Pilbara Minerals Limited

JV with POSCO Progressing Well: Pilbara Minerals Limited (ASX: PLS) is engaged in the exploration and development of mineral resources. The flagship project for the company is the 100% owned Pilgangoora Project (Pilgangoora). The company recently issued 2,225,533 ordinary fully paid shares for the purpose of exercising unlisted options issued pursuant to the Company’s Employee Award Plan.

The company recently came up with the production and sales update of Pilgangoora.PLS remains focused towards optimising the Pilgangoora Project and posted a record production of 22,375 dry MT of spodumene concentrate during May 2019, representing approximately 85% of planned Stage I plant capacity. The company forecasted the production of Spodumene concentrate to be between ~20 - 24kt (dmt basis) in the month of June 2019 with a 6-days planned shut-down of the concentrator.

POSCO Joint Venture Update: Updating on the JV with POSCO, PLS informed that both the companies are progressing well with due diligence and negotiations for the proposed joint venture chemical conversion plant in South Korea during the June ended quarter. Pilbara Mineral’s due diligence is now complete on proposed 40kt LCE facility in Gwanyang, South Korea.

June 2019 Quarterly Activity Report: The company shipped tonnes for June 2019 Quarter of 43,214 dry metric tonnes (dmt), at the higher end of recently stated guidance.The management also mentioned that the production and sales of PLS are likely to return to full capacity for December 2019 Quarter.

March 2019 Quarterly Activity Report: The company’sMarch Quarter production stood at 52,196 dry metric tonnes (dmt) of spodumene concentrate while in the December quarter it was 47,859dmt despite the impact of the Tropical Cyclone Veronica.

Total Production and sales (Source: Company Reports)

Outlook: The company expects sales for the September quarter to be in the range of 35,000-48,000 dmt. For the December quarter, the sales are expected to be in the range of 65,000-80,000 DMT. PLS enjoys the status of being one of the largest cost-effective lithium-tantalum producers in the world. The company stated that, with Stage 1 project now in the commercial production, the proposed expansion plans are taking shape with the completion of Stage 3 Scoping Study highlighting outstanding economics of increasing production to 1.2 million tonnes per annum of spodumene concentrate.

Stock Recommendation: At the current market price of $0.490, the stock is trading towards the lower end of its 52-week trading range. Despite the decent production and sales numbers posted in the last two quarters, the stock has corrected significantly in the last 1-year. Considering the above-mentioned facts, prospects for the business going forward, and current trading levels, we recommend a “Speculative Buy” on the stock at the current market price of $0.490 (down 4.854% on July 10, 2019).
 

Telstra Corporation Limited

Impact of nbn Largely Absorbed: Telstra Corporation Limited (ASX: TLS) provides telecommunication and information services for domestic and international customers. The company recently updated that, as a result of good progress on its T22 strategy, it expects to make a non-cash impairment and write down of the value of its legacy IT assets by around $500 million. Also, as a result of bringing forward a consultation on proposed job reductions, the company has increased FY19 guidance for restructuring costs by approximately $200 million. Telstra stated that it is ahead of plan on the simplification of its structure as well as ways of working announced as part of T22, which is expected to lead to a net reduction of approximately 8,000 employees over the time span of three years.

1H19 Performance Highlights: The company reported the total income of $13.8 billion, down 4.1% whereas EBITDA, on a reported basis, at $4.3 billion was down 16.4%. The company also updated that more than half of the impact of the nbn has been engrossed with ~55% of premises connected. If nbn is excluded, TLS performed well on the face of prevailed market conditions. 
With the onset of 5G, the Management is optimistic to realize the positive ARPU impacts across the industry from uptake and new services as the company has with other new Gs. The Management also expects to witness a sign of improvements in nbn wholesale prices.


1H19 Results Snapshot (Source: Company’s Reports)

Stock Recommendation: At the current market price of $3.870, the stock is trading at the price to earnings multiple of 14.870x with moving towards a 52-week high price of $3.910. The stock has gained ~41% in the last 1-year. With its T22 strategy progressing well, rollout of its world-leading 5G technology, significant progress in cost reduction, etc, we are of the view that the company is on track to achieve its long-term growth path. The company reaffirmed its FY19 guidance for total income to be in the range of $26.2-$28.1 billion and EBITDA, ex-restructuring costs, to be in the range of $8.7-9.4 billion. With the aforesaid facts and bright business outlook, we recommend to “Hold” rating on the stock at the current market price of $3.870 (down 0.258% on 10 July 2019).  

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