Latest Research

Peet (PPC) - Contract Momentum Into 2H

Peet Limited LogoPPC’s 1H17 results were solid, and the business is well positioned for growth into the 2H and FY18. With a large, diversified land bank at a good cost base, PPC is under no pressure to restock, implying management can continue focusing on price, margin and cash flow. The significant exposure to growth corridors on the east coast, where there is still evidence of volume and price appreciation, is offsetting the weaker WA market (which will only deliver ~10% of earnings in FY17). There is upside to our forecasts and we maintain a buy call and a $1.40 valuation.

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Northern Star Resources (NST) - Eyes On The Big Prize At Jundee

Northern Star Resources LogoNorthern 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).

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Tox Free Solutions (TOX) - Construction Tails Off

Tox Free Solutions LogoThe 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.

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Ausdrill Limited (ASL) - Contract Wins Underpin Revenue

Ausdrill Limited Logo 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).

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Matrix Composites & Engineering (MCE) - Diversifying Away From Subdued Markets

Matrix Composites & Engineering LogoAs 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).

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