GoldMoney Inc. (TSX: XAU) is engaged in the precious metals business spread globally. Through its ownership of various operating subsidiaries, the company is engaged in precious metal sales to its clients, including arranging delivery and storage of precious metals for its clients, coin retailing, and lending.

Key Highlights:

• Improved gross profits and reduced operating expenses: For Q3FY22, the company reported an increase in the gross profits to CAD 5.76 million as compared to the gross profits of CAD 4.91 million in Q3FY21. The increase was majorly from the gain on a revaluation of precious metals in Q3FY22. Group improved its cost management to a great extent which is reflected in the decreased operating expenses of CAD 3.08 million against the CAD 3.65 million in Q3FY21. The decrease in the operating expenses was majorly from the decline in payroll expenses in Q3FY22. 

• Asset under management: The company saw an increase in its asset under management business where all the precious metals are stored on an allocated basis and made available for delivery at the request of the customers. For the 9MFY22 ending, the group reported its asset under the management of CAD 2.15 billion. Below is the pictorial presentation of the growth of the assets under management by the company.

Source: Company filing

• Improved liquidity: For Q3FY22, the company reported an increase in its cash and cash equivalents to CAD 26.34 million as compared to the cash and cash equivalent of CAD 18.38 million in Q3FY21. The increase in cash and cash equivalent will help the company to meet its business operations smoothly and achieve the strategic growth objectives as laid by the management.

Risks associated with investment

The company is vulnerable to the declining prices of precious metals such as gold, silver, etc. The other key challenges the business is facing are, currency volatility, rise in interest rates which might lead to a decline in the demand for commodities.  

Financial overview of Q3FY22 (Expressed in CAD)

Source: Company Filing 

• During Q3FY22, the company reported a decrease in the total revenues to CAD 67.07 million as compared to CAD 97.59 million in Q3FY21. The decline in the revenue was from the change in the consumer behavior as post-COVID-19, the demand for the traditional assets (such as stocks, and real estate) has increased as compared to the safe heave assets such as gold.

• The company reported an increase in gross profit to CAD 5.76 million in Q3FY22 against the gross profit of CAD 4.91 million in Q3FY21.

• For Q3FY22, the company reported a decline in the net income to CAD 2.62 million vs the net income of CAD 4.04 million in Q3FY21.

Stock Recommendation:

The group reported an increase in the assets under management for the 9MFY22 at CAD 2.15 billion, which has been on an increasing trend over the past few years. Further, the company witnessed a rise in gross profits despite the lower sales in Q3FY22 as compared to the numbers of Q3FY21. Recently the company closed its Jersey operations to avoid redundancies in operations and to maximize the cost savings. On the valuation front, the stock is measured on the EV/ Sales based multiple and the stock is currently trading at 0.3x as compared to the industry (technology) median of 2.9x, suggesting the stock is still undervalued.

Therefore, based on the above rationale, we recommend a “Speculative Buy” rating on the stock of XAU at the last closing price of CAD 1.55 on May 26, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as of May 26, 2022). Analysis by Kalkine Group

Note- The reference data has been partly sourced from REFINITV 

Technical Analysis Summary

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