Latest Research

Decmil (DCG) - Pipeline Potential

Decmil Group LogoThere were no big surprises in DCG’s FY18 result, with revenue of $342m (we had $350m) and group EBITDA from continuing operations of $4.7m (we had $2.4m). Eyes were on the outlook though, where DCG has maintained guidance for revenue of at least $500m (underpinned by a solid order book and large potential pipeline). We expect the efforts to diversify into new sectors and geographies to pay off from FY19, make little change to our earnings forecasts, and maintain a valuation of $1.35. A positive macro view and valuation upside continues to support a BUY recommendation.

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Gage Roads (GRB) - Continues To Impress

Gage Roads LogoGRB has kept up the positive momentum with a strong 4Q18 performance and an impressive $4.5m EBITDA (unaudited) for FY18. This was driven by increased volumes and the shift to higher-margin proprietary products, which made up 39% of the total sales mix. The “brand in hand” strategy has not only demonstrably boosted brand awareness, but looks to have made a contribution to earnings given an overall GP margin of 62%. We have upped FY19 forecasts given the strong 2H18 outturn, and largely maintain forecasts further out. Our target price, based on longer-term expectations, climbs to $0.123 (prior $0.117). We like the sector appeal and strategic execution to date. BUY maintained.

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Argonaut Oil & Gas Report

Argonaut LogoThis report takes a closer look at ASX listed oil producers. It is a small cohort of companies that have survived the oil downturn and are now beginning to thrive in the higher oil price and lower cost environment. We also have a look at the macro picture for oil and examine the drivers of crude oil demand as we believe that hydrocarbons will have a place in the global energy mix for some time to come. Our view is that the use of renewable energy will increase but not at the expense of hydrocarbon-based energy due to the growing demand from the emerging world. We believe the demand is being driven by the ongoing movement of people into the ranks of the middle class in emerging countries. Our key pick on the ASX is Otto Energy, and we review Australis Oil and Gas, Buru Energy, Byron Energy, Freedom Oil and Gas and Sundance Energy.

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Doray Minerals Ltd (DRM) - Debt Dwindling - Cash Collecting

Doray Minerals LogoDoray Minerals (DRM) reported record June Q production at its Deflector Mine with 18.5koz Au and 818t Cu at an AISC of A$1,196/oz (versus 19koz @ A$986/oz in the March Q). Resources grew by 34% after incorporating the new Link and Da Vinci lodes at Deflector, adding ~180koz at around 18g/t Au which are yet to be incorporated into the mine plan or reserves. Cash increased to $30.7m and debt was reduced to $20.5m (from $27.5m in March Q). FY19 guidance was released with 80-85koz Au and 2,250-2750t Cu at an AISC of $1,050-1,150/oz), a 30% increase on FY18 output. Overall, the growth on multiple fronts has re-invigorated DRM’s appeal as a growth story trading on 5x FY19 PE and EV/Production of $1,900/oz. Flexibility in FY19 production, additional exploration success and an aggressive $10m exploration budget will continue to show further upside appeal in the short and medium term. BUY, TP $0.48ps (prior $0.41).

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Dacian Gold (DCN) - The More You Drill The More You Find

Dacian Gold LogoDacian Gold (DCN) raised $40m through an institutional placement at a price of $2.70ps. DCN aims to raise a further $5m via a Share Purchase Plan which is expected to close at the end of July. Funds raised will provide additional cashflow flexibility for aggressive exploration targeting higher production rates and a longer mine life at Westralia and additional resource growth at Cameron Well (CW) via a ~110km drill program over 18 months. In addition, DCN will also extinguish the uncapped royalty on parts on the Jupiter mine area at a cost of $12m. Argonaut believes this is well-timed and a prudent move aimed at enhancing the project economics via aggressive growth aspirations. DCN trades on undemanding EV/Production metrics of $3,300/oz vs the peer group averaging $6,000/oz. Once operations reach steady state and exploration gets underway, we expect that DCN’s discount to our NAV and its peer group valuation will unwind. BUY, TP $3.64ps.

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