Cloudbreak Discovery PLC

Cloudbreak Discovery PLC (LON: CDL) is an FTSE main market listed entity that is engaged in exploration and development activities for the natural resource industries, with a diverse portfolio of mineral assets.

Investment Rationale – Watch at GBX 9.00

• Loss Making Company: The Group incurred losses of £0.90 million for the year ended 30 June 2021 compared to £1.07 million as of 30 June 2020.
• Exploration Uncertainty: Exploration is a high-risk activity, and there is no certainty that any mineralization identified will lead to proven and probable reserves or become a working mine.
• Funding Risk: The success of the exploratory efforts will determine the Group's capacity to obtain more funding. Unsuccessful experimental efforts may raise the company's liquidity risk.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.
• Unfavourable Technical Indicators: The stock has broken through the upper Bollinger band, and the 14-day RSI of ~89.76 suggests an overbought position.

Corporate Update (Released on 15 February 2022)

• Strategic Alliance: For the identification and advancement of copper properties in the Southwestern United States, Cloudbreak formed a strategic agreement with Alianza Minerals Ltd. Cloudbreak has been able to benefit from Alianza's significant expertise in the region because of the agreement, which has resulted in some early successes.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

Conclusion

Based on recurring losses, exploration uncertainty, macroeconomic factors, and bearish technical indicators, we have given a “WATCH” recommendation on Cloudbreak Discovery PLC at the current market price of GBX 9.00 (as of 22 February 2022 as at 11:55 AM GMT).

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 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.

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