Latest Research

Gage Roads (GRB) - According To Plan

Gage Roads LogoThe $10m capital raising during the year has given GRB the ownership structure and financial strength to execute strategy by promoting proprietary brands through all channels to market. One year into its plans to “return to craft”, the Company has made an encouraging start and comfortably delivered against expectations. We maintain a positive view, a valuation of $0.066, and a buy call.

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Austin Engineering (ANG) - Miners Spending Again

Austin Engineering LogoEchoing comments from peers ANG noted a significant improvement in market conditions in 2H17 as a pick-up in replacement capex from major miners drove a sharp rebound in performance. After a breakeven result in the 1H ANG delivered full year underlying EBITDA of $14.3m, towards the top end of the $11-15m guidance range. Australia was the key driver, as the Perth operations in particular benefited from a jump in orders. We are encouraged by 1H18 EBITDA guidance of $11-12m based largely on committed work, and expect the positive recovery trend to continue in future periods. Reflective of investors looking at significant growth potential in the mining services sector beyond FY18, our valuation increases to $0.26 (prior $0.22). Buy maintained.

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Southern Cross Electrical Engineering (SXE) - Turning On The Lights

Southern Cross Electrical Engineering LogoFY17 represented a transformational year for SCEE, broadening both its sector and geographic presence through the acquisitions of Datatel and Heyday5. The Company ends the year with a record order book of $480m (FY16 order book was $55m), and a potential pipeline of another $1.3bn work. Significant restructuring has also reduced SCEE’s fixed cost base, providing expanded EBITDA margins for FY18 and beyond. SCEE’s successful diversification, higher than expected order book, and reduced fixed cost base has caused us to increase our valuation to $0.85 (previously $0.60). BUY call maintained.

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Doray Minerals (DRM) - Treading Water

Doray Minerals Limited LogoDoray Minerals (DRM) reported its FY17 result with operating cashflow of $59.1m (vs Argonaut $62.8m, -6%) on production of 102koz and 4.6kt Cu in FY17. The Company recorded a net loss of $71.7m after non-cash impairments of $69.5m. DRM had previously flagged ~$46.9m impairments in the 1H result in February 2017, with a further $22.6m of impairments incurred in the 2H as a result of mine plan revisions at both Andy Well and Deflector. Overall, the top line result was broadly in-line, but was muddied by the non-cash impairments following the notice of closure of Andy Well. We revise our forecasts to include the updated Deflector mine life and the closure of Andy Well. As a result, we move to a HOLD recommendation and revise our target price down to $0.23ps (prior $0.43ps).

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Berkeley Energia (BKY) - Retortillo Fully Funded

Berkeley Energia LogoBerkeley Energia (BKY) has secured funding for the second stage of development for the Retortillo uranium mine and processing centre, part of the greater Salamanca Project in Spain. The Company has entered into an agreement with the sovereign wealth fund of the Sultanate of Oman (State General Reserve Fund ([SGRF]), who will issue BKY an unsecured interest free loan to the value of US$65m which can be converted into ordinary shares at £0.50 (A$0.82), an 11% premium to the 10-day VWAP. In addition, SGRF will be issued 50.4m unlisted options with a weight average exercise price of £0.85 (A$1.39) over three tranches. The loan will fund final development of the Retortillo uranium mine and processing centre and the options will largely fund the second mine, Zona 7, located ~10 km from the Retortillo plant. Argonaut maintains a BUY recommendation with a $1.70 target price. BKY is the only listed uranium developer globally with near term, large scale production capability. We regard this funding agreement as a creative, low dilution (relative to current pricing) and unencumbering financing solution.

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