Three Diversified Stocks Under 20 cents with Decent Growth Potential – VMY, KSN, FRX

1. Vimy Resources Limited (Recommendation: Speculative Buy, Market Cap: ~$206.14 million)

Vimy Resources Limited (ASX: VMY) is an Australia-based exploration and evaluation company focused on the exploration and evaluation of its Mulga Rock Project.

Q2FY22 Operations Highlights: During Q2FY22, the company received several key project approvals and commenced the development of the Ambassador North pit at Mulga Rock Uranium Project. Over the quarter, the company initiated a process to review project de-risking and corporate value enhancing opportunities.

Cash Scenario: As at 30 June 2021, the company had cash and cash equivalent of $24.06 million, up from $7.18 million as at 30 June 2020.  The company had nil debt to equity ratio in FY21. At the end of December 2021 quarter, the company had cash of $16.2 million.

Current Ratio (Source: Analysis by Kalkine Group)

Outlook: Recently received approvals, along with the earlier approvals of the Mulga Rock Project Management Plan, allow VMY to continue the Early Works Program and undertake activities at the project. The company is currently focused on the construction of the water pipeline to the Kakarook North bore field. Looking ahead, the company expects to benefit from the widening gap between contracted uranium and forecasted annual requirements.

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by ~31.8%.
• The stock is currently trading lower than the average 52-week price level band of $0.088 and $0.310.
• Key Risks: Exploration-related Risks, Fluctuation in the prices of Uranium, COVID-19 Uncertainties, etc.
• Considering the decent progress in the development of Mulga Rock Project, ongoing exploration programs, modest outlook, current trading level, robust balance sheet, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing price of $0.185, down ~5.129% as on 11 February 2022.

VMY Daily Technical Chart, Data Source: REFINITIV

2. Kingston Resources Limited (Recommendation: Speculative Buy, Market Cap: ~$74.29 million)

Kingston Resources Limited (ASX: KSN) is gold development and exploration company advancing the Misima Gold Project in PNG.

Q2FY22 Operational Highlights: During the quarter, KSN entered into a binding agreement to acquire the Mineral Hill Mine from US-based Quintana MH Holding Co LLC for up to A$22.7 million in cash and shares. At the Misima Gold Project, the company advanced major DFS engineering packages including plant design work, civil works, site water management, HV electrical work, and non-processing infrastructure.

Cash Scenario: With a cash of $19.8 million as at 31 December 2021, the company seems well placed to progress the ramp-up at Mineral Hill, advance exploration and conclude studies on the Misima Gold Project.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: Looking ahead, the company is focused on near-mine or brownfields targets within the existing Mining Leases (ML) of the recently acquired Mineral Hill Project in NSW. The company has recently completed a Share Purchase Plan (SPP), proceeds from which will be used to advance its exploration and development activities at Misima Gold Project in PNG, and Mineral Hill Mine.

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by ~29.17% and is trading lower than the average 52-week price level and of $0.140 - $0.255.
• On a TTM basis, the stock is trading at a price-to-book value multiple of 1.8x, lower than the industry (Basic materials) median of 2.7x, thus seems undervalued.
• Key Risks: Gold Price Fluctuations, Exploration-related Risks, COVID-19 Uncertainties, etc.

Considering the company’s ongoing exploration programs, expected benefits from the acquisition of Mineral Hill mine, modest outlook, current trading level, valuation on TTM basis, and key associated risks, we give a “Speculative Buy” rating on the stock at the current market price of $0.170 as on 11 February 2022, 11:30 AM (GMT: GMT+10), Sydney, Eastern Australia.

KSN Weekly Technical Chart, Data Source: REFINITIV

3. Flexiroam Limited (Recommendation: Speculative Buy, Market Cap: ~$28.28 million)

Flexiroam Limited (ASX: FRX) is a global mobile data provider that offers competitive roaming rates and connectivity solutions.

Q3FY22 Result Highlights: For the quarter ending 31 December 2021 (Q3FY22), FRX reported cash receipts of A$963k, up 166% on the previous corresponding period (pcp). Further, the company reported revenue of A$1.1 million, up 116% on pcp, underpinned by substantially higher data consumption and rise in active users.

Cash and Debt Scenario: As at 30 September 2021, the company had a cash and cash equivalent of $1.51 million and nil borrowings in its balance sheet. The company’s cash balance was increased to $2.25 million in December 2021 quarter.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: Looking ahead, the company is focused on developing new eSIM solutions to capture IoT demand; and executing on the growing pipeline of Flexiroam Solutions opportunities. The company has recently completed a $2.75 million placement, funds of which will be used to accelerate the company’s growth initiatives and capitalise on the expansion into the global Internet of Things (IoT) connectivity market.

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has provided a positive return of ~4% and is currently trading slightly lower than the average 52-week price level band of $0.023 and $0.082.
• On a TTM basis, the stock is trading at an EV/Sales multiple of 10.5x, lower than the industry (Telecommunications Services) average of 13.2x, signifying undervaluation.
• Key Risks: Technology Disruption, Stiff Competition, Foreign Currency Risk, etc.

Considering the company’s decent performance in Q3FY22, rise in active users, increasing cash balance, modest outlook, current trading level, valuation on TTM basis, and key associated risks, we give a “Speculative Buy” rating on the stock at the current market price of $0.050 as on 11 February 2022, 11:30 AM (GMT: GMT+10), Sydney, Eastern Australia.

FRX Daily Technical Chart, Data Source: REFINITIV

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

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above. 

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

Kalkine New Zealand Limited is authorised to provide general advice only. The information on this website does not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions.