Goldmoney Inc.

Goldmoney Inc. (TSX: XAU) 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 updates:

• Cash flow turned positive: In Q1FY22, the company reported its cash flow from operating activities of CAD 3.615 million, as compared to cash used of CAD 5.476 million in pcp. A positive cash flow is encouraging as it supports the company’s overall liquidity.

• Improved macros: In the recent past, the international price of gold and silver has remained elevated, supported by rising bond yield, overvalued equities, lower dollar index etc. We expect the outlook of precious metals in the long-term, is likely to remain elevated, supported by high levels of fiscal stimulus due to the weakening U.S. dollar and rapidly increasing prices to cryptocurrencies, commodities, equities and non-fixed interest financial assets.

• Improved client holdings: The company reported a constant growth in its client holdings, which is a key positive, and continuation of the above trend would lead to improved prospects for the company.

Source: Company Report

• Launch of digital storage drive solution: Recently, the company reported the launch of its digital storage drive solution in beta through its subsidiary company Totenpass Inc. The above would allow its clients with the permanent storage of precious digital data, and hence eliminating any future dependence on the internet and additional storages. 

Q1FY22 Financial highlights:

• XAU announced its quarterly result, wherein the company posted its revenue of CAD 94.705 million, higher than CAD 173.499 million in pcp.
• Gross profit came at CAD 6.167 million, slide from CAD 10.615 million in Q1FY21. The decline was primarily due to lower income, partially offset by lower cost of sales.
• The quarter was marked by a decline in the total operating expenses of CAD 3.716 million v/s CAD 4.934 million in pcp.
• Net income was recorded at CAD 0.95 million, as compared to CAD 6.048 million in pcp. The decline was primarily due to an unrealized gain of CAD 895.434 million in Q1FY21, as compared to an unrealized loss of CAD 803.517 million in the current period.

Q1FY22 Income Statement Highlights (Source: Company Report)

Risks: The company reported a slide in its income and profitability on y-o-y basis, and the continuation of the above trend is likely to dampen the company’s upcoming performance.

Stock Recommendation:

The group reported a constant increase in client holdings, which is a key positive. Moreover, with the recent launch of digital data, the clients would empower to decentralize, preserve and fully control their precious digital data permanently. The stock of XAU is trading at a significantly lower valuation of 0.3x on a TTM basis, as compared to the industry (Technology) median of 5.1x. Hence, considering the aforesaid facts, we give a ‘Speculative Buy’ rating on the stock of XAU at the last traded price of CAD 2.38 on October 29, 2021.

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

Technical Analysis Summary:

One-Year Technical Price Chart (as on October 29, 2021). Analysis by Kalkine Group 

PFB Corporation

PFB Corporation (TSX: PFB) is Canadian based firm which is in the business of delivering products and solutions in the areas of manufacturing insulating building products made from expanded polystyrene materials. 

Key Highlights:

• Improved liquidity: In Q3FY21, the company reported its liquidity position of quick ratio of 1.61x and current ratio of 2.03x, respectively, which is better than the industry median of 1.34x and 1.95x, respectively. The above indicates that the company is prudently managing its short-term liabilities through its short-term assets.

• Positive technical outlook: On a daily chart, the PFB stock showed a positive up move in the last four-trading session and closed above its 20-days and 50-days simple moving average, indicating a bullish pattern.

Daily Price Chart (October 29, 2021). Source: REFINITIV, Analysis by Kalkine Group

• Improved margins: The company commands higher margins than its peers, which indicates improved operational efficiency and is a key positive. Notably, EBITDA margin and operating margin were recorded at 18.4% and 16.2%, respectively, higher than the industry median of 17.4% and 14.2%, respectively. Moreover, the company’s net margin stood at 12.1% during the period, higher than the industry median of 9.1%.

Q3FY21 Financial Highlights:

• PFB announced its quarterly result, wherein the company posted its revenue of CAD 47.981 million, higher than CAD 41.986 million in pcp. The growth was driven by strong growth from the USA segment (CAD 21.932 million v/s CAD 15.436 million in pcp) due to solid traction across the majority of the company’s product lines.
• Gross profit stood lower at CAD 13.182 million, as compared to CAD 15.417 million in pcp, due to significantly higher cost of sales (CAD 34.799 million v/s CAD 26.569 million in pcp) on account of rising raw material prices.
• Net income was recorded at CAD 5.80 million, as compared to CAD 7.331 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks: The company’s operation was hindered due to the sharp rise in the raw-material prices due to increase in resin and other materials prices during Q3FY21, and continuation of the above trend is likely to dampen the company’s margins and cash flows.

Valuation Methodology (Illustrative): Price to Earnings 

Stock Recommendation:

The company’s operations are directly co-related to the U.S. building sector, which has performed well in the recent past, while the momentum is likely to continue in the coming quarters as the residential, commercial and infrastructure construction service continues to grow. Additionally, there is robust demand for the branded insulation building products and services across North America. The corporation is highly poised to take advantages from the above demand scenario. We have valued the stock using the Price to Earnings based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered industry (Home building & construction supplies) median on an NTM basis. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of PFB at the closing price of CAD 22.40 on October 29, 2021.

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

Technical Analysis Summary:

One-Year Technical Price Chart (as on October 29, 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.