South Star Battery Metals Corp. engages in the exploration and development of mineral properties in Brazil. It is developing the Santa-Cruz Graphite project that consists of 13 licenses covering an area of approximately 13,316 hectares located in Bahia State, Brazil. The company was formerly known as South Star Mining Corp. and changed its name to South Star Battery Metals Corp. in May 2021. South Star Battery Metals Corp. was incorporated in 1984 and is headquartered in Vancouver, Canada.

Canada

South Star Battery Metals Corp.

Basic Materials

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

STSBF reported revenue of CAD 0mn in the last 12 months, down 0% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 19% from FY23 to CAD -0.11.

The stock has been falling steadily in the past six months, losing 40% in total. The stock has lagged its global peers from the same sector and industry (as shown above), underperforming then by 31ppts in total. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is slightly negative.

South Star Battery Metals Corp. reported a return on equity (RoE) of -73.1% in the last 12 months, down from -44.1% in FY22. 

Another important profitability metric, return on assets (RoA), amounted to -24.0% in the last 12 months, a decrease from -18.5% in FY22. 

In the last 12 months, the return on capital employed (RoCE) declined to -27.3%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -6.1 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

STSBF has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to weak positions in its industry, negligible return on capital, and inadequate interest coverage. We note solid cash flow generation and an favourable capital structure, among the positive credit factors. 

In highly turbulent market conditions, STSBF is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, STSBF is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from critical to immense. 

From both historical and forecast perspectives, the stock is considerably overpriced compared to similar stocks. 

South Star Battery Metals Corp.

$ 0.29

1

South Star Battery Metals Corp.

$ 0.29

1

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Profitability factor

Risk / Profitability

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$ 0.29

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