Aeris Resources Limited

Company Overview: Aeris Resources Limited (ASX: AIS) is engaged in exploring and developing a diversified mining portfolio of mainly copper and gold. Its projects include Tritton Copper operations, Torrens, Canbelego, and the Cracow Gold project. The company was listed on ASX on 2 February 2011.

­­­­­­AIS Details

Material Business Updates

Figure 1: Valuable Business Updates

Source: Company Reports, Analysis by Kalkine Group

Historical Financial Trend:

AIS illustrated a significant uptick in the top-line in FY21 due to spiked commodity prices and decent volume increases. Gross profits manifest a considerable surge, attributed to upscaled top-line. Operating revenues grew at a 26.6% CAGR (FY17 – FY21).

Source: Company Reports, Analysis by Kalkine Group

First Half FY22 Performance:

Source: Company Reports, Analysis by Kalkine Group

Full-Year FY21 Performance:

Source: Company Reports, Analysis by Kalkine Group

Top 10 Shareholders:

The top 10 shareholders together form ~46.33% of the total shareholding. Tudor Court Ltd. and Paradice Investment Management Pty. Ltd. holds a maximum stake in the company at ~­­­19.10% and ~9.90%, respectively.

Top 10 Shareholders; Analysis by Kalkine Group

Key Metrics:

Improved copper prices and decent production levels in Cracow Gold and Tritton Copper Operations have promoted the top line. Subsequently, gross profits entered the expansionary territory with a steady upward movement. The current ratio remained elevated at 1.36x in FY21, supporting liquidity position.

Growth and Liquidity Profile; Analysis by Kalkine Group

Outlook:

Source: Company Reports, Analysis by Kalkine Group

Key Risks:

The commodity price movements have turned extensively volatile amid Russia-Ukraine geopolitical stress. The labour shortage has substantially affected the production in H1FY22, cutting down revenues and returns.

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: AIS has delivered 3-month and one-year returns of ~-23.529% and ~+30.000%, respectively. The stock is trading below the average of the 52-week high price of $0.093 and the 52-week low price of $0.245. The stock of the company has been valued using the EV/Sales multiple-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 compared to its peers, considering current geopolitical stress and labour shortages, etc. For the purpose of valuation, a few peers like Equus Mining Ltd (ASX: EQE), AIC Mines Ltd (ASX: A1M), Red 5 Ltd (ASX: RED), and others have been considered. Considering the current trend in copper prices, decent financial status, consistent top-line growth, current trading levels, and potential upside, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.130, as of 25 March 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

AIS Daily Technical Chart (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 on 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 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 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.

Disclaimer

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