Latest Research

Quintis (QIN) - Pruning plantations

Only time will prove whether QIN and McKinsey are right about end markets. Naysayers’ strong assertions on the other hand need only stoke fear to see predictions fulfilled. Regardless of who’s right or wrong, ructions caused will impact the business. Accordingly, we assume downgrades in the near term and are more conservative longer term. This reduces our valuation, although at $2.09 (prior $3.30) it still reflects our long-term belief in significant value. We expect this to be largely ignored though while near-term risks are elevated. As a result we downgrade to hold with a $1.50 target price.

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Paladin Energy (PDN) - Fight for survival

Paladin Energy (PDN) released March Q results with 0.9Mlb U3O8 production and 0.7Mlb sales from Langer Heinrich (LHM: 75% PDN, 25% China National Nuclear Corporation [CNNC]), down 26% and 52% respectively Q-on-Q. C1 costs increased 31% to US$21/lb, primarily driven by lower production. Cash at 31 March was US$22m with face value debt of US$382m. The Company is attempting to restructure the balance sheet, but a dispute with CNNC over a potential option to acquire the remaining 75% of LHM has delayed the process.

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Saracen Mineral Holdings (SAR) - Positive cashflow still around corner

Saracen (SAR) released March Q results with group production of 65.1koz gold at an all-in sustaining cost (AISC) of $1,510/oz (previously announced), vs Argonaut’s forecast of 68koz at $1,380/oz. Production was impacted by heavy rainfall and a gearbox failure at Carosue Dam, which offset the benefit of higher mined grades across all operations. Cash outflow was higher than Argonaut anticipated, declining by $13.3m Q-on-Q to $30.6m. HOLD maintained with a $1.05 target price.

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Global Construction (GCS) - Cementing East Coast Presence

Global Construction Services Limited (GCS) recently announced acquisition of Melbourne based Summit Formwork Pty Ltd continues the Company’s strategy of diversifying and expanding outside of WA. The acquisition price of approximately 3-times EBITDA is reasonable and, according to our forecasts, the acquisition should be value accretive to GCS shareholders. We have increased our valuation to $0.80 (previously $0.75) and subsequently maintain our buy recommendation.

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Tox Free Solutions (TOX) - Diversified Base

Tox Free Solutions LogoTOX made a final deferred payment for Daniels at the end of March, concluding a highly acquisitive period. This has been necessary to diversify away from resource exposure in WA, but has made it difficult to gauge underlying business performance. Organic growth may be constrained in the near term by top-line and margin pressure, however we believe TOX now has a solid, diversified base for growth in an industry with attractive fundamentals. Opportunity for improved longer-term returns underpins our buy call.

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