Canada’s primary stock market has performed laudably in the last two months. As of August 23, 2024, the TSX is up 11.1% year-to-date, aided by the nearly 8% gain since the start of summer on June 20. With less than a month left, two TSX stocks are poised to have a big end-of-summer before the next bull market.
Pollard Banknote (TSX:PBL) has underperformed, while Aya Gold & Silver (TSX:AYA) continues to outperform so far this year. However, both stocks could break out following their record second-quarter financial results.
Solid fundamentals
Pollard Banknote provides lottery and charitable gaming products and solutions in Canada, the U.S., and internationally. At $21.55 per share, the gaming stock trades at a deep discount (-32.5% year-to-date) despite solid fundamentals. Moreover, the business has been consistently profitable in the last four years. The $583 million company also pays a modest 0.9% dividend.
In Q2 2024, revenue rose 5.1% to a record $137.8 million versus Q2 2023, while income from operations jumped 37% year-over-year to $11.9 million. For the first half of the year (six months ended June 30, 2024), the top and bottom lines increased 3% and 34% to $263.3 million and $18.8 million, respectively, compared to the same period last year.
John Pollard, co-CEO of Pollard, credited several factors for the impressive results. The profitability of the instant ticket business and gross margins improved significantly during the quarter. Also, the repriced customer contracts resulted in higher average selling prices. Pollard expects the upward gross margin trend to continue as more repriced contracts come on stream.
For Q3 2024, John Pollard anticipates an improved product mix with higher-value items to deliver leading to the holiday season. Another silver lining is the growing interest and positive feedback in Pollard’s proprietary omni-channel iLottery platform and game content. Increased investments and innovation should translate into the segment’s continuing growth.
Doug Pollard, a co-CEO, added that the purchase of electronic bingo gaming content in Q2 2024 was an important component of management’s strategic plan. “Great gaming content is a cornerstone of Pollard’s success across all of our products and solutions,” he said. The ultimate goal is to make Pollard the leading partner of choice for lottery and charities.
Market analysts forecast 9% annualized revenue growth in 2024 or higher than the 7% historical growth over the past five years.
Catalyst-rich year
Aya Gold & Silver is a rapidly growing Canadian mining company focused on silver production. The underground Zgounder Silver Mine in Morocco is the $2.1 billion miner’s flagship precious metals project. At $15.85 per share, current investors enjoy a 63.2% year-to-date gain. Market analysts’ 12-month average price target is $21.15 (+25.1%).
In Q2 2024, silver sales revenue climbed 42% year-over-year to a record US$13.7 million. Net income reached US$6.8 million compared to the US$525,000 net loss in Q2 2023 while operating cash flow increased 44% to US$5.3 million from a year ago. Benoit La Salle, President and CEO of Aya, believes that 2024 is a catalyst-rich year.
Aya’s primary focus is commissioning Zgounder. “Commissioning activities are on track for commercial production in Q4-2024, positioning us for significant production and cash flow growth and low-quartile costs,” said La Salle.
Under the radar
Pollard Banknote and Aya Gold & Silver fly under the radar but are among the top picks that could deliver outsized gains post-summer.
