G8 Education Limited (ASX: GEM)
Upside momentum: Up 3.67% on April 30, 2018, G8 Education Limited has entered the green zone post a 33.5% fall of past three months, as the group gains some positive sentiments. Meanwhile, group’s directors have been noted to acquire the shares of the group lately. Mark Johnson acquired 10,000 fully paid ordinary shares to add to the previously held 40,000 shares. Julie Ann Cogin acquired 2,000 fully paid ordinary shares while Margaret Zabel acquired 15,000 fully paid ordinary shares. The group lately appointed Tracey Wood as General Counsel and Company Secretary for the Group with effect from 28 May 2018 while Sarah Zeljko has resigned effective 24 April 2018. The group expects to witness some favourable changes owing to the new Government funding package expected to drive demand in the sector from July 2018, with the demand/supply environment to be much more in balance in 2019. To manage the scenario well with retaining capital for growth and funding requirements and returning profits to shareholders, the group has changed its dividend policy and will focus on delivering a semi-annual 10 cents per share dividend in 2018 instead of fixed quarterly 6 cents per share dividend. The group would position itself for a semi-annual dividend equating to 70 to 80% of Net Profits from 2019 onwards. While year 2017 was a challenging one for the group given industry conditions weighing on occupancy, revenue and profits, the scenario seems to be improving and we maintain a “Hold” at the current price.
Orocobre Limited (ASX: ORE)
Rise in cash margin: Up 3.86% on April 30, 2018 after falling about 25.3% in last three months, the group has been surging high on the latest quarterly report for period ending March 2018. The quarterly sales revenue of US$41.3 million on total sales of 3,052 tonnes of lithium carbonate has been the key highlight with total sales revenue for the year to date of US$105 million. Gross cash margin is up 21% to US$9,177 per tonne at the back of firmer sales prices and cash generation ability of the Olaroz operations. The group has reported for a record price of US$13,533/tonne received on a free on board basis (FOB), and this is up 17% quarter on quarter (QoQ) with higher priced contracts basis firmer market conditions, as opposed to being highlighted lately by the market. In fact, the group expects higher prices for the June quarter 2018 than in the March 2018 quarter. Meanwhile, cash costs (on cost of goods sold basis) have also been up 10% QoQ to US$4,356/tonne as a result of lower production and sales volumes in the quarter. The group now expects to have FY18 production to be about 10% less than the previous guidance of approximately 14,000 tonnes. Moreover, the group has commenced preparatory works at Olaroz for the 25,000 tonne per annum (tpa) Phase 2 expansion, and an updated resource estimate expected to be completed in the June quarter, is understood to provide further upside. Further, ORE has stated that the market is expected to remain tight until at least 2020 with consensus market demand to be at a level of 14% CAGR or above, and short-term requirement driven by electric vehicle uptake. We recommend to stick with the stock on the premise of the current updates.
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Updates for Olaroz (Source: Company Reports)
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