This report is an updated version of the report published on 28 November 2024 at 5:30 PM AEDT.  

Deterra Royalties Limited (ASX: DRR)

DRR is an Australia-based company that manages and grows a portfolio of royalty assets across a range of commodities, primarily focused on bulks, base, and battery metals.

Recommendation Rationale – SELL at AUD 3.72 

• Financial Highlights: DRR’s revenue declined by 9.2% QoQ to AUD 53.1mn in 1QFY25 vs AUD 58.5 4QFY24, due to lower sales in royalty revenue. DRR’s mining production facility, under the Mining Area C Iron Ore Mine, produced 33.9mn wet metric tonnes (Mwmt) on a 100% basis in 1QFY25, reflecting a 0.9% decline compared to the previous quarter. Implied average revenue per tonne decreased by 11.6% QoQ to 130 in 1QFY25.

• Trading Near the Resistance: DRR’s share price is trading near to its R1 level recommended on 13 November 2024. Therefore, share price can face resistance at the current levels.

• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/Sales EV/EBITDA, Price/Cash Flow, Price/Earnings, Price/Book) are higher than the median of Basic Materials sector.

• Market Risk: The company's revenue depends on commodity prices, making it sensitive to price changes. Additionally, changes in mining regulations, environmental laws, and taxation policies may threaten its revenue streams.

DRR’s Daily Price Chart

Considering the volatile market condition, risks associated, and the share price can face consolidation at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the closing market price of AUD 3.720, as of 28 November 2024.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 28 November 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.