Gold Resource Corporation

Gold Resource Corporation (AMEX: GORO) is a mining company which is a producer of metal concentrates that contain gold, silver, copper, lead and zinc, and dore containing gold and silver at the Aguila and Alta Gracia projects in the southern state of Oaxaca, Mexico.

Key highlights

• Robust production and sales numbers for Q2 2021: In Q2 2021, the Company's Don David Gold Mine produced 6,555 ounces of gold and 295,979 ounces of silver, a significant increase over the previous equivalent period's 2,411 ounces of gold and 185,330 ounces of silver. The similar upward trend in output was seen in other metals, which is a significant plus. Furthermore, it sold 9,685 of total AuEq oz in Q2 2021 against 4,333 of total AuEq oz in Q2 2020.

• Unlocking the value of the Don David Gold Mine: During the first half of 2021, a completely new management team has been assembled with a directive to take a disciplined approach to unlocking the value of the Mexican assets and grow the company. With a focus on unlocking the value of the Don David Gold Mine, during the first half of 2021, deliberate changes to the current mine plan were made. Mining has resumed in the Soledad vein of the Switchback which would result in improved productivity due to wider potential mining widths and higher ore grades in the second half of the year.

• Consistent dividend distribution: The Company has an excellent track record of dividend distribution, reflecting resilience and healthy cash flow generation. Recently, it declared its quarterly dividend of USD 0.01 per common share for the third quarter of 2021, payable on September 30, 2021.

• A healthy balance sheet with no debt burden: The company holds a strong balance sheet with USD 30.5 million in cash as of June 30, 2021. On top of all, the company holds no debts in its book, which is commendable. We believe that the company's current liquidity would be sufficient to carry out its activities satisfactorily.

Financial overview of Q2 2021 (in thousands of USD)

Source: Company

• In Q2 2021, the company posted sales of USD 30.8 million, increased greatly compared to USD 12.5 million in the previous corresponding period. The increase was mainly due to higher sales and higher average realization price of metals.
• The company registered gross profit of USD 6.8 million against a loss of USD 1.3 million in the previous corresponding period.
• Total cost and expenses increased to USD 3.8 million against USD 0.4 million in pcp, on behalf of higher G&A expenses and higher exploration expenses.
• The company managed deliver a net profit of USD 1.2 million in the reported period compared to loss of USD 1.8 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. Moreover, the price volatility of the commodities could directly affect their profitability and cash flow. 

Stock recommendation

In Q2 2021, the business produced 5,697 gold ounces and 295,979 silver ounces, a significant increase over the previous equivalent period's 2,441 gold ounces and 185,330 silver ounces. The similar upward trend in output was seen in other metals, which is a significant plus. It would be reinvesting USD 11.1 million in Don David Gold Mine exploration and infrastructure enhancements, as we believe its present cash would be adequate to carry out its operations successfully. Furthermore, the company is in process of unlocking the value of its Don David Gold Mine which will result in improved productivity in the second half of the year. On the valuation front the stock is trading at NTM EV/Sales multiple of 0.8x against an industry (Basic Material) median of 1.6x. Therefore, based on the above rationale, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 1.81 as on August 11, 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 August 11, 2021). Source: REFINITIV, Analysis by Kalkine Group

Paysign, Inc.

Paysign, Inc. (NASDAQ: PAYS) is a leading provider of prepaid card programs, complete patient affordability offerings, digital banking services and integrated payment processing services, and caters to organizations, consumers and government institutions.

Key Highlights:

• Decent guidance amidst sluggish economic scenario: For FY21, the company expects its total revenue to grow by 20% to 32% on y-o-y basis to USD 29.0 million to USD 32.0 million. Adjusted EBITDA for FY21 is expected within the range of USD 0.75 million to USD 1.90 million, supported by improved Q2FY21 results. Gross profit margin for FY21 is expected at around 46.5%, reflecting a growth of 790 bps over FY20. The company expects its volume to recover in plasma segments as the group expects to add more pharma programs for the rest of the year.

• Management Update: The company reported the appointment of Brad Cunningham for the post of chief technology officer and Alan Geiger as the director of relationship management. Additionally, Richard Graub also joined as the director of product management.
  

• Offers innovative services: The group offers end-to-end technologies used for transaction processing, cardholder enrollment, value loading, cardholder account management, reporting, customer care etc. The company caters primarily to the pharmaceutical and healthcare companies, while several multinational enterprises also relied on the customized services provided by the PAYS. Moreover, the company launched innovative offerings in the form of prepaid card programs such as corporate rewards, employee incentives, donor compensation, consumer rebates, clinical trials, healthcare reimbursement etc. Additional services like corporate incentive products and demand deposit accounts accessible with a debit card were also provided by the group. We believe the above would enhance the company’s overall presence in the coming days and would improve the company’s business prospects.
  

Q2FY21 Financial Highlights:

• PAYS announced its quarterly result, wherein the company posted total revenues of USD 6.651 million, slightly higher than USD 443 million in the previous corresponding period (pcp). The company reported 30.1% growth in the plasma segment, supported by the addition of thirteen plasma centers during Q2FY21, exiting the quarter with 356 centers. 
• Gross profit was recorded at USD 3.152 million, down from USD 3.304 million in the previous corresponding period (pcp).
• Loss from operations stood USD 0.936 million, as compared to a loss of USD 0.646 million in pcp. Selling, general and administrative costs stood slightly higher at USD 3.474 million, versus USD 3.401 million in pcp.
• Net loss during the period stood at USD 0.931 million, as compared to USD 0.219 million in pcp.

Source: Company Report

Risks: The company is yet to be profitable and posted higher input costs, while the continuation of the above trend is likely to dampen the company’s overall performance.

Stock Recommendation:

The group reported impressive performance from the plasma segment and expects the momentum to continue in the later part of the year, which is a key positive. With the increase in digital payments across the globe, we believe the demand for payment solutions services is likely to improve in the coming days, supported by the change in consumers preferences. On the valuation front, the stock is available at an EV to Sales multiple of 3.2x on an NTM basis, as compared to the industry mean of 6.4x. Hence, considering the above facts, we give a ‘Hold’ rating on the stock at the closing price of USD 2.46 on August 11, 2021.

One-Year Technical Price Chart (as on August 11, 2021). Source: REFINITIV, Analysis by Kalkine Group

Diffusion Pharmaceuticals Inc

Diffusion Pharmaceuticals Inc (NASDAQ: DFFN) is a clinical-stage biotechnology company. It is focused on extending the life expectancy of cancer patients by improving the effectiveness of current standard-of-care treatments, including radiation therapy and chemotherapy.

Why Should Investors Sell the Stock?

• The Company has not received any income from product sales and has relied on the proceeds of public and private equity and convertible debt offerings to support its operations. Even, the management does not expect product sales to produce income in the near future.
• Since the start, it has experienced operational losses. For the three and six months ended June 30, 2021, it had net losses of USD 3.8 million and USD 8.4 million, respectively. Furthermore, as of June 30, 2021, the accumulated deficit was USD 114.3 million, and the company expects to continue to lose money in the future.
• As the organization continues to progress the growth of TSC, the firm expected its operational expenditures to skyrocket.
• Net cash used in operating activities increased to USD 8.50 million in first half of 2021, compared to USD 6.64 million in the same previous period.
• Substantial additional financing would be required by the Company to continue to fund its research and development activities. 

• The stock is generating negative return on shareholder’s money, with TTM ROE of negative 45.48%.
• The stock is trading far below the key support levels of the 100-day and 50-day SMAs, indicating a bearish trend.
  

Stock recommendation

The company is a clinical-stage biopharmaceutical company having a sole product in its pipeline. At the present stage, the company is not realizing any sort of revenues and even the management has not shared any guidance on its revenue realization. Additionally, the company reported higher input cost in the recent past, which has resulted in a higher deficit. Hence, considering the aforesaid facts, we recommend a “Sell” rating on the stock at the closing price of USD 0.54 on August 11, 2021. 

One-Year Technical Price Chart (as on August 11, 2021). Source: REFINITIV, Analysis by Kalkine Group

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