Altus Strategies PLC

Altus Strategies PLC (LON: ALS) is an FTSE AIM All-Share listed mining royalty entity, managing diversified portfolio of metal assets.

Investment Rationale – SELL at GBX 58.50

• Subdued Gold Prices: The Gold futures reported the biggest monthly drop in January 2022 since September 2021, and investors are maintaining a cautious stance ahead of the Central Bank policy decisions this week.
• Weak Fundamentals: ALS has not generated any revenue yet, while the net losses were aggravated significantly in 9M FY21.
• Technical Indicators: From a technical standpoint, the current market price is hovering below the 20-day EMA (GBX 59.85), reflecting a bearish price pattern.
• Underperformance Against Index: ALS has fallen ~29% in the last year, showing significant underperformance against the FTSE AIM All-Share benchmark index.

Key Risks

• Gold Price Volatility: The interest rate hikes, and rising US Treasury Yield can cap the gains of gold prices.
• Subdued UK Macroeconomic Indicators: The UK Composite PMI fell marginally to 53.4 in January 2022 from 53.6 in December 2021, while the UK consumer price inflation breached a nearly 30-year high of 5.4% in the 12 months to December 2021.

Financial Highlights (for the three-month periods ended 30 September 2021, as on 12 November 2021)

 (Source: Company Website)

• Cash Balance: ALS ended Q3 FY21 with a cash balance of £5.9 million, following the cash outflow for operating activities of £3.1 million.
• Holdings: As of 30 September 2021, the Group held listed equity holdings of £1.6 million.
• Acquisition: The acquisition of 0.418% net smelter return royalty on the Caserones copper mine is likely to generate annual cash flow of US$3.2 million to Altus.

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group) 

Conclusion 

ALS is a loss-making entity, dependent upon external funding for its growth prospects amid rising interest rates and the US Dollar scenario. Moreover, the significant downtrend in price is also giving an alarming signal. Therefore, it is prudent to liquidate the position at the current levels. The stock made a 52-week High and Low of GBX 91.99 and GBX 53.50, respectively.

Based on the worsened losses, macroeconomic uncertainties, weak fundamentals, and bearish technical indication, we have given a “SELL” recommendation on Altus Strategies PLC at the closing price of GBX 58.50 (as of 28 January 2022). 

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 for 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 is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

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