Petra Diamonds Limited

Petra Diamonds Limited (LON: PDL) is an independent diamond mining company, which is also a reliable supplier of rough diamonds to the global market. The Company primarily operates in the African region, including South Africa, Botswana, and Tanzania.

Rationale for Valuation – Watch at GBX 69.00

• Weak Leverage Position: PDL’s debt-to-equity ratio of 0.96x remained more than the industry median of 0.44x during FY21, signifying that the Company was more leveraged when compared with the industry.
• Marginal Decline in Revenue: The top-line revenue demonstrated a marginal decline from USD 122.8 million during Q4 FY21 to USD 114.9 million for Q1 FY22.
• Reduced Production: The Company’s year-on-year production went down by around 12% during Q1 FY22.
• Omicron Variant: The increased number of Omicron cases in Africa could dent the mining operations.
• Unfavourable Technical Indicator: From the technical standpoint, the 20-days exponential moving average price of GBX 71.50 reflects a bearish price momentum.

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis by Kalkine Group)

Conclusion

Based on the quarter-on-quarter decline in top-line revenue during Q1 FY22 and weak leverage position, we have given a “WATCH” recommendation on Petra Diamonds Limited at the current market price of GBX 69.00 (as of 16 December 2021 at 10:44 AM GMT). However, for any profit booking scenario, buy and holding levels should be looked at as per the risk appetite of investors.

Yourgene Health PLC

Yourgene Health PLC (LON: YGEN) is an FTSE AIM All-Share index listed Manchester, United Kingdom-based company, which provides the molecular diagnostics business.

Investment Rationale – Watch at GBX 12.00

• H1 FY22 Results: The Company’s top-line revenue jumped by around 113%, and the gross profit witnessed a growth of approximately 107% during H1 FY22. However, YGEN still remained a loss-making entity during H1 FY22.
• Significant Decline in Cash Balance: The Cash & cash equivalents stood at £4.7 million as of 30 September 2021, while it was £7.0 million as of 31 March 2021.
• Weak Profitability: The Company’s operating margin and net margin were in a negative zone during H1 FY22, while the respective industry median remained positive.
• Non-Covid Division: The growth across non-Covid division remained subdued throughout H1 FY22.
• Unfavourable Technical Indicator: From a technical standpoint, the stock price is hovering lower than the 20-days exponential moving average of GBX 12.32, reflecting a bearish price momentum.

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis by Kalkine Group)

Conclusion

Based on the reduced cash balance and an unfavourable technical indicator, we have given a “WATCH” recommendation on Yourgene Health PLC at the current market price of GBX 12.00 (as of 16 December 2021 at 10:43 AM GMT). However, for any profit booking scenario, buy and holding levels should be looked at as per the risk appetite of investors.

*The reference data in this report has been partly sourced from REFINITIV.

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