Kodal Minerals PLC (LON: KOD) – Recent Bulk Sample Reflects Upside Potential at Bougouni

Kodal Minerals PLC is a FTSE AIM All-Share listed mining exploration and development company. The Company is focused towards its Southern Mali’s flagship Bougouni Lithium Project.

Recent News
11^th May 2020:The Group unveiled the initial test result of Bougouni Lithium Project, which reflected that the project is nearly at commercial scale for producing high-grade Lithium hydroxide. The study was performed by Shandong Shengli Environment Protection Technology Company.

Trading Update (as on 7^th April 2020) - Reflecting Remuneration cut and Financing Facilities
The Kodal Minerals affirmed that COVID-19 disruption had affected the Company’s operations in Mali since due to travel restrictions, company is not able to provide guidance on license application. Hence, the Group decided to reduce the salary for all its employees by one-third of basic pay. Moreover, the Board and executive have slashed their fees by 60 per cent. Further, the group has secured a financing facility by issuing 1,428,571,429 ordinary shares, with the investors (Riverfort Global Opportunities PCC Limited and YA II PN Ltd). 

Share Price Performance
 
Daily Chart as on 15^th May 2020, after the market closed (Source: Thomson Reuters)

KOD’ shares closed trading at GBX 0.0338 on 15^th May 2020, up by 4% against the last day closing price. Stock's 52 weeks High is GBX 0.1375 and Low is GBX 0.0191, respectively.

Valuation Metrics
  
(Source: LSE)

As on 30^th April 2020, the Price/Book multiples of the KOD was 0.3x, which was lower as compared with the Mining industry, reflecting that the company is trading at a lower multiple as compared to its peers.
 
Growth Catalysts
The recent bulk sample (of pegmatite hosted lithium mineralisation) from Bougouni project in southern Mali reflected 71 per cent higher recovery than the initial feasibility. Further, the plant has received an aggregate recovery of up to 83 per cent for 5.5 per cent to 6 per cent lithium oxide spodumene product. It reflected the upside potential on the project post commercialisation.

The lucrative fundaments from the feasibility study shows the potential of producing 220,000 tonnes of spodumene concentrate (6 per cent) annually.
 
(Source: Presentation - March 2020, Company Website)

Conclusion
During the first half of 2020, the group reported an operating loss of £338,641 as against £358,058 in H1 FY2019, since the Company has not begun the commercial production yet and thus, there was no reported revenue. Company’s basis and diluted loss per share stood at 0.0040 pence in H1 FY2020 (H1 FY2019: 0.0044 pence). Once the Bougouni project gets operational, it has the capability to host multiple operations for open pit lithium. On 16^th April 2020, the group also announced a further three-year term concession in Côte d'Ivoire exploration, which bolsters the company’s potential value of the portfolio.

Based on the decent growth prospects of the company, we have given a “SPECULATIVE BUY” recommendation at the closing price of GBX 0.0338 (as on 15^th May 2020).

Signature Aviation PLC – Decent Trading Update Amid Elevated Global Volatility

FTSE 250 listed Signature Aviation PLC (LON: SIG) is a global FBO (fixed base operation) network for Business & General Aviation (B&GA) travellers. It provides aviation services through a network of owned FBO real estate and contracted or licensed locations. SIG was earlier known as BBA Aviation Plc.

On 8^th September 2020, the company will release its interim results.

Trading Update (for the period 1 January 2020 to 30 April 2020, as on 15^th May 2020) – Decline in Flying in April 2020
In the first thirteen days of May 2020, the Company has stated that flying activity exhibited a 66% decline against the last year same period. Whilst the flying activity plunged 77% in April 2020 as compared with the same period of the last year. In the three months to 31 March 2020, SIG continued to deliver better outperformance versus the US B&GA market. As stated, US B&GA flight movements by the FAA (Federal Aviation Administration) reduced by 8.9%, and like-for-like revenue in the Signature business (Fixed Base Operation (FBO) and TECHNICAir) declined by 7.5 per cent (on a leap year adjusted basis). In April 2020, the Group’s revenue for the continuing operations (Signature FBO, EPIC and TECHNICAir) tumbled 72 per cent, while in the first four months of 2020, it showed a decline of 28%. As per the month of April 2020, SIG has delivered a healthy cash generation of $6 million. At the end of April 2020, the RCF (Revolving Credit Facility) was drawn by $49 million, leaving undrawn facilities of $351 million plus $74 million of cash held. During the month of April 2020, the Group was cash flow positive by $6 million. It had total facility headroom and cash of $425 million at the end of April 2020.

Share Price Performance
 
Daily Chart as at May-15-20, after the market closed (Source: Refinitiv, Thomson Reuters)

Signature Aviation PLC’s shares closed at GBX 189.50 on 15th May 2020 and were up by 2.24 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 402.04 /GBX 129.40.

From the technical standpoint, its shares were trading well below its short-term support level of 20-day simple moving average prices, which reflects a downtrend in the stock. The RSI (14) is moving downwards from the top.

Valuation Methodology


Valuation Metrics


As on 30^th April 2020, the EV/EBITDA and Price to Book multiples of the SIG were 8.6x and 1.3x, respectively and the same multiples were higher as compared with the Industrial Transportation industry. It is reflecting that the company is trading at a higher multiple as compared to its peers.

Key Risks
The company will not be able to meet the required cost avoidance and productivity enhancement targets in the life of the plan and provide the transformation programme, driven by the threat of industrial action. Lower rate of economic growth could impact financial performance. Moreover, the uncertain crisis of Covid-19 would further affect guidance.

Conclusion
The Group has suspended its guidance and dividend payments later in the year.SIG will continue to monitor the COVID-19 situation closely. The Company is going through a transformation phase and investing more towards the quality of service at this crucial time. The $400 million unsecured RCF matures in March 2025. The Company has executed several actions to best align the cost base with the reduction in flight activity across the FBO network. The Aviation Services industry outlook stays uncertain. As the company operates in multiple geographies, its profits can be impacted negatively due to foreign exchange rate fluctuations.

Based on the factors highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 189.50 (as on 15^th May 2020), with support from new catalysts to be evaluated at a later stage. 
 
*All forecasted figures and Peers information has been taken from Refinitiv, Thomson Reuters.
*The “Speculative Buy” recommendation is also valid for the current price as covered in the report (as on 18^th May 2020).

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