Stocks’ Details

Genex Power Limited 

Capital Funding Commitment from Queensland Government: Genex Power Limited (ASX: GNX) is a power generation and energy company, which is focused on the development of numerous renewable energy projects. The market capitalisation of the company stood at $107.42 Mn as on 23^rd September 2020. Recently, the company notified the market with an update on the 250MW Kidston Pumped Storage Hydro Project, wherein, it stated that GNX has been working with various investors to wrap up the financing activities related to project and to achieve financial close for the project by 30 September 2020. In addition, the company managed to finish its competitive equity process. The company is in the final stages of completing negotiations with an equity partner to invest up to 50% interest in the project. Previously, GNX has also received a commitment from the Queensland Government for the capital funding of $132 million in the project transmission infrastructure.

Signing of Agreement: On 22^nd September 2020, GNX inked an agreement with Powerlink Queensland to establish a standalone large-scale battery energy storage system (BESS) project, which is likely to be sized at an initial 50/75MWh.

Fall in Bottom Line: In FY20, the company reported revenue amounting to $12.3 million, reflecting a fall of 23% against the prior year. Kidston Solar Project (KS1) generated 116,520MWh, indicating a fall of 8% over pcp. This was impacted by a software issue in October 2019. The company reported a net loss of $10.53 million against $5.4 million in FY19. GNX managed to close the financial year with a strong cash position of $65.5 million as compared to $3.4 million in FY19. During FY20, GNX finished a capital raising of $21.3 million. The company is likely to use a portion of these funds to finance the progression of its standalone 50MW/75MWh large scale battery in Queensland.

Financial Summary (Source: Company Reports)

Outlook: The focus of the company revolves around attaining financial close for its Kidston Pumped Storage Hydro project. In addition, the company is also planning to finish the construction of its Jemalong Solar Project by the end of CY20. The company has scheduled to conduct its Annual Shareholders Meeting on 19^th November 2020.

Stock Recommendation: The stock of GNX has moved up by 121.05% in the past six months, and as a result, the stock is inclined towards its 52-week high level of $0.280. GNX has EV/Sales multiple of 19.7x against the industry average (Electric Utilities & IPPs) of 10.4x on TTM basis. In addition, the stock is trading at a price to book value multiple of 6.8x as compared to the industry average (Electric Utilities & IPPs) of 1.2x on TTM basis. On a technical front, the stock of GNX has a support level of ~$0.191 and a resistance level of ~$0.221.  Therefore, considering the past price movement in the stock, higher debt to equity, higher valuation on TTM basis and deterioration in the bottom line, we advise the investors to avoid the stock at the current market price of $0.205 per share, down by 2.381% on 23^rd September 2020.

Triangle Energy (Global) Limited

Capital Raising for Workover Planning: Triangle Energy (Global) Limited (ASX: TEG) is involved in the production and exploration of petroleum with a market capitalisation of $21.71 Mn as on 23^rd September 2020. In the month of August 2020, the company finished a capital raising of $2.2 million through a placement of shares and launched a Share Purchase Plan (SPP) to offer eligible shareholders up to $30,000 worth of shares in the company at $0.03 per share. However, the closing date for SPP has been extended to 2 October 2020 from 18 September 2020. The company would use the funds for workover planning, and long lead equipment purchases for production wells CH6, CH7 and CH10 at Cliff Head, planning and initial tabletop activities for the South East Nose, West High and Mentelle drilling campaigns as well as for general working capital.

SPP Timetable (Source: Company Reports)

Disruption in financials: The company mainly generates its revenues from the sale of hydrocarbons, and it recorded revenue amounting to $12,255,139 in FY20 as compared to $13,174,305 in FY19. The company posted net loss after-income tax of $3.787 million against $1.764 million for FY19. This was mainly due to significant one-off costs within its cost of sales of $0.274 million with respect to an incident with the electrical fault and a loss from associates of $0.493 million for the FY20.

Outlook: For FY21, TEG is focused to on the continued operation of the Cliff Head oil field, and to attain decent progress on the Mt Horner joint venture farmout activities. The company is likely to conduct its Annual Shareholders Meeting on 17^th November 2020.

Stock Recommendation: The global pandemic Covid-19 has left impact on all companies and businesses in Australia. In addition, the energy companies have experienced a steep fall in oil prices due to pandemic.  In the past one and six months, the stock of TEG has moved up by 42.86% and 100%, respectively. As a result, the stock is inclined towards a 52-week high level of $0.077. The stock is trading at a price to book value multiple of 8.6x as compared to the industry average (Oil &Gas) of 2.2x on TTM basis. On a technical front, the stock of TEG has a support level of ~$0.026 and a resistance level of ~$0.064.  Therefore, considering the price movement in the past months, current trading levels and higher valuation, we give an “Expensive” rating on the stock at the current market price of $0.045 per share, down by 10% on 23^rd September 2020.

Hazer Group Limited

Funding for HZR CDP: Hazer Group Limited (ASX: HZR) is engaged in the production of hydrogen gas from methane. The market capitalisation of the company stood at $63.36 Mn as on 23^rd September 2020. Recently, the company reached a binding funding agreement with Australian Renewable Energy Agency (ARENA) for up to $9.41 million in grant funding to underpin the construction and operation of the Hazer CDP (Commercial Demonstration Plant). The company can use up to $7.9 million for construction costs and the remaining $1.5 million to be drawn in three annual tranches during the operational phase. Previously, the company also secured funding of $8.4 million through equity raising.

Improving Bottom Line: For the year ended 30^th June 2020, the company reported revenue amounting to $1,436,617 as compared to $1,669,368 in FY19. During FY20, the company experienced a fall of 27% in losses to $3,225,289. This was mainly due to a reduction of 58% in non-cash expenditure. In addition, HZR witnessed a decline of 9% in total cash operating expenditure to $3,944,781. As on 30^th June 2020, the cash and cash-equivalent stood at $17,236,257 against $6,003,608 in FY19.

Key Financials (Source: Company Reports)

Outlook: Looking forward, the company remains on track to continue the execution of Hazer CDP. In addition, the Hazer technology is likely to boost the utilisation of waste resources, enhance civic infrastructure as well as offer new economic opportunities.

Stock Recommendation: Current ratio of the company stood at 36.48x, reflecting a YoY growth of 66.2%. This indicates that the company has improved its position to address its short-term obligations against the broader industry. The stock of HZR gave positive returns of 20.78% and 17.72% in the past one and three months, respectively. On a technical front, the stock of HZR has a support level of ~$0.390 and a resistance level of ~$0.514. Therefore, considering the decent liquidity position, funding from ARENA, and declining losses, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.500 per share, up by 7.527% on 23^rd September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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