ALS Ltd

 
ALQ Details 
·         Earnings driven by commodities business in FY2017:Stock of ALS Ltd (ASX: ALQ) moved up by 12.8% on May 24, 2017, following the announcement of better performance for FY2017 and divestment of loss making businesses. The revenue grew by 2.7% year on year (yoy) to $1,272 million, while net profit reported a 4.0% yoy growth at $112.7 million for FY2017, aided by a second half underlying result of $53.1 million (excluding nonlaboratory operations of Oil & Gas) with continuing recovery in mineral resource exploration. The statutory net profit for FY2017 stood at $81.6 million compared with the net loss after tax of $240.7 million recorded in FY2016, while the revenue from operations was $1,366 million, unchanged from the $1,365 million in FY2016. Importantly, the commodities division of ALS (now incorporating the coal services operations) delivered an underlying contribution growth of 28.1% with improved geochemistry sample flow being partially offset by small profit reductions in the coal, metallurgy and inspection businesses. The Industrial Division delivered relatively flat performance while Life Sciences suffered a decline in profitability as a result of issues experienced in North and South America, and higher carrying costs associated with the integration of Alcontrol in the UK.
 

FY17 Financial summary (Source: Company reports)
 
·          Divesting majority of assets in the Oil & Gas technical services sector:Further, the company intends to divest most its assets in the Oil & Gas technical services sector, while retaining the laboratory services component as announced in November 2016. Simmons & Company International (energy specialists of Piper Jaffray) were engaged to advise the company on options to transact the divestment and are currently assessing several offers to acquire the business.

·         Recommendation: The stock has declined 9.6% over the past six months while it was up 38.3% in the last twelve months (as of May 23, 2017), and is currently trading at 52-week elevated levels.We give an “Expensive” recommendation on the stock at the current price of $ 6.60

Iluka Resources Limited

ILU Details
·         Moving up on increasing Zircon reference price: Iluka Resources Ltd (ASX: ILU) shares moved up by 6.9% on May 24, 2017, after announcing the increase in its Zircon reference price. The company has increased its Zircon reference price (benchmark against which a range of Iluka zircon products are priced) by US$130 per ton to US$1,100 effective from July 01, 2017.However, its weighted average received price can and does vary from this, reflecting specific customer arrangements, market channels, geographies and product mix.
 
·         Recommendation: The stock has moved up 43% in the last twelve months, while it was up about 23.0% in the last three months (as on May 23, 2017) driven by robust production and financial performance. Given the current trading levels with further momentum expected ahead, we maintain a “Hold” recommendation on the stock at the current price of $ 9.17

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