The below-mentioned stocks are trading close to their 52 weeks low prices. In the last six months, both the stocks have provided negative returns. Let’s take a closer look at these stocks and their recent updates.
MaxiTRANS Industries Limited (ASX: MXI)
Australia’s leading supplier of truck and trailer parts, MaxiTRANS Industries Limited (ASX: MXI) operates two types of businesses: the Trailer Solutions business and the Parts business; MaxiPARTS, a trailer and truck parts business in Australia.
On 23 August 2019, MaxiTRANS Industries unveiled its FY19 results. For FY19, the company reported a sales revenue of $352 million in FY19, down by 14% on last year. The company’s Underlying NPAT decreased by 52% to $4.8 million in FY19, as compared to pcp. The FY19 results were impacted by the weak economic conditions throughout the Australian economy.
FY Results Snapshot (Source: Company Reports)
Following the release of FY19 results, MXI’s stock has declined by around 19.298% during the intraday trade.
In the second half of FY19, underlying business in the commercial vehicle spare parts market was estimated to be 5-10% below the like for like (LFL) period in FY18 while the new trailer market in Australia declined by more than 15% in Q4 FY19 LFL. As a consequence FY2019 trailer sales being 100-150 units below expectations.
Despite this, the company’s other businesses performed well. The MaxiPARTS business generated increased sales revenue and earnings in FY19 driven by organic growth initiatives and efficiency gains. The New Zealand business improved its profitability underpinned by better warranty performance and manufacturing efficiency.
FY2019 results have been further impacted by the following significant one-off items which includes
- A loss on sale of the MTC business in China of $1.6 million;
- Transaction costs associated with the disposal costs for the sale and leaseback of the Queensland and Auckland manufacturing facilities of $0.5 million;
- ERP system implementation costs that cannot be capitalised, of $1.9 million;
- Redundancy and restructuring costs of $0.3 million
During the year, the company reduced its net debt by 22% to $32.0 million supported by the proceeds received from the sale and lease back of the Queensland and Auckland manufacturing facilities. As a consequence of this net debt to equity ratio reduced from 30% to 26% in FY19.
During the year, the company’s working capital increased by $7.4 million to $57.2 million underpinned by the higher mix of fleet customers in May and June and higher pre-payments that had previously positively impacted the FY18 results.
As a result of the increase in the working capital, the Operating cash flow was negative $6.1 million in FY19. Due to the negative operating cashflows and the challenging general economic conditions, the company’s Board has not declared a final dividend for FY19.
Dividend in PCP (Source: Company Reports)
Outlook: While providing the outlook, the company has advised that the market conditions in the Australian trailer market are expected to remain slow as consumer confidence and other macro-economic drivers are expected to remain soft. The performances in both the Australian Trailer business as well as the MaxiPARTS parts business will be affected by this. The company expects that its significant investment in the new IT systems will drive operational efficiency through the business resulting in strong operating cashflow in future years.
Following the resignation of Alison Groves as General Counsel and Company Secretary, the company has recently appointed Amanda Jones as Company Secretary. Amanda has been serving MaxiTRANS since 2018 as Senior Legal Counsel.
Recently, TelstraSuper Pty Ltd became a substantial holder of the company by holding 9260831 Ordinary shares with 5% voting power.
Stock Performance: MXI’s stock has provided a negative return of 29.63% in the last six months as on 22 August 2019. The stock is trading at a PE multiple of 15.410x with an annual dividend yield of 5.26%. Its 52 weeks high price is $0.610 and its 52 weeks low price is $0.230 with an average volume of 109,399. At market close on 23 August 2019, the stock was trading at a price of $0.230 with a market capitalisation of circa $52.75 million. It is to be noted that MXI’s shares are trading at 52 weeks low price.
Prospect Resources Limited (ASX: PSC)
African focused mining company, Prospect Resources Limited (ASX: PSC) has inked a Memorandum of Understanding with African Continental Minerals Limited (ACM) for the supply of power to the Arcadia Lithium Project from ACM’s Coalbed Methane Gas to Power Project.
Map of African Continental Minerals special grant permits
Key terms of the MOU include:
- An agreed term of five years from the commencement date;
- Minimum supply of 20 Megawatts daily power to meet all of Arcadia’s power supply requirements (Arcadia’s peak power requirement is 16 Megawatts);
- Option for an additional 25 Megawatts of supply in the event of further expansion of the facility or downstream processing (Lithium Carbonate or Hydroxide plant);
This agreement is providing Prospect with power supply optionality for the Project. And besides that, it is also generating opportunities for additional services/projects, such as ACM’s Coalbed Methane Gas to Power Project, to be developed.
Ever since the company completed its Definitive feasibility study at Arcadia Lithium Project, its main focus has been to rapidly progress the Project from financing through to production. In 2019 June quarter, the company scaled back its exploration activities at the project to maximise the value generated from Arcadia.
During the quarter, raised A$5.171 million through:
- the exercise of 7.84 million options at $0.15 to raise A$1.176 million;
- through a placement of 23.5 million fully paid ordinary shares at $0.17 to raise A$3.995 million;
During the June quarter, the company spent $32k on exploration & evaluation activities. The total net cash used in operating activities was around $1,57 million. The net cash used in investing activities was around $1.67 million. The net cash inflow from financing activities was around $4.809 million in 2019 June quarter. At the end of the June quarter, the company cash and cash equivalent of around $5.474 million.
In the September quarter, the company is planning to participate in a number of investor and trade events to promote Prospect and the unique opportunity Arcadia presents. For the September quarter, the company expects to incur a cash outflow of around $2.77 million which includes $90k to be spend on exploration and evaluation activities, $1,200k to be spend on development activities, $750k to be spend on staff costs and $730k to be spend on administration and corporate costs.
In July 2019, Reserve Bank of Zimbabwe gave its approval to acquire additional 17% of the Arcadia Lithium Project.
After completing the acquisition, Prospect’s ownership in the Arcadia Lithium Project will increase from 70% to 87%. Prospect will also increase its share of future revenues and profits from the Project’s strong economics:
- Pre-tax NPV1 (10% discount rate) of US$533 million;
- Life-of-mine project revenue of US$2.932 billion;
- Competitive C1 cost of US$2303 per tonne of concentrate placing Arcadia in the lowest operating cost quartile;
- Average annual EBITDA of US$109 million over an estimated 12-year mine life;
- Delivering a rapid payback for the project of 2.5 years from first production and an exceptionally strong IRR of 45%;
Stock Performance: PSC’s stock has provided a negative return of 31.58 % in the last six months as on 22 August 2019. Its 52 weeks high price is $0.350 and its 52 weeks low price is $0.110 with an average volume of 330,949. At market close on 23 August 2019, the stock was trading at a price of $0.130 with a market capitalisation of circa $30.67 million. It is to be noted that PSC’ shares are trading near to their 52 weeks low price.
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