Iofina PLC

Iofina plc (IOF) is a London, the United Kingdom-based holding company. The company is engaged in the production and exploration of iodine, formed water and natural gas, and iodine speciality chemical derivatives. The company operates in the United Kingdom and in the United States. The company is differentiated in two segments: Iodine and Iodine Derivatives, and Montana.

Recent News
On 13^th June 2019, the group announced its Open Offer to raise up to £2.04 million which was previously announced on May 20, 2019. The total Open Offer Shares of 9,464,655 will be allotted to those qualifying shareholders that participated in the Open Offer Shares with total gross proceeds thereunder of around £1.5 million.

Q1 FY19 Market Update
The Company produced 134.4 million tonnes of crystalline iodine, an increase of 14 per cent as compared to 118.2 million tonnes in Q1 FY18 and the highest level of Q1 iodine production in history.

The international iodine market remains strong and iodine prices have continued to increase into early Q2 FY19. At the end of the period, large volume spot sales of iodine were over $28 per kg, an increase of 16 per cent as compared to $24 per kg in Q1 FY18. The company expects pricing to move higher in 2019.

Financial Highlights (FY2018, US$)

(Source: Annual Report, Company Website)

The company’s reported revenue surged by 15 per cent to $24 million as compared with the financial year 2017 of $20.8 million and gross profit rose by $1.4 million to $6.3 million, due to a surge in iodine prices with an increase in volume sold. EBITDA climbed by $1.2 million or 89 per cent to $2.6 million against the $1.4 million in FY17. Operating profit stood at $1.1 million as compared to an operating loss of $0.7 million in FY17. A revaluation credit of $3.2 million has been recognised in respect of share conversion rights relating to convertible notes. Loss before tax declined from $9.8 million in FY17 to $1.4 million in FY18. Cash balances surged to $4.5 million as compared with the previous year data. Capital investment stood at $0.9 million, a decrease from the prior year data. Debt balances totalling $25.6 million have been refinanced in March 2019.

Share Price Performance

Daily Chart as at June-14-19, before the market closed (Source: Thomson Reuters) 

On 14th June 2019, at the time of writing (before the market close, GMT 1:05 PM), IOF shares were trading at GBX 17.586 and increased by 0.78 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 33.28/GBX 9.88. The company’s stock beta stood at 1.94, reflecting higher volatility of the stock as compared to the benchmark index.

Valuation Methodology


Conclusion
The company has a high-grade exploration portfolio which will help the company to generate good output in terms of production and will help the company to increase its revenue. The company had shown improvement in its top-line and bottom-line performance in the current financial year.
The company had a good start to the financial year 2019. The company plans to move into the production of CBD (cannabidiol) oils after receiving conditional approval for a licence to process hemp in Kentucky, the United States. The company is well positioned for future growth with improvement in the iodine prices.

Based on the decent growth prospects of the company and the valuation done using the above method, we have given a “Speculative BUY” recommendation at the closing price of GBX 17.45 (as on 13th June 2019) with lower double-digit upside potential based on 1.25x NTM EV/Sales (approx.) on FY19E sales (approx.).

Europa Metals Ltd

Europa Metals Limited (EUZ), previously name was Ferrum Crescent Limited, is a metals development company. The Company is mainly focused on European projects. The company’s project is the Zinc, Toral Lead, Silver Project Spain. The group’s project is situated in the Province of Leon, Spain. Its Toral mining domain includes the Las Medulas mine, Antonina mine, and the Rubiales mine. Europa Metals Ltd. is headquartered in Australia.

Financial Highlights (H1 FY19, AUD)

(Source: Interim Report, Company Filling, LSE)

The company’s reported revenue from continuing operations decreased from AUD 71 thousand in H1 FY18 to AUD 7 thousand in H1 FY19. The loss before income tax stood at AUD 1,534 thousand, an increase from the corresponding period of the last year. The company recorded a net loss after income tax of AUD 1,534 thousand as compared with the previous year same period data. Basic and diluted loss per share stood at 0.028 cents, a surge from the H1 FY18 loss of 0.026 cents.

Total Assets decreased to AUD 2,023 thousand as compared to AUD 2,714 thousand in FY18. The company’s reported total liabilities stood at AUD 86 thousand, a decline from the financial year 2018. Total equity stood at AUD 1,937 thousand in H1 FY19.

Share Price Performance

Daily Chart as at June-14-19, before the market closed (Source: Thomson Reuters)
 
At the time of writing (as on June 14, 2019, at 2:42 PM GMT), shares of EUZ were quoting at GBX 0.0145/share and added 7.41 per cent against the yesterday's closing price level. The outstanding market capitalisation of the company stood at around £1.62 million. The company’s stock beta stood at 0.61, reflecting lower volatility of the stock as compared to the benchmark index.

In the last 52-wks, shares of EUZ have registered a high of GBX 0.17 and a low of GBX 0.0126. At the current trading level, as quoted in the price chart, its shares were trading 91.47% below the 52wk high price level and 45% above the 52wk low price level.

Today's volume in the stock (before the market close, at the time of writing) stood at 86,569,592. However, the 5-day average daily volume traded in the stock was at 74,520,914.80, which was 16.77% below the 30-day average daily volume of 89,538,353.63 traded on the London Stock Exchange.

In the past 1 year, shares of EUZ have delivered a negative price return of 80.71%. However, on a year-to-date basis, the stock was down by approximately 62.50% and declined by 58.46% in the past three months.

Share's RSI for the 30-days, 14-days and 9-days were hovering at a normal range and stood at 36.35, 38.49 and 34.51 respectively. However, 3-days RSI of the stock stood at 10.97.

Conclusion
EUZ notes the uncertain political risk and potential nationalisation, although they believe the latter would face significant hurdles. In H1 FY19, the company’s return on equity (ROE) was in negative zone and profitability margin also declined. The current ratio surged in the current period as compared to the industry median.

The company had shown downtrend in top-line and bottom-line performance in the current period. Moreover, the company is trading near its 52-week low, raising doubts at its upside potential at current prices.

From the SMA standpoint, shares of the Europa Metals Ltd were quoting below its 30-day, 60-day and 200-day SMA prices, which is a bearish technical indicator and carrying the potential to move down further from the current price level.

Based on the macro headwinds and weak financial performance concerning political and economic uncertainties, investors are recommended to “AVOID” the stock at the current price level of GBX 0.0145 (as on 14th June 2019).

*In valuation Methodology, all USD figures have been converted into GBP; USD: GBP - 0.79.
*All forecasted figures have been taken from the Thomson Reuters.
*The “Speculative Buy” recommendation is valid for the current price as covered in the report as on (14th June 2019).

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