Northern Star Resources (NST) - Eyes On The Big Prize At Jundee
- Created on Monday, 27 February 2017 10:40
Northern Star Resources (NST) 1H result was in line with expectations with 1HFY17 NPAT of $104.6m (vs Argonaut $100m, +61% on pcp). The positive financial result, backed up by $61m growth capital investment in the first half and a growing cash pile bodes well for NST’s ambitions to increase production to 600kozpa. Argonaut believes that mid-2016 will be a positive inflection point for resource and reserve growth supporting the long-term growth aspirations of the company. Our recent visits to the Jundee and Kalgoorlie operations highlighted exploration and production upside at both assets. We maintain our BUY recommendation and increase our target price to $5.08ps (from $4.43 prior).
Tox Free Solutions (TOX) - Construction Tails Off
- Created on Monday, 27 February 2017 10:35
The decline in resource construction volumes and a weak period for Worth Recycling (impacted by unseasonal weather) resulted in a weaker than expected 1H report card for TOX. We have pared back forecasts as a result, which has seen our valuation drop to $2.60 (prior $2.85). Despite disappointment in earnings we like the waste management industry and a diversification strategy which should set TOX on a long term growth path once shorter term resource construction jobs translate to longer term production contracts. Buy maintained.
Ausdrill Limited (ASL) - Contract Wins Underpin Revenue
- Created on Friday, 24 February 2017 09:50
The financial year to date has seen ASL seal ~$1.2b in contract wins and extensions, with Africa being the key growth area. We expect the impact to start to be felt in 2H17, but the real gains will be evident in FY18 where we are factoring in strong earnings growth. With gearing the lowest it’s been in 5 years, ASL is well positioned to fund these wins. The rationalization strategy has been well executed, and momentum positive despite ongoing challenges in Australia. Buy maintained on a $1.75 valuation (prior $1.50).
Matrix Composites & Engineering (MCE) - Diversifying Away From Subdued Markets
- Created on Friday, 24 February 2017 09:38
As expected, MCE posted weak first half results, failing to break-even at the EBITDA line. Based on the continuing soft market for MCE’s buoyancy products and a softer than expected order book, we have reduced our FY17 and FY18 revenue forecasts. The impact on our valuation has been largely offset by the pending receipt of an outstanding payment from a shipyard customer. Our Hold call remains on a $0.62 valuation (prior $0.65).
Fortescue Metals Group (FMG) - Stellar Result But How Long Can The Iron Ore Party Last?
- Created on Thursday, 23 February 2017 09:38
Fortescue Metals (FMG) released a stellar 1HFY17 result with revenue of US$4,492m (+34% on 1H16). Underlying EBITDA of US$2.65bn was 103% higher than the previous period driven largely by productivity improvements contributing to lower operating costs and sustained higher product pricing and price realization. NPAT of US$1.22bn was 283% higher than the previous period which was enhanced by a strong uptick in iron ore prices and a 20% reduction in C1 costs from 1H16. Cash on hand at Dec 31 was US$1.16bn with net debt of US$3.97bn. We maintain our view that iron ore prices will moderate in the short term. SELL recommendation and upgrade our price target to $6.04ps ($5.18 prior).