Simon Herrmann, wise-owl.com
BUY RECOMMENDATIONS
Afterpay Touch Group (APT)
The buy now, pay later platform provider has experienced rapid growth in Australia and New Zealand across all key operational metrics – active customers, total transactions and integrated retailers. We see potential for this trend to accelerate as international expansion gathers pace. Successful adoption of its payment technology in foreign markets could be a long term revenue growth driver.
Sun Resources NL (SUR)
We regard this oil and gas company as a speculative buy. We’re attracted to development potential of the US Bowsprit Oil Project. We like the management team’s track record and pathway to near term, profitable oil production. With appraisal drilling scheduled in the second quarter of 2019, management will now advance the program to secure project financing with a recently upgraded internal resource estimate. Funding remains a key risk, but could also be a major value driver if delivered at favourable terms to shareholders.
HOLD RECOMMENDATIONS
Genetic Signatures (GSS)
An Australian biotechnology company focusing on molecular diagnostics. Its products detect infectious diseases. We’re attracted to the disruptive benefits its EasyScreen technology could deliver to the industry. Genetic Signatures has a high profile share register, and has delivered sales traction to date. Sales and investor interest could accelerate ahead of potential registration with the US Food and Drug Administration in 2019.
ALS Limited (ALQ)
After selling its oil and gas services unit, ALQ’s financial position has been getting stronger. Earnings in this testing and laboratory services company are rebounding, and the company has used surplus capital to undertake share buy backs and acquisitions in the less cyclical life sciences industry. Further earnings growth is the primary driver for ALQ, as it aims to increase EBITDA by more than 70 per cent by 2022.
SELL RECOMMENDATIONS
Mint Payments (MNW)
Santos (STO)
Chart: Share price over the year
The energy giant’s share price has been rebounding from lower levels in December 2018. The company operates in a highly cyclical industry, and, in our view, needs to deliver more shareholder value. We believe better opportunities exist elsewhere. The shares have risen from $5.22 on December 19 to close at $6.19 on January 24. Consider taking a profit.
Gavin Wendt, MineLife
BUY RECOMMENDATIONS
Australian Potash (APC)
An emerging potash hopeful that’s just produced Australia’s first field-evaporated sulphate of potash (SOP) at its pilot processing facility at Canning Vale in Western Australia. This is a milestone achievement that exceeded company expectations in terms of product purity. The company will release the results of a definitive feasibility study (DFS) during the second half of 2019, with the aim of demonstrating that it can deliver a low cost SOP product to the competitive world market.
Orion Minerals (ORN)
Released positive scoping study results from its flagship Prieska zinc-copper project in South Africa prior to Christmas. This was followed by an upgrade of the JORC 2012 compliant resource base to 30 million tonnes at 3.7 per cent zinc and 1.2 per cent copper. Exciting near mine exploration results have identified numerous additional VMS (volcanogenic massive sulphide) ore bodies. Prieska is shaping up as one of the more significant new VMS development projects globally. Orion will release the results of a bankable feasibility study during the second quarter of 2019.
HOLD RECOMMENDATIONS
Highlands Pacific (HIG)
Highlands Pacific has long been regarded as a takeover target due to its stakes in world class assets at the development stage in Papua New Guinea. And so it’s proven, with HIG entering into a scheme implementation agreement (SIA) with Canadian company and major shareholder, Cobalt 27, that’s resulted in a friendly cash takeover offer at 10.5 cents a HIG share. The offer will increase to 11.5 cents if the closing nickel spot price exceeds $US13,220 a tonne by December 31, 2019. Holders are best served by waiting to see if a higher offer will emerge.
Oklo Resources (OKU)
OKU has generated strong gold exploration results in Mali, culminating in the discovery of a 12 km corridor at its Dandoko project in the past year. The Seko prospect has proven to be a highlight, with mineralisation of a similar style to many other large gold deposits found nearby in western Mali. This is encouraging, as Oklo attempts to outline a large, multi million ounce open pit gold deposit. The company’s 2019 field season is underway, with four drill rigs in operation as part of a $5 million/60,000 metre drilling program.
SELL RECOMMENDATIONS
Pilbara Minerals (PLS)
We have elected to cease coverage of Pilbara Minerals, as its market capitalisation has grown to $1.2 billion, well outside our typical junior threshold. The company has generated a gain of more than 300 per cent since we initiated coverage at 17.5 cents in September 2015. The Pilgangoora project can be considered a relatively low risk exposure to lithium from a geopolitical and technical standpoint. The company’s strong share price performance over the past three years reflects its first mover advantage in the lithium space. Investors can consider taking profits. The shares closed at 67.5 cents on January 24.
Fenix Resources (FEX)
Fenix Resources has recently completed a RC (reverse circulation) drilling program at its flagship Iron Ridge Project in the mid west region of Western Australia. The Iron Ridge Project hosts an existing inferred mineral resource of 5 million tonnes at 64.1 per cent iron. The company’s share price has enjoyed strong recent gains and long time holders might look to lock in some profits.
Tony Locantro, Alto Capital
BUY RECOMMENDATIONS
Red Metal (RDM)
Chart: Share price over the yearWe expect this mineral explorer to prioritise projects and drilling programs going forward. The company focuses on Australian copper-gold and base metal deposits. I believe the company has the most exciting high risk/high reward exploration projects on the ASX. Downside support is provided by two joint ventures totalling $14 million in expenditure. The shares closed at 9.4 cents on January 24.
Black Cat Syndicate (BC8)
Chart: Share price over the year
BC8 offers attractive leverage to the gold sector, with the potential for a major discovery. BC8 has assembled an experienced senior management team after listing a year ago. I expect the team to build a serious gold company. The share price has fallen from a high of 40 cents in March last year to close at 14 cents on January 24, 2019. I believe BC8 offers good value and share price upside.
HOLD RECOMMENDATIONS
HRL Holdings (HRL)
The share price has plunged more than 50 per cent since June last year after revenue fell in its New Zealand environmental division. In my view, HRL is well in the hold and accumulate range. The acquisition of Analytica Laboratories in New Zealand has added substantial scale to HRL, particularly in the milk testing division. A large part of the bad news appears to be factored into the share price. The share price closed at 8.5 cents on January 24.
Western Areas (WSA)
Chart: Share price over the yearWSA remains the purest nickel exposure on the ASX, and is one of the most heavily shorted stocks on our market. Given potential for a nickel price recovery, WSA offers the best leverage profile through the Odysseus Project that is moving towards production.
SELL RECOMMENDATIONS
Afterpay Touch Group (APT)
Chart: Share price over the yearThe growth numbers for this buy now, pay later platform provider have been stunning, with a huge retailer uptake in Australia and the US. However, competition is intensifying in the buy now, pay later space, which may pressure APT’s performance going forward. Investors can consider taking a profit.
Please note that Afterpay Touch Group is offered as a buy and sell recommendation this week as brokers take different outlooks.
Westpac Bank (WBC)
Chart: Share price over the yearBanking stocks have staged a mild recovery in 2019, but the risk/reward profile remains unattractive, in my view. I have long been concerned about Westpac’s interest only loan exposure. Of the four major banks, I believe Westpac faces more challenges in a correcting housing market. In the hunt for yield, I believe it’s best to stick with Telstra and the gambling stocks.
Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.
