Northern Star Resources Limited

NST Details

March 2021 Quarter Highlights: Northern Star Resources Limited (ASX: NST) is a leading gold production company in Australia with Tier-1 world-class projects located in highly prospective and low sovereign risk regions of Australia and North America. During the March 2021 quarter, NST sold 368,273oz of gold at an AISC of A$1,598/oz. One of the important highlights of the quarter was the successful implementation of the scheme of arrangement by which NST acquired all of the shares in Saracen Mineral Holdings Limited (ASX: SAR). Underlying free cash flow stood at A$97 million in the March quarter at an average realised price of A$2,222 per ounce. As at 31 March 2021, NST had cash and bullion of A$696 million.

H1FY21 Result Highlights: For the half-year ended 31 December 2021 (H1FY21), the company reported a record underlying net profit after tax (NPAT) of $194.4 million, up 63% on the previous corresponding period (pcp). Further, the company reported record underlying free cashflow of $226 million, up 94% on pcp. For the half-year period, the company paid an interim dividend of 9.5 cents per share, fully franked, up 27% on pcp.

H1FY21 Results (Source: Company Reports)

Key Risks: The company is exposed to the risks associated with gold exploration, mining and production businesses. The company is also exposed to the risk related to gold price fluctuations, actual demand, currency fluctuations, drilling, and production results.

Outlook: The merger with Saracen Mineral Holdings Limited is expected to lift the production profile to the highest-margin ounces and deliver an estimated A$1.5-2.0 billion of NPV (pre-tax, net of stamp duty) over the next 10 years. The company is on track to achieve its FY21 production guidance of 1.5-1.7Moz at an AISC of A$1,370-1,470/oz (Australian Operations) and US$1,200-1,400/oz (Pogo Operations).

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: Over the last three months, the stock of NST has corrected by 18.21% and is trading lower than the average 52-weeks’ price level band of $8.990 and $17.03, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$9.593 and resistance of ~$12.61. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). We have taken premium to its peer average P/E (NTM Trading multiple), considering the decent H1FY21 performance, modest outlook, and improved gold price environment. We have taken peers like OceanaGold Corp (ASX: OGC), Regis Resources Ltd (ASX: RRL), and Resolute Mining Ltd (ASX: RSG). Considering the recently implemented merger with Saracen Mineral Holdings Limited, decent performance in March 2021 quarter, modest outlook, current trading level, and valuation, we give a “Buy” recommendation to the stock at the current market price of $10.51, down by ~3.49% as on 30 April 2021.

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

Breville Group Limited 

BRG Details

Sale of Shares by CEO: Breville Group Limited (ASX: BRG) is mainly involved in the manufacturing and marketing of home appliances. On 12 March 2021, the company announced that its CEO, Mr. Jim Clayton, has sold 328,338 shares in the company to buy a residence in Australia and to satisfy personal tax obligations. Mr. Jim Clayton now retains around 180,393 ordinary shares and 427,650 performance and fixed deferred remuneration rights. Recently, one of the company’s substantial shareholders, Bennelong Funds Management Group Pty Ltd, increased its holding in the company from 8.69% to 9.91%. Bennelong Funds Management Group Pty Ltd now holds around 13,777,357 ordinary shares of the company.

Decent Revenue Growth in H1FY21: During H1FY21, witnessed decent revenue growth in all regions and categories, supported by the WFH (working from home) and premiumisation trends. Revenue for H1FY21 stood at $711 million, up by 28.2% on the previous corresponding period (pcp). Over the half-year period, the company tactically invested in selected growth drivers and capabilities. EBIT for H1FY21 stood at $94.6 million, up 29.6% on pcp. For H1FY21, the company has paid an interim dividend of 13 cents per share, down by 36.6% on pcp.

H1FY21 Results (Source: Company Reports)

Key Risks: The company is exposed to the risk related to the change in economic conditions in the Group’s major trading markets. Further, the company is exposed to the risks related to the COVID-19 uncertainties.

Outlook: Looking ahead, the company expects to keep investing in new product development (NPD), marketing, and IT to support medium-term growth momentum. In the second half of FY21, the company expects to witness growth in constant currency Global Product segment. The Distribution segment growth is expected to remain at subdued levels. For FY21, the company expects its EBIT to be around $136 million. 

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: Over the last three months, the stock is corrected by 10.23%. The stock is currently trading slightly above the average 52-weeks’ price level band of $16.6-$32.850. On the technical analysis front, the stock has a support level of ~$23.87 and resistance of ~$30.63. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). We have taken premium to its peer median EV/Sales (NTM trading multiple), considering the improved H1FY21 results, continued investment in selected growth drivers, and modest outlook. We have taken peers like Adairs Ltd (ASX: ADH), City Chic Collective Ltd (ASX: CCX), and Nick Scali Ltd (ASX: NCK), etc. Considering the company’s decent financial performance in H1FY21, continued investment in new product development (NPD), marketing, and IT, modest outlook, and valuation, we give a “Buy” recommendation on the stock at the current market price of $26.07, down by ~0.724% as on 30 April 2021.

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

St Barbara Limited

SBM Details

March 2021 Quarter Highlights: St Barbara Limited (ASX: SBM) is a gold exploration and production company with operations in Australia, Canada, and Papua New Guinea. For March 2021 quarter, the company reported consolidated gold production of 82,303 ounces, down from 89,670 ounces in Q2FY21. During the quarter, the COVID-19 situation in Papua New Guinea deteriorated with a significant increase in community transmissions. Over the quarter, the company sold 71,329 ounces of gold. As at 31 March 2021, the company had cash at bank of A$100 million and total debt of A$102 million.

Combined Quarterly Gold Production (Source: Company Reports)

Simberi Sulphide Feasibility Study Highlights: SBM recently announced the results of the Simberi Sulphide Feasibility Study which highlighted a robust project with decent financial returns. The Feasibility Study has indicated life of mine average sulphide gold production of 160 koz per annum with initial capital expenditure of US$170 million, including expansion capital. If compared to the 2020 Pre-Feasibility Study, the nameplate capacity of Sulphide plant increased from 2.7 to 3.0 Mtpa.

H1FY21 Result Highlights: For H1FY21, SBM reported underlying EBITDA of $151 million, up 17% on pcp. Statutory net profit after tax stood at $37.46 million in H1FY21. Cash contributions from operations stood at $99.635 million in H1FY21, up from $87.095 million in the previous corresponding period (pcp).

H1FY21 Results (Source: Company Reports)

Key Risks: SBM is exposed to the risk related to the volatility in the gold prices as it creates revenue uncertainty. Further, the company is exposed to the risks and uncertainties caused by the COVID-19 pandemic.

Outlook: Looking ahead, the company is focused on growing its production from the Leonora Province and deliver brownfield projects in Simberi and Atlantic. SBM is also focused on improving its current operations through productivity improvements and cost reduction. For FY21, the company expects its production to be in the range of 370 to 380 koz with AISC expected to be between A$1,440 and A$1,520 per ounce.

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: Over the last three months, the stock of SBM has corrected by 16.28%. The stock is currently inclined towards its 52-weeks’ low level of $1.815, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$1.719 and resistance of ~$2.352. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). We believe the company can trade at a slight premium to its peers, considering its diversified portfolio of gold operations, healthy balance sheet, and ongoing focus on cost reduction. We have taken peers like OceanaGold Corp (ASX: OGC), Regis Resources Ltd (ASX: RRL), and Resolute Mining Ltd (ASX: RSG). Considering the company’s improved underlying results in H1FY21, encouraging outcomes of Simberi Sulphide Feasibility Study, current trading level, and valuation, we give a “Buy” recommendation for the stock at the closing price of $1.845, down by ~2.381% as on 30 April 2021.

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

NRW Holdings Limited

NWH Details

Award of Contract for Subsidiary: NRW Holdings Limited (ASX: NWH) provides services to the resources and infrastructure sectors in Australia. The market capitalisation of the company as on 30 April 2021, stood at ~$912.73 million.  As per a recent update, the company has announced that its subsidiary RCR Mining Technologies has been awarded a $27.2 million contract for the design and construction of a Primary Crushing Plant (PCP) at Fortescue Metals Group’s Cloudbreak mine. RCR will partner with Primero Group, who will provide engineering support and construction services.

Award of Contract for Primero: NWH has announced that its wholly-owned subsidiary Primero Group Limited has been awarded a contract for the EPC of the Coburn Minerals Sands project for Strandline Resources. The project is expected to be completed on Q4 2022 and employing approximately 180 site personnel. The EPC contract has been valued at $135 million and is based on a lump sum contracting model.

H1FY21 Results Update: During the period, the company delivered decent revenue growth of 44% to $1,168 million, compared to the previous corresponding period. The order wins were in excess of $1 billion and included two major infrastructure projects. The cash position stood at $171.4 million as of 31 December 2020 and there was a reduction in the net debt to $96.5 million. NWH declared an interim dividend of 4 cents per share during the period.

H1FY21 Financial Performance (Source: Company Reports)

Key Risks: The company’s business depends on the level of activity in the resources and mining industry, and as any impact in the activity of these sectors, might have a direct impact on the profitability of the company.

Outlook: The company expects FY21 revenue to be between $2.2 billion to $2.3 billion. The tender pipeline has been increased to $14.1 billion. The acquisition of Primero augurs well for the company, as it has secured work for the second half of FY21 of around $130 million.

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 NWH is trading below its average 52-weeks’ levels of $1.440-$3.190. The stock of NWH gave a positive return of ~6.26% in the past nine months and a positive return of ~14.36% in the past one year. On a technical analysis front, the stock of NWH has a support level of ~$1.842 and a resistance level of ~$2.241. 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 can trade at a slight premium to its peer average P/E (NTM Trading multiple), considering the impressive financial position, key order wins, and comfortable cash position. For the purpose, we have taken peers such as CIMIC Group Limited (ASX: CIM), Intega Group Limited (ASX: ITG), Service Stream Limited (ASX: SSM), to name a few. Considering the expected upside in valuation and current trading levels, impressive financial position, strong pipeline and expected synergy benefits from the acquisition of Primero, we recommend a ‘Buy’ rating on the stock at the current market price of $1.945, down by 2.750% as on April 30, 2021.

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

Genetic Signatures Limited

GSS Details

Q3FY21 Results Update: Genetic Signatures Limited (ASX: GSS) is engaged in the research and commercialisation of identifying individual genetic signatures, and the sale of associated products. The market capitalisation of the company as on 30 April 2021, stood at ~$200.05 million. The company has reported a robust increase in revenue with year-to-date revenue at $23 million as of the end of Q3FY21. The revenue during the quarter grew by 136% to $4.3 million, on the pcp. It received receipts amounting to $4.6 million from the customers during the quarter. There has been continued growth in international sales with a contribution of 43% of the total quarterly revenue. It ended the quarter with a cash balance of $31.9 million as of 31 March 2021, and no debt on the balance sheet.

Revenue Performance (Source: Company Reports)

Key Risks: The company’s business exposes it to a prudent regulatory overview, and as such, it may not be able to carry out its operations in the desired manner.

Outlook: SARS-CoV-2 has given the company access to a number of new customers in the USA, Europe and Australia, and the company seems to be well positioned to take advantage of the opportunity with regulatory approvals for Respiratory, Enteric, STI and antibiotic resistance detection kits in Europe and Australia. It also has SARS-CoV-2 kit along with ASR’s available in the USA.

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 6 April 2021, the company has announced the appointment of Dr Neil Gunn to the Board of Directors. As per ASX, the stock of GSS is trading below its average 52-weeks’ levels of $1.330-$2.940. The stock of GSS gave a negative return of ~27.10% in the past three months and a negative return of ~11.21% in the past one month. On a technical analysis front, the stock of GSS has a support level of ~$1.331 and a resistance level of ~$1.645. 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 can trade at a slight discount to its peer average EV/Sales (NTM Trading multiple), considering the increase in cost of materials, and the stringent regulatory requirements in the sector. For the purpose, we have taken peers such as Cochlear Limited (ASX: COH), Imricor Medical Systems Inc (ASX: IMR), ImpediMed Limited (ASX: IPD), to name a few. Considering the expected upside in valuation and current trading levels, robust financial performance, growth in international sales, strong balance sheet position and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.380, down by ~1.429% as on April 30, 2021.

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

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