Central Asia Metals PLC- Diversified Base Metals Producer at Low Cost

Central Asia Metals PLC (LON: CAML) is a Piccadilly, United Kingdom-headquartered low cost, diversified base metals producer with lead mine in North Macedonia and copper operations in Kazakhstan.

Financial Highlights – Lower Operating Expenses for FY2019 (31^st December 2019)

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, driven by lower gross revenue for the period, the revenue declined to USD 171,748 thousand as against USD 194,379 thousand in FY2018. The gross profit stood at USD 96,827 thousand in FY2019 versus USD 115,916 thousand in FY2018. The group’s operating profit stood at USD 78,612 thousand in the financial year 2019 as against USD 87,416 thousand in FY2018. The PBT (profit before tax) declined to USD 67,795 thousand in FY2019 versus a PBT (profit before tax) of USD 72,681 thousand in FY2018. The PAT (profit after tax) from continuing operations stood at USD 51,884 thousand in FY2019 versus USD 53,859 thousand in FY2018. The Profit for the year (continuing and discontinued operations) stood at USD 51,937 thousand in FY2019 versus USD 46,585 thousand in FY2018. The basic earnings per share (continuing and discontinued operations) stood at 29.39 cents in FY2019 versus 27.21 cents in FY2018. The diluted earnings per share (continuing and discontinued operations) stood at 28.57 cents in FY2019 versus 26.53 cents in FY2018. The group’s cash balance stood at USD 28,466 thousand as at 31^st December 2019 versus USD 34,649 thousand as at 31^st December 2018. The group’s total assets stood at USD 515,075 thousand as at 31^st December 2019 versus USD 549,725 thousand as at 31^st December 2018.

Share Price Performance

Daily Chart as of7^th May 2020, after the market close (Source: Refinitiv, Thomson Reuters)

Central Asia Metals’ shares closed at GBX 137.20 at the time of writing after the market close on 7^th May 2020. Stock's 52 weeks High is GBX 233.00 and Low is GBX 100.20.

 
Valuation Methodology

*Peers: Bushveld Minerals Ltd, Petra Diamonds Ltd, Atalaya Mining Plc and Fresnillo Plc.
* Currency Exchange Rate taken for 1 USD = 0.80673 GBP.
Growth Catalysts
The strategic expansion allows the company to enhance its presence in the leading and developing markets. Increasing global demand for copper may lead to a potential increase in the demand for the company’s products. Central Asia Metals supports growth in its diversified portfolio through the acquisition and integration of firms as part of an inorganic growth strategy.
Conclusion
 
During the period, due to current global uncertainties, the financials of the group were impacted, and valuation declined as commodity prices fell. But its ability to generate significant free cash flow, low production costs and long-life assets indicates a strong position in the short and long term. The company has a majority stake in the copper, molybdenum, and gold projects. The company’s strong asset base focus on safety and strong operating performance are its major strengths, even as declining cash position remains an area of concern. Going forward, environmental regulations, increasing manpower cost in the UK, and operational risks may impact the company’s performance. However, growing demand for copper, strategic acquisition and technological advancements are likely to present new growth opportunities to the company. 
 
Based on the decent prospects and supported by valuation done using the above method, we have given a "Speculative Buy" recommendation at the closing price of GBX 137.20 (as on 7^th May 2020), with lower double-digit upside potential, based on 8.00x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
AdEPT Technology Group PLC – Resiliently Performing while Maintaining a Healthy Financial Position.

AdEPT Technology Group PLC (LON: ADT) is a FTSE AIM All-Share Company, which is independently provides managed services for unified communications, information technology, voice solutions and connectivity.  The Company caters the education, health, commercial and public sector.

The Group will announce its full-year results to 31^st March 2020 in July 2020.

Recent News
On 2^nd April 2020:Roger Wilson agreed to postpone his retirement for six months which was scheduled at end of March 2020. Further, Andy Lovett was appointed as Chief Operating Officer, with immediate effect.

Trading and Covid-19 Update (as on 2^nd April 2020)
The Group stated in its latest update that the Government recognised the workforce of AdEPT as key workers since Telecommunications and IT support has become a '4th Utility Service' o keep Government, education and the economy going in the prevailing crisis. The Group affirmed that all its employees were providing support remotely and it witnessed 85% increase (compares to last few weeks) in call volumes. The turnover of the Company is nearly 45 per cent contributed through public sector while 55 per cent is contributed by the commercial sector. Further, the Group reported that Sales and EBITDA for FY20 were in line with expectations with an increase of 19% and 13%, respectively against the previous year. The Cash position at 31^st March 2020 was GBP 12 million, and net debt was GBP 28 million (GBP 3 million below the market expectation).

Share Price Performance

Daily Chart as on 7^th May 2020, after the market closed (Source: Refinitiv, Thomson Reuters)

AdEPT Technology Group’s shares closed trading at GBX 225 on 7^th May 2020 and remained flat against the last day closing price. Stock's 52 weeks High is GBX 405.50 and Low is GBX 160.05.

From the technical standpoint, 3 days, 9 days and 14 days relative strength index of the stock were favourable, and the price could rise further from the current trading level.

Valuation Methodology
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*Peer: Telecom Italia SpA, Telefonica SA, Orange SA and Telekom Austria AG

Growth Catalyst
The Group’s acquisition of ETS in Wakefield and Advanced Computer Systems (in Doncaster) has gone well and likely to generate synergy in future also. Moreover, the business remains profitable and cash generative under the stress test scenario conducted by the Company.

Conclusion
Overall, the Group has delivered another year of strong performance in FY 2020 and expanded its geographic expansion into Yorkshire. Further, to combat the disruption of Coronavirus mayhem, the Board decided to cancel the interim dividend of April 2020 and might suspend the final dividend of 2019 as well. Regarding revolving credit facility, the Group has maintained a healthy relationship with lenders and might consider the covenant waiver, if needed.  Furthermore, the Group is confident about its ability to survive the economic turmoil presented by Covid-19.

Based on the decent prospects which are supported by valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 225 (as on 7th May 2020) with lower double-digit upside potential based 8.52x Industry NTM Average Price/Earnings (approx.) on FY20E earnings value per share (approx.).
 
*All forecasted figures and peers have been taken from Refinitiv, Thomson Reuters.
*The “Speculative Buy” recommendation is valid for the current price as covered in the report (as on 11^th May 2020).

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