Labor Force Data Showcasing Favourable Employment Statistics
Employment Data on Select Industries
Gold and Copper Commodities Riding on Raised Demand Prospects
Key Risks and Challenges
Outlook
Considering the positive developments in the employment situation, 3 ASX stocks from select industries are identified to showcase the momentum.
(1) Newcrest Mining Limited (Recommendation: ‘Buy’ at AUD 19.280, Potential Upside: Low Double-Digit)
(M-cap: AUD 17.20 bn, Annual Dividend Yield: 3.40%)
Company Overview: Newcrest Mining Limited (ASX: NCM) owns exploration assets such as Cadia, Telfer, Lihir, Havieron, etc., in Australia, Papua New Guinea, and Canada.
Expanding Margins Raising Cash Flow: In FY22, NCM embarked upon gold production and 1,956.2 ounces (FY21: 2,093.3 ounces) and copper production of 120,650 tonnes (FY21: 142,724 tonnes). The marginal production decline was attributed to lockdown events during the end of 2021. All-In Sustaining Cost increased marginally to USD1,044/ounce from USD911/ounce in FY21.
Business Update: On 25th July 2022, GQG Partners LLC ceased to be a substantial shareholder, with 10,988,083 securities affected.
Outlook: The two-stage Cadia Expansion Project remains on track for completion by September 2022, with the first production expected in 1HFY23. Cadia has commenced the planning of its long-term continuation of mining operations.
(2) Sims Limited (Recommendation: ‘Buy’ at AUD 14.210, Potential Upside: Low Double-Digit)
(M-cap: AUD 2.77bn, Annual Dividend Yield: 4.95%)
Company Overview: Sims Limited (ASX: SGM) is engaged in buying, processing, and selling ferrous and non-ferrous recycled metals.
Raised Pricing Impact Favouring Fundamentals: On 17th July 2022, SGM released a daily buy-back notification with repurchased securities amounting to 70k. In FY21, SGM experienced material developments in market prices and an increase in proprietary sales volumes by 8.0%, with proprietary intake volumes increasing by 7.1% PcP.
Raised Price and Volume Metrics Surging Top-Line: In H1FY22, SGM registered sales revenue of AUD 4,265.0mn, up by 73.9% PcP and statutory EBIT was inked at AUD 341.4mn, up by a significant 334.9% PcP. The earnings grew due to increased sales volumes and higher material prices, alongside disciplined margin management. Trading margin expanded by 45% via disciplined management of bid-ask spread as selling price improved.
Outlook: Momentum has continued to H2FY22 in the metal business. Intake volumes have increased, as non-ferrous commodity prices increased relative to the HY22 average while ferrous prices remained elevated, despite high volatility.
(3) Lifestyle Communities Limited (Recommendation: ‘Hold’ at AUD 15.830, Potential Upside: High Single-Digit)
(M-cap: AUD 1.66bn, Annual Dividend Yield: 0.59%)
Company Overview: Lifestyle Communities Limited (ASX: LIC) is involved in Australia's property development and management company.
Momentum in Residential Property Market Raising Settlements: In FY22, new home settlements of 401 (FY21: 255) and 143 counts of resale settlements attracted a deferred management fee. Momentum in the residential property market and continued compression in capitalisation rates for land lease assets have resulted in an uplift of AUD 92.6mn in the value of the property portfolio. LIC expects reported NPAT in the range of AUD 88.4 – 89.4mn.
Outlook: LIC plans to deliver 1,400 – 1,700 new home settlements from FY23 to FY25. Settlements for FY23 are expected to be consistent with FY22 as new projects come online at Phillip Island, Woodlea, Clyde, St. Leonards, Pakenham, Leopold, Merrifield, and Ocean Grove.
Comparative Price Chart
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 25th July 2022. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.