees, operational functions, and thereby profitability.
• Interest Rate Fluctuations: With the changing preferences of customers housing lending market and competitive low interest rate environment, the bank is susceptible to the Interest Rate risks.

Outlook: The group expects subdued positive growth in Gross Domestic Product (GDP) happened in in September 2021 to improve from 2022. It continues to witness decent increase in demands for lending in near future.

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

Source: 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 stock of the company has been corrected by ~16.55% in the past six months. Currently, the stock is trading below the average of its 52-week low and high levels of $8.43 and $11.68, respectively. The stock has been valued using the P/B based relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). After considering the unsettling cyclical effect of Omicron COVID-19, interest rate fluctuations, and decline in net interest margin than the industry median, the company can trade at a slight discount to its peers. For the purpose of its valuation, peers like Bank of Queensland Ltd (ASX: BOQ), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ) have been considered. Considering indicative upside in the valuation, increasing capital ratio and decreasing non-performing loans, current trading levels, increasing customer base, and key risks associated with the business, we give a “Buy” rating on the stock at the closing market price of $8.58, down by ~1.606% as on 31 January 2022.

BEN Daily Technical Chart, Data Source: REFINITIV

Medical Developments International Limited

MVP Details

Change in Director’s Interest: Working in a healthcare industry, Medical Developments International Limited (ASX: MVP) manufactures and distributes pharmaceutical drugs, and medical and veterinary equipment. It operates through three segments: Pharmaceuticals, Medical Devices and Veterinary Products. In November 2021, Mr Gordon Naylor changed his interest by acquiring 62,000 fully paid ordinary shares.

Top Line and Bottom Line FY21:

• Gross Revenue: The company’s gross revenue marginally increased by ~9% Y-o-Y and reported as ~$25.7 million in FY21 versus ~$23.6 million in FY20. Due to the reduction in people movement (COVID-19) and sporting events, reduction in ambulance callouts affected the overall sales of its Penthrox in its first half, but it faced a rebound in second half as the restrictions eased out.
• Profitability/Losses: The company converted its net profits for ~$0.4 million in FY20 to ~$12.6 million loss in FY21. A possible reason can be a significant increase in Penthrox EU transition costs of ~$9.5 million and ~$9 million impairment cost related with medical devices goodwill and the CSIRO Technology Project.
• Cash Position: The company closed its accounts with a cash balance of ~$36.27 million at the end of 30^th June 2021 versus ~$15.54 million at the end of 30^th June 2020.

Cash Balance Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19: The company is vulnerable to the risks associated with the impacts of COVID-19 and the new variant Omicron and affects the employees, operational functions, and thereby profitability.
• Forex Fluctuations: As the company has its operations in various other regions than Australia, it is susceptible to the risks associated with the currency fluctuations.

Outlook: The company remains positive in investing in its regulatory program in USA and China for FY22 and beyond. After seeing a modest sales decline in France, MVP has deployed a key account manager and eight more following in FY22, same strategy will be used in Belgium. Whereas in the USA augment the company perceives to submit revised clinical trial protocol in 1HFY22 to FDA. As aligned with the expectations of easing the restrictions, the company anticipates overall sales growth in FY22, driven by rapid development of European market along with the strong focus on the profile in Australia market.  Its focus for FY22 will be to innovate new/improved models of:

• Asthma/COPD Space Chambers
• Peak Flow Meters
• Portable Nebulisers
• Silicone Face Masks

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

Source: 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 stock of the company has given a positive return of ~22.54% in the past six months. Currently, the stock is trading below the average of its 52-week low and high levels of $3.21 and $6.68, respectively. The stock has been valued using the EV/Sales based relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). After considering the foreign currency fluctuations, expected cyclical effect of Omicron COVID-19, and conversion of net profits to FY21 net losses, the company can trade at a slight discount to its peers. For the purpose of its valuation, peers like Starpharma Holdings Ltd (ASX: SPL), Clarity Pharmaceuticals Ltd (ASX: CU6), Mesoblast Ltd (ASX: MSB), and others have been considered. Considering the focus on innovation in new products and expansion in world, indicative upside in the valuation, reducing debt-to-equity ratio, current trading levels, rise in gross revenues, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the current market price of $4.50, 12:30 AM (GMT+10), Sydney, Eastern Australia, as on 31 January 2022.

MVP Daily Technical Chart, Data Source: REFINITIV

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

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided. 

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 the 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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