GoldMoney Inc. (TSX: XAU) is engaged in precious metal sales to its clients on its online platform. Its services include arranging delivery and storage of precious metals for its clients, coin retailing, and lending.

Key highlights 

• Growth in Asset Under Custody: The company's asset under management has grown gradually in recent years, owing to its continued focus on offering a smooth experience, as well as additional services such as custody arrangement, dealing, managing, and unrivalled research. It has clients in 120 countries and manages about CAD 2.1 billion in precious metal assets.

Source: Company Filing

• Clocking higher fee income on sequential basis: Fee revenue is mostly generated by the storage of precious metals on the Goldmoney.com platform. This fee is also recurred from bar registration services as well as inactive/dormant fee charges. The company continues to follow its policy of earning revenues based on metal weight, which, combined with higher overall precious metal market prices, has resulted in significant increases in fees revenue on a sequential basis, with CAD 1.58 million in fee revenue in the reported period compared to CAD 1.41 million in Q1 2022.

• Restructured Jersy operations: In June 2021, the Company successfully transferred its operations to Canada, and in Q2 2022, the Company effectively ended all operations in Jersey. In the following reporting periods, the Company intends to reap the full benefit of anticipated cost savings and efficiencies.

Risks associated with investment: The Company is exposed to price risk concerning the price of gold, silver, platinum, and palladium held as assets. Commodity price risk is defined as the potential adverse impact on the earnings of the Company. Other risks involved are like Foreign Currency Risk, Interest Rate Risk, and Liquidity Risk, etc.

 Financial overview of Q2 2022 (Expressed in Canadian Dollars)

Source: Company Filing

• In Q2 2022, the company posted revenue of CAD 69.0 million compared to CAD 243.6 million in the previous corresponding period. The lower revenue was primarily due to decreased metal trading operations, compared to the last year.
• Gross profit in the reported period stood at CAD 1.6 million against CAD 10.4 million in the previous corresponding period. The decrease is due primarily to lower gross profits and revaluation loss on precious metals.
• On the back of higher operating expenses, the company witnessed operating loss in the reported period which stood at CAD 4.8 million compared to a profit of CAD 5.8 million in pcp.
• Net loss stood at CAD 3.2 million compared to net profit of CAD 7.5 million in pcp. The loss was mainly due to lower revenue along above stated reasons.
  

Stock recommendation

Despite the fact that precious metals markets are now volatile, we anticipate strong performance in H2 2022 by the company as investors deal with the economic consequences of the pandemic and the low-interest-rate environment. Additionally, the company’s clients will be returned to normal trading activity on the platforms following the brief period of transition and re-onboarding that occurred the previous quarter, which is a significant positive. Furthermore, post restructuring of its Jersy operations the Company expects to realize the full benefit of expected cost savings and efficiencies in the subsequent reporting periods.

On the valuation front, the stock is available at an EV to Sales multiple of 0.4x on TTM basis, which is significantly lower than the industry (technology) median of 4.3x. Hence, considering the above rationale, we recommend a ‘Speculative Buy’ rating on the stock at the last closing price of CAD 1.97 on January 19, 2022.

One-Year Technical Price Chart (as on January 19, 2022). Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in 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 where-in 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: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings.

Disclaimer

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