GoldSpot Discoveries Corp (TSX: SPOT.V) is a technology company engaged in machine learning to reduce capital risk while working to increase efficiencies and success rates in resource exploration and investment. The Company has developed a monetization strategy into multiple verticals of the mining and investment industry, including consulting service offerings, exploration property staking and royalty acquisition.

Investment highlights 

• Posted record consulting revenue: The company’s consulting revenue in Q2 202, increased 166% to CAD 2.49 million as compared to CAD 0.93 million in the previous corresponding period. Furthermore, the company expects to boost its consultancy revenue to CAD 10 million in FY 2021. The higher revenue will be mainly due to healthy  service contract from senior mining companies.

Source: Company 

• Healthy operating matrix: The company has showed some lively performance, improving on all criteria of its operational matrix. Furthermore, it is constantly collaborating with clients; as a result, its visibility is growing in tandem with volume, which is commendable. In Q2 2021, the company leaped industry median on many fronts, reflects the operational efficiency.
  

• Developing technologies: While the company holds an appeasing operating metric and furthermore, it plans on investing significantly in accelerating the development of key technologies to eventually monetize it as a software. The Company believes this will contribute greatly to its revenue and sustainability in the longer-term, which is a key positive.
  

Financial overview of Q2 2021 (in Canadian dollars)

Source: Company 

• In Q2 2021, the company posted healthy revenue at CAD 18.49 million compared to CAD 4.13 million in the previous corresponding period. The higher revenue witnessed healthy performance from the consulting revenues as well as from investment gains.
• After taking account of losses from equity investment in the reported period the company’s income before income tax stood at CAD 14.3 million compared to CAD 2.8 million in pcp.
• Net income in Q2 2021 stood at CAD 12.7 million compared to CAD 2.8 million in Q2 2020.
  

Risks associated with investment

Mining and exploration companies may be affected by economic factors and government factors, which may impact a low drilling activity. This could affect the company’s operations, which would minimize its topline and bottom-line.

Valuation Methodology (Illustrative): EV to Sales based 

Stock recommendation

With record second quarter results, the company continues to acquire remarkable pace, delivering increased revenues and strong net profitability. The company's achievement in the reported quarter, we think, confirms its diversified business plan as an artificial intelligence leader with a well-funded balance sheet and a multi-channel sales and distribution network poised for expansion in the worldwide mineral exploration industry. Furthermore, with a favorable operational metric, it intends to invest heavily in speeding the development of important technologies in order to eventually monetize it as software, which is a huge plus. Therefore, based on the above rationale and valuation, we recommend a " Speculative Buy" rating on the stock at the closing price of CAD 1.04 on November 04, 2021. We have Select Sands Corp, Americas Gold and Silver Corporation, Ibc Advanced Alloys Corp etc., as a peer group for comparison purpose.

Technical Analysis Summary:

One-Year Technical Price Chart (as on November 04, 2021). Source: REFINITIV, Analysis by Kalkine Group

Medipharm Labs Corp

Medipharm Labs Corp (TSX:LABS) formerly known as POCML 4 Inc, is a Canada-based medicinal cannabis company specializing in the pharmaceutical grade production of cannabis. The Company is focused on distillation and cannabinoid isolation and purification.

Key Highlights

• New CEO is in place to lead company’s next phase of international expansion: As of October 21, 2021, Bryan Howcroft appointed as new CEO of. Bryan Howcroft brings over 20 years of leadership in multiple industries including medical devices, healthcare imaging, and manufacturing. Most recently, Bryan held the position of Chief Operational Officer and Chief Financial Officer of Southmedic, a company that provides healthcare products, custom manufacturing, and distribution in over 60 countries globally.
  

• CBD50 product to proceed to Phase 2 trial: Insomnia Treatment Study using MediPharm Labs CBD50 Product to Proceed to Phase 2 trial as MediPharm Labs’ CBD25:, have received a no objection letter from Health Canada to begin recruiting human subjects for a placebo-controlled trial using cannabis- oil for treatment of insomnia in major depressive disorder.
  

• Scaled Canadian presence with New Products: In Q2FY21, the company has begun delivery to government operated cannabis retail stores in the Province of Québec. The Company has experienced positive reorders with weekly POs being fulfilled. Moreover, the company bagged the Ontario Cannabis Store product call adding SKUs in oil and vape formats, particularly a high demand CBD vape product that contains only CBD and naturally derived terpenes.
  

• MACD Crossover: On daily price, the leading momentum indicator Moving Average Convergence Divergence (MACD) is rising, with the difference between short-length 12-day EMA and long-length 26-day EMA is positive, and MACD oscillator registered a crossover above 9-day SMA signal line, a bullish indicator.

Technical Chart (as on November 04, 2021). Source: REFINITIV, Analysis by Kalkine Group

• Registered a breakout above 20-day SMA: On daily price chart, LABS shares registered a breakout above 20-day SMA and sustained above it for two consecutive sessions, a bullish indicator. Moreover, the 14-day RSI after taking strong support near 40 has now charted into neutral zone with bullish bias at 50.17, indicates a potential upside from the current trading level.

Technical Analysis (as on November 04, 2021). Source: REFINITIV, Analysis by Kalkine Group

Risk Associated to Investment

Given the bearishness in the broader Cannabis market, investors are exposed to large swings in Cannabis sector stock prices. Further, the company is exposed to regulatory risks, liquidity risk, interest rate risk, supply chain risks and others.

Financial Highlights: Q2FY21

Source: Company Filing

• On a sequential quarter basis, the company reported a 7.7% decline in revenue , mainly because of 26% decline in domestic Canadian sales from CAD 3.5 million to CAD 2.6 million as a result of restrictive COVID19 lock downs and resulting provincial distributor inventory reductions.
• However, in Q2FY21, the company international sales expanded by 24% to CAD 2.5 million vs CAD 2 million reported in Q1FY21.
• In Q2FY21, the company’s reported Net loss stood at CAD 11.8M, losses narrowed sequentially due to reduced finance expense from the convertible debenture.

Stock Recommendation

In the second quarter of FY21, the company business was adversely impacted due to resurgence is COVID-19 cases. However, supply chain related issues expected to get fixed gradually given the mass vaccination programme exercised across the Canada and in other countries as well. We believe that the company’s performance will improve in remaining period of 2021 and in 2022 given the gradual recovery in the broader economy and improving supply chain.

Further, on daily price chart, stock is generating bullish technical signals with MACD crossover, 14-day RSI in neutral zone with bullish bias, and a breakout above 20-day SMA.

However, company is exposed of varied number of risks, so investors those who are having a higher risk appetite could punt on this stock from a long-term standpoint. 

Hence, we recommend a “Speculative Buy” rating on “LABS” stock at the closing price of CAD 0.28 (November 04, 2021).

Technical Analysis Summary:

Technical Price Chart (November 04, 2021). Source: REFINITIV, 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.