Gold Resource Corporation

GORO Details

Gold Resource Corporation (NYSE: GORO) is a mining company engaged in the production of metal concentrate and doré, which includes both precious and base metals such as gold and silver, as well as copper, lead, and zinc. Its Mexican subsidiary Don David Gold Mine has six projects, including the Arista underground mine at the Aguila project, its principal mineral production project that provides ore to its processing facilities, also located at the Aguila complex.

Latest News:

• Strategic Acquisition: On October 06, 2021, GORO signed a definitive agreement to acquire Aquila Resources Inc., a development-stage mining company focused on the US Upper Midwest, under which 100% of the equity interests in Aquila will be exchanged for 0.0399 shares of GORO, amounting to consideration of CAD 0.09 per Aquila share (representing a total purchase consideration of CAD 30.9 million). Upon closing, GORO and Aquilla shareholders will own around 85.1% and 14.9%, respectively, of the combined entity on a fully diluted basis. The merger is expected to be accretive to GORO's shareholders in the short to medium term by multiple factors, including the beginning of production at the Back Forty Project (scheduled to start by FY24 end).

Q2FY21 Results:

• Surge in Topline: The company reported a YoY surge of 146.27% in net sales to USD 30.84 million in Q2FY21 (ended June 30, 2021) from USD 12.52 million in Q2FY20. The Concentrate sales, representing 88.42% of the net sales in Q2FY21, witnessed a sharp uptick of 1.77x, whereas the Doré sales improved by 18.06% YoY.
• Visibility of Profitability: GORO reported a net income of USD 1.28 million in Q2FY21 vs. a net loss of USD 1.81 million in Q2FY20.
• Cash and Debt Position: As of June 30, 2021, the company had cash & cash equivalents of USD 30.54 million and no outstanding debt.

Risks:

• Metal Price Risk: The highly unpredictable and uncontrollable prices of gold, silver, and base metals on the worldwide market substantially impact GORO's operations. As a result, any unfavorable price movement could have a detrimental influence on the company's financials.
• Regulatory Risk: GORO is a gold mining company that requires several ongoing permits from the federal government and municipal governments. As a result, tighter rules or non-compliance with required legislation could harm the company's profitability.

Outlook:

Updated FY21 Guidance (Source: Press Release, October 14, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation   

(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.

GORO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

GORO's stock price decreased 37.77% in the past six months and is currently leaning towards the lower band of its 52-week range of USD 1.55 to USD 3.78. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 57.74. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 2.16.

Considering the correction in the stock price, strong balance sheet, accretive corporate acquisition, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 1.76, up 3.85% as of October 25, 2021, 11:19 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. 

AcelRx Pharmaceuticals, Inc.

ACRX Details

Pharmaceuticals, Inc. (NASDAQ: ACRX) is a specialty pharmaceutical business specializing in the development and commercialization of acute pain medicines. Its major pipeline products include DSUVIA (also known as DZUVEO in Europe) and Zalviso. In addition, ACRX is also developing ARX-02 and ARX-03. As of October 25, 2021, the company's market capitalization stood at USD 108.81 million.

Q2FY21 Results:

• Contraction of Topline: The company reported a YoY decline of 84.85% in total revenue to USD 0.44 million in Q2FY21 (ended June 30, 2021) from USD 2.92 million in Q2FY20, due to a decline in Contract & Other Collaboration revenue on account of termination of Grünenthal agreements (which previously granted Grünenthal GmbH the right to market Zalviso in Europe).
• Expansion of Net Losses: Net loss for the company increased to USD 9.85 million in Q2FY21 vs. USD 6.61 million in Q2FY20.
• Strong Balance Sheet: As of June 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 55.33 million and total debt of USD 18.14 million.

Key Risks:

• Product Concentration Risk: The success of DSUVIA is critical to ACRX's prospects. It has invested a significant amount of resources in its development. If it fails to get marketing permissions or set up an efficient manufacturing and distribution system, it could harm its operations.
• Distributor Concentration Risk: ACRX distributes DSUVIA and Zalviso through a small number of distributors and pharmaceutical wholesalers. As a result, any breach of contract by distributors and wholesalers could adversely impact the company's operations.

Outlook:

As of July 31, 2021, ACRX had obtained 516 formulary approvals, and it intends to exceed its guidance of 615 approvals by the end of FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(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.

ACRX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ACRX's share price fell 62.86% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 0.75 to USD 2.94. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 25.74. We have valued the stock using the EV/Sales multiple-based relative valuation methodology and arrived at a target price of USD 1.10.

Considering the correction in the stock price, increasing demand of the pharmaceutical products, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 0.90 as of October 25, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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.