Ride the gold rally with Goldmoney stock, says Mackie Research

A positive gold pricing environment bodes well for Goldmoney (Goldmoney Stock Quote, Chart TSX:XAU), says analyst Nikhil Thadani of Mackie Research Capital Corporation, who in a client update on Tuesday reported on the company’s quarterly results.

Precious metal-focused investment company Goldmoney delivered its fiscal fourth quarter and year ended March 31, 2019, on Tuesday, generating annual net income of $21.7 million, which the company says is a 734-per-cent increase year-over-year. CEO Roy Sebag called fiscal 2019 the company’s most successful ever.

“On a purely financial basis, we have grown our tangible net worth by nearly $37.5 million, or 40 per cent, over last year. This result has been achieved even though the precious metal industry has been in a period of severe decline. It can be attributed to the innovative and entrepreneurial approach we take towards our mission of broadening gold ownership. Such was the case with the founding, development, and ultimate launch of Menē, our 24-karat direct-to-consumer jewelry brand,” Sebag said in a press release.

For the quarter, XAU reported revenue of approximately $64 million, which compares to Thadani’s estimate of approximately $87 million, with the caveat that a recent change in the company’s accounting made comparability challenging. Nonetheless, the analyst notes that the company’s operating revenue, which he defines as reported revenue ex. movements in inventory, was about $2.4 million for Q4 versus his estimate of about $2.7 million, while core gross margin was approximately 220 bps versus his estimate of 170 bps.

“XAU is up ~40 per cent since Q3 (Dec) F2019 results reported in February. We believe the stock could have upside if recent favourable gold pricing continues. In addition, XAU should also benefit from any traction at Menē. Management has demonstrated successful capital allocation on adjacent ventures such as Menē, Schiff Gold and for a while, crypto initiatives. While the planned China JV did not come to fruition as expected, management has shown talent for seeking out and executing on new opportunities as well as course correcting when appropriate, which we believe will continue to deliver shareholder value over time. XAU has ~$46 million in cash (inc. ~$17 million in GICs), which provides the means to opportunistically deploy capital on potentially accretive initiatives,” writes Thadani.

The analyst is maintaining his “Speculative Buy” rating and price target of $8.25, which represents a projected 12-month return of 262 per cent at the time of publication.

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