SUNDAY ROAST: The small caps that lit a fire under Stockhead’s experts this week
Gold’s having a tougher time of it than it probably should be. December quarter production was a general disappointment and Garimpeiro’s tipping March quarter production won’t be much better.
The big sell-offs have been among the junior producers. Sounds like a great place to go bargain-hunting, and Fitz has settled on Gascoyne (ASX:GCY), based in WA’s Murchison region, currently suspended, and currently not a producer at all.
Gascoyne suspended operations at its 70,000 ounce-a-year Dalgaranga operation last year so new MD Simon Lawson (formerly Northern Star) could save some cash and gold while he pulls together a new long-term vision.
There’s a new prospect in the form of the Never Never deposit, and unlike Dalgaranga, it’s high grade. It’s also helped GCY pull $50m funding, including $23m from savvy resources private equity fund Tembo Capital.
Lawson aims to turn Never Never into a five-year operation delivering 130,000-150,000 ounces annually, and have Dalgaranga back in production in the September or December quarter next year.
The $50m was raised at 10c a share, so when GCY comes out of suspension on March 9, it won’t be at 19.5c. At 10c, it will have a market cap of $87 million.
And that’s not a lot at all, Garimpeiro reckons “for a (potential) 130,000-150,000 ounce producer which has become low-cost all of a sudden thanks to a discovery like Never Never.”
There’s been a noticeable rise in interest amongst brokers for education stocks lately.
CCZ is on-board the thematic, and this week put out a couple of very lofty price targets on two specialist education stocks, starting with an upgrade to Buy for online learning specialist 3P Learning (ASX:3PL).
CCZ’s target price of $1.84 is around 50% above the $1.21 range it ended the week at. So what’s the market missing?
A couple of programs nearing development completion – ‘Mathletics’ and ‘Writing Legends’. Both are expected to launch in the second half of FY23, aka “revenue generation stage”.
And there’s a huge target price call for Kip McGrath Education Centres (ASX:KME). has a share price target on KME at $1.68, which is more than triple last week’s lows around 51c.
KME recently released an expansion strategy to grow educational centres from 522 to 800+ in existing markets. CCZ’s forecast is based on the conservative end of that strategy, and also takes into account Kip’s potential to increase revenue by extending its operating weeks in the year from 40 to 52 weeks.
Co-founder and CEO, Fresh Amplify
With a tightening of private capital, Fresh Amplify co-founder and CEO Ben Williamson told Stockhead more startups are starting to rethink the listed market.
They might again after seeing how the following three have fared since listing. It’s a jungle out there, and the market hasn’t been kind – but at least they’ve hung in there and Williamson says with revenue and profitability approaching, they look very undervalued.
Tinybeans (ASX:TNY) – listed April 21, 2017 at $1, hit $4 in 2019 and currently trading at 25 cents with a market cap of ~$16m.
TNY sells an information and social media tool for families to privately share memories. In six years of listed life, it’s moved from $1.3m revenue to $16m in 2022.
“Now trading at around 1x revenue, it is a company that would most definitely be valued much higher as a private company,” Williamson says.
Wisr (ASX:WZR) – listed July 13, 2015 at 20c, now trades around 6 cents with a current market cap of $84m.
This non-bank consumer lender uses technology to help drive applications and lending decisions.
“Whilst impacted from the market sentiment shift away from listed fintechs (think BNPL & boutique lenders), Wisr has continued to grow with a loan book nearing $1bn and annualised revenue approaching $100m,” Williamson said.
“These are cash hungry businesses whilst getting set up, and then typically become cash generating machines afterwards.”
He said sentiment appears to be turning for WZR as investors can see hard work shining through and it starts to move to operational profitability.
Spectur (ASX: SP3) – listed June 2017 at 40c, currently trading around 3 cents for a market cap of $6m.
SPC is an autonomous security and warning system. Williamson said with the average daily trading volume being ~$6k, the low liquidity brings risk, and poses the question – is this the right valuation?
“With all that in mind the company’s revenue is ticking up steadily, with last quarter hitting a record of $1.96m,” he said.
“Annualised that is nearly $8m of revenue, and growing, for a business with a $6m market cap.”
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.