3 Hot Resources Stocks - WPL, SAR, KDR

Woodside Petroleum Ltd 

Increased Prices Supported Revenues in December 2018: Woodside Petroleum Limited (ASX: WPL) had recently published the results for the December 2018 quarter. The company posted sales revenues amounting to $1.41 billion which implies a substantial 43% rise Q4 2018 on the YoY basis thanks to the increased prices. The company’s report also threw light on Greater Western Flank Phase 2 project’s start-up which was witnessed in the month of October which that started six months earlier than it was actually planned.


WPL’s Revenues (Source: Company Reports)

The company’s gross margins have improved on the YoY basis. At the end of June 2018, the company posted gross margins of 49.9% which implies the rise of 2.1% on the YoY basis which represents the favourable momentum in the revenues as well as management of the direct costs. Moreover, the company’s net margins are higher as compared to the industry median. At the end of June 2018, the company’s net margin stood at 24.8% as compared to the industry margin of 10.4% reflecting that the company has been efficient in managing its cost and expenses.

Expected Production For 2019: Woodside Petroleum Limited had stated that there are expectations that the company would post the production in the range of 88-94 MMboe in FY 2019. The company had also provided the guidance with respect to the investment expenditure. The company is expected to incur investment expenditure in the range of $1,600-$1,700 million in FY 2019.

Moreover, there are expectations that the company’s control upon its margins would support it moving forward.

Stock Analysis: On the daily chart of Woodside Petroleum Limited, Exponential Moving Average or EMA has been used and default values were used for the purposes. As per the observation, the stock price has crossed the EMA and is trending in the upward direction. This represents the bullish momentum. Therefore, the stock might witness favourable momentum moving forward.

Moreover, the company is expected to be supported by its margins moving forward. On the backdrop of these factors, we maintain our “Buy” recommendation on the stock at the current market price of A$33.850 per share (up 1.927% on 24 January 2019).
 

Saracen Mineral Holdings Limited

Decent Momentum in Cash and Equivalents: Saracen Mineral Holdings Limited (ASX: SAR) recently declared the results for the December 2018 quarter. The company witnessed gold production of 88,833 ounces in the December quarter. Moreover, the company ended the December 2018 quarter with A$143 million cash/liquids. This amount was maintained after the company deployed A$55 million towards the growth capital/exploration.


Cash and equivalents build (Source: Company Reports)

The company witnessed a rise in the gross margins from 6.4% in FY 2014 to 21.8% in FY 2018, reflecting the strength in its top-line momentum. However, the company’s net margins have also improved over the past five years. In FY 2014, its net margins were 2.8% while in FY 2018 the company’s net margins stood at 14.8% which happens to be higher than the industry median of 12.8%.

Expenditure to Witness A Rise Moving Forward: There are expectations that Saracen Mineral Holdings Limited might witness a rise in the spending with regards to growth capital as well as exploration in the three months ended March 2019. The company has raised the production guidance to a range of 345-365,000 ounces from the previous guidance of 325-345,000 ounces.

Because of the success of recent exploration, the company has raised the capital budget by A$35 million for FY 2019 so that the underground development can be helped. The company’s ROE stood at 22.4% which implies the rise of 12.2% YoY, and which happens to be higher than the industry median of 11.9% which could attract market players’ attention moving forward.

Stock Analysis: On the daily chart of Saracen Mineral Holdings Limited, exponential moving average or EMA has been applied and default were used for the purposes. After carefully observing, it was noticed that the stock price has just crossed the EMA and, after the crossover, the stock price started moving downwards. However, since the crossover has just occurred, there is no certainty about the future momentum of the stock. As a result, we maintain our “Hold” rating on the stock at the current market price of A$2.920 per share (down 3.311% on 24 January 2019).
 

Kidman Resources Limited

Look at December 2018 Quarter Results: Kidman Resources Limited (ASX: KDR) recently declared the results for the December 2018 quarter. The company announced funding term sheet with its joint venture partner with regards to Mt Holland Lithium Project which was Sociedad Quimica y Minera de Chile S.A. or SQM. SQM would be giving Kidman Resources Limited capital expenditure debt facility amounting to US$100 million so that partial financing of Kidman Resources Limited’s construction share of Mt Holland Lithium Project can be done.


Operating Cash Flow (Source: Company Reports)

In the December 2018 quarter, the company’s net cash used in the operating activities amounted to $5.26 million. The company incurred significant expenses towards the payments for exploration and evaluation, staff costs as well as administration and corporate costs. On the YoY basis, the company’s return on equity witnessed an improvement in FY 2018. In FY 2018, ROE of KDR was -59.9% while in FY 2017 it was -114.9%.
 
What to Expect Moving Forward: Kidman Resources Limited would be conducting the discussions involving multiple strategic parties which are seeking lithium hydroxide offtake agreements.

In addition, the company would also be working with the lenders so that it can garner the debt financing to support its funding requirements with regards to its share of project development costs. 

Stock Analysis: On the daily chart of Kidman Resources Limited, Moving Average Convergence Divergence or MACD has been applied and default values were considered for the purposes. As per the observation, the MACD line has crossed the signal line and is moving in the upward direction. This signifies the bullish momentum. Therefore, there are expectations that the stock might witness upward momentum.
As a result, we maintain our “Buy” rating on the company’s stock at the current market price of A$1.200 per share (up 2.128% on 24 January 2019).
 

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