Maverix Metals Inc

Maverix Metals Inc. (TSX: MMX), is a precious metals royalty and streaming company which offers a mining-related investment that provides exposure to metal price appreciation, and exploration and expansion potential.

Key highlights

• Rising GEO outlook for 2021: On the back of healthy portfolio of operating mines the company expects 27,000 to 30,000 attributable GEOs in 2021, with a cash margin of over 90% and revenue earned from gold and silver accounting for nearly all of it, which is commendable.

Source: Company

• Increase in cash flow from operations: In Q1 2021, the company clocked the cash flows from operations at USD13.5 million compared to USD4.8 million in the previous corresponding period. The increase in cash flows was mainly due to growing portfolio of cash flowing Royalties and Streams and 13% increase in the realized gold price per GEO.

• Increase in dividend distribution: The company has recently paid a quarterly dividend of USD 0.0125 per share on June 15, 2021, to shareholders.  The amount of the dividend is a 25% increase from the previous dividend of USD 0.01 per share, which is a key positive. An increase in dividend distribution reflects the resilience of business as well as an investor friendly status.

Source: Company

• Industry Beating Margins: The resilient business of the company assisted in outperforming the industry margins. The matrix below gives a glimpse of this.

Financial overview of Q1 2021 (in thousands of United States dollars)

Source: Company

• In Q1 2021, the company’s revenue increased to USD 13.0 million compared to USD 9.2 million in the previous corresponding period. The increase was mainly due to higher sales and royalty income.
• Gross profit in the reported period increased to USD 7.9 million against USD 5.0 million in pcp, although it recorded higher cost of sales.
• Income from operation in Q1 2021, stood at USD 5.4 million compared to USD 2.4 million in pcp.
• On the back of gain on buy back of royalty interest and gain on conversion of debentures, the company posted massive increase in its net profit at USD14.7 million against USD 0.86 million in pcp.

Risks associated with investment

The company is prone to many risks, such as risks related to international operations, government and environmental regulations, delays in mine operations, actual results of mining and current exploration activities, etc. Furthermore, its financial performance is mostly dependent on the price of gold, which directly affects its profitability and cash flow. 

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

Maverix was added to the GDXJ in the first quarter of 2021, marking yet another milestone. The revenue was boosted by 41% in the first quarter of 2021, compared to the same period in the previous year. We believe the firm is on track to meet its previously disclosed forecast of 27,000 to 30,000 GEOs in 2021 at a cash margin of about 90%, with gold and silver accounting for nearly all the projected revenue. Furthermore, recently the company increased its dividend distribution by 25%, which reflects the company is an investor friendly. We expect gold as an asset class would continue to remain in the limelight. Based on technical analysis, the stock has support at CAD 5.55 level. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 6.70 on June 30, 2021. We have considered Franco-Nevada Corp, Agnico Eagle Mines Ltd, etc., as the peer group for the comparison.

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

One-Year Technical Price Chart (as on June 30, 2021). Analysis by Kalkine Group 

Chemtrade Logistics Income Fund

Chemtrade Logistics Income Fund (TSX: CHE.UN) provides industrial chemicals and services which operates in four business segments: Sulphur Products & Performance Chemicals (SPPC), Water Solutions & Specialty Chemicals (WSSC), Electrochemicals (EC) and Corporate (Cor). 

Key highlights 

• Catering to diverse industries: The company continuously develops its product offering while working with customers to improve performance, drive efficiency and enhance product quality. Today its products are used across many major industries such as Water and Wastewater Treatment, Food, Beverage, Pharmaceutical, Pulp & Paper, Oil & Gas, Industrial Processing, Agriculture, and more. We feel that this diversification contributes to its success because it is not entirely dependent on one area. These industries' sluggish demand has begun to improve, although it is still well below pre-pandemic levels.
  

• An income play: The group continues with a track record of dividend payment and recently it announced a monthly dividend of CAD 0.05 per common share payable on July 27, 2021. At the last closing price, the stock was offering a dividend yield of 8.955%, which is lucrative considering the current interest rate environment.

• Enhanced liquidity through issuance of Fund units: During Q1 2021, the company completed an equity offering of 9.8 million units at a price of CAD 7.15 per unit, resulting in total gross proceeds of CAD 70.1 million. Proceeds from the offering were used to repay its outstanding indebtedness under its senior credit facilities and for general trust purposes.

  Financial overview of Q1 2021 (In thousands of CAD)

Source: Company

• In Q1 2021, the company reported revenue at CAD 312.4 million, against CAD 366.9 million in the previous corresponding period. The fall in revenue was primarily due to lower sales volumes and lower selling prices for caustic soda and hydrochloric acid, lower merchant sulphuric acid, Regen acid, and other Sulphur Products and Performance Chemicals products segment.
• Gross profit enhanced to CAD 20.9 million, against a loss of CAD 21.0 million in Q1 2020. An improved gross profit was mainly due to the lower cost of sales and services.
• On the back of lower SG&A expenses, the operating loss stood at CAD 7.5 million in the reported quarter against CAD 51.5 million of loss in pcp.
• The company managed to minimize its net loss to CAD 20.4 million compared to CAD 97.8 million in the previous corresponding period, mainly due to lower finance cost.

Risks associated with investment

Commodity prices influence the company's performance, and price volatility impacts the company's success. Other business risks include a general decrease in demand for its products, the loss of a segment of its client base, the disruption of product or raw material supply, etc.

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

The company began to see signs of improvement in several of its businesses. However, the operating results for Q1 2021 were affected by conditions caused by the COVID-19 pandemic, primarily non-essential travel restrictions that have impacted refinery production rates and the demand for regen acid, and reduced demand for paper, which affects demand for sodium chlorate. Since it caters to the specialty chemicals segment, which has high entry barriers with a stable client base, it also transformed itself into a leading supplier of several industrial chemicals and has a substantial product presence across the North American market. Furthermore, the stock is offering a hefty dividend yield of ~8.96%. We also expect the improving demand for the company's products supporting the revenues with a gradual revamp of the economy. Based on technical analysis, the stock has support at CAD 5.60 level. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of CAD 6.70 as on June 30, 2021. We have considered Ag Growth International Inc, Mosaic Co, Superior Plus Corp, etc. as the comparison's peer group.

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

One-Year Technical Price Chart (as on June 30, 2021). Analysis by Kalkine Group

StageZero Life Sciences Ltd.

StageZero Life Sciences Ltd. (TSX: SZLS) is a Canada-based company focused on developing and commercializing molecular diagnostic tests for the early detection of cancer. It has developed Sentinel Principle platform technology, which determines biomarkers from whole blood. In addition, the company offers a ColonSentry product, which is a blood test to determine an individual's current risk for having colorectal cancer.

Key Highlights:

• Acquiring Care Oncology: The company announced that it would be acquiring Care Oncology, which provides the clinical interventions needed to help patients stay well and avert chronic disease. The acquisition would offer multiple revenue streams, from testing to ongoing patient monitoring. The acquisition is expected to close in Q3 2021.
• Capitalizing on the latest trend in the sector: The company is leveraging its technology to broaden into the intervention of other chronic diseases over time and capitalizing on strong trends towards liquid Biopsy and Telehealth, a long-term catalyst for the company. The acquisition of Care Oncology would help the company to use telehealth to reach millions of consumers and employers.
• The resurgence of COVID-19 would help the topline: The company is generating near term revenue from COVID-19 testing, and a resurgence of COVID-19 Delta mutant would support this segment in the near term.
• Providing COVID-19 testing result same day: Recently, the company announced the opening of a new drive-up COVID-19 testing site at 8751 Park Central Drive in Richmond, VA. While most COVID-19 PCR testing programs can only provide a 1-2 day turnaround for results, StageZero's fast-track, the drive-up testing program, is providing results the same day. International air travel is picking up, and many countries - including Canada, Barbados, Bermuda, Jamaica and others - require travellers, regardless of vaccination status, to provide proof of a negative COVID-19 PCR test prior to departure. The most rapid-result testing options currently available are antigen tests, which are not widely accepted for international travel. StageZero Life Sciences provides fast, convenient COVID-19 PCR test results and clear documentation for travel abroad.
• Breakout on the daily price chart: On the daily chart, SZLS stock price broke the downward sloping trend line resistance at CAD 0.475 level on 30 June 2021 after hitting the 52-week low of CAD 0.40 level. Prices are now showing a sharp upside recovery from the lower end. The momentum oscillator RSI (14-period) has bounced from the oversold zone and now trading at ~39.53 level, indicating a possibility of price pullback. However, prices are trading below the 50-period SMA, acting as the immediate resistance level for the stock. An important crucial support level for the stock is placed at CAD 0.40, while the key resistance level is placed at CAD 0.583.

Technical Analysis Chart, Analysis by Kalkine Group

Financial Highlights: Q1FY21

• For the three-month period ended March 31, 2021, the Company generated CAD 2.5 million in revenue and reported a consolidated net loss of CAD 7.30 million, or CAD 0.08 loss per common share, as compared with revenue of CAD 0.03 million and a consolidated net loss of CAD 2.4 million, or CAD 0.08 per common share, for the same period in 2020.
• The CAD 4.9 million increased in loss results from the CAD 4.2 million impact of the revaluation of warrants, the CAD 0.7 million impact from the increase in cost of goods sold, the CAD 1.2 million impact from the increase in general and administrative costs, the CAD 1.4 million impact from the change in the fair value of the conversion debenture, offset by the CAD 0.2 million impact of a decrease in finance costs and the CAD 2.4 million impact of the increase in revenue.
• The company’s financial cost had drastically dropped by 75% in the quarter under consideration.

Risk Associate to Investment: Any adverse move in the long-term business plan could also have a weigh on the group’s performance. Moreover, given the penny cap market capitalization of the company, the group is exposed to multiple risks ranging from liquidity to large swing in the stock price.

Stock Recommendation: The company is executing on its long term strategy and expanding the use of the Aristotle multi-cancer panel. The company is managing a complete cancer patient journey from liquid biopsy testing, telehealth and adjunctive treatment. The company is also leveraging its technology to broaden into the intervention of other chronic diseases over time. On the valuation front, the stock is available at forwarding EV to Sales multiple of 1.4x, which significantly lower compared to the industry (healthcare) median of 6.9x. Also, technical indicators are also suggesting a potential pullback in the prices. Based on technical analysis, the stock has support at CAD 0.4 level. Hence, based on the rationales mentioned above, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 0.485 on June 30, 2021, with lower double-digit upside potential.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock if the price closes below the support level.

One-Year Technical Price Chart (as on June 30, 2021). Analysis by Kalkine Group

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

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.