A-Mark Precious Metals, Inc.

AMRK Details

Q3FY21 Results Update: A-Mark Precious Metals, Inc. (NASDAQ: AMRK) is an integrated precious metals platform and offers gold, silver, platinum, palladium and copper bullion, numismatic coins, and related products to its customers. It operates through three segments- Wholesale Sales & Ancillary Services, Secured Lending, and Direct-to-Consumer services. The market capitalization of the company as on 01 June 2021 stood at ~$606.81 million. The company has recently reported its Q3FY21 results and posted revenues of over $2 billion, on the back of decent market conditions and completion of the acquisition of JM Bullion on 19 March 2021. The revenues increased by ~63% to $2.05 billion in Q3FY21 from $1.26 billion in the previous corresponding period. The gross profit increased by ~203% to $68.2 million, reflecting a margin of 3.33%. NPAT stood at $76.6 million for the period and included a $26.3 million re-measurement gain on its pre-existing equity interest in JMB with regards to the acquisition.

Revenue and Gross Profit Trend (Source: Analysis by Kalkine Group)

Acquisition of JM Bullion: On 19 March 2021, the company has closed its previously announced acquisition of the 79.5% of the issued and outstanding shares of JM Bullion, Inc., which is a well-known e-commerce retailer of precious metals. After taking into consideration some reductions and adjustments, the deal was closed at $82.3 million of cash and $30.3 million of A-Mark common stock to JMB and its stockholders.

Key Risks: The company’s line of business exposes it to credit risk and is also prone to regulatory measures.

Outlook: The company expects to continue its operational momentum into Q4FY21 and has witnessed a sustained rally in the precious metals market. It is optimistic about its business prospects and seems to be well-positioned to leverage on near term opportunities.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company has recently expanded its trading team and appointed Rick Gibbons as senior vice president of trading, global precious metals. The stock of AMRK is trading close to its 52-weeks’ high levels of $57.63. The stock of AMRK gave a positive return of ~88.74% in the past three months and a positive return of ~147.81% in the past nine months. On a technical analysis front, the stock of AMRK has a support level of ~$51.055 and a resistance level of ~$55.900. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in % terms). We believe that the company can trade at a slight premium to its peer median P/E (NTM trading multiple), considering the robust financial performance and completion of the acquisition of JM Bullion, Inc. For this purpose, we have taken peers such as SWK Holdings Corp (NASDAQ: SWKH), FlexShopper Inc (NASDAQ: FPAY), to name a few. Considering the current high trading levels, recent rally in the stock price, high asset to equity ratio, we suggest investors to book profits and give a ‘Sell’ rating on the stock at the closing market price of $54.490, up by ~2.19% as on June 01, 2021.

AMRK Daily Technical Chart, Data Source: REFINITIV 

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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.