Western Areas Ltd

Positive free cashflow in the March Quarter: Western Areas Ltd.’s (ASX: WSA) stock rose 3.34% on May 14, 2018 with positive momentum. The company in the March quarter had achieved positive free cashflow of A$16.9m mainly due to a higher average (pre-payable deduction) nickel price for the quarter of A$7.80/lb (December quarter A$7.22/lb1), and the effective completion of the major, nonrecurring, capital projects. The cash at bank was A$135.7m compared to A$132.6m in the December quarter while cash at bank plus nickel sales receivables had totalled A$154.1m (December quarter A$149.1m).  During the March quarter, WSA has mined the total nickel of 6,236 tonnes, which is the highest production volume in twelve months.  This resulted in total nickel contained in stockpiles increasing to 4,311 tonnes, being the highest level since March 2015. Moreover, for the Odysseus Project at Cosmos, DFS is due to be released in the September quarter and is expected to detail an operation with a mine life in excess of ten years and average annual production in excess of 12,000 nickel tonnes per annum, post a project ramp up period. Additionally, WSA has reviewed its guidance metrics for FY18. The company expects the mine production to be around the midpoint of the range and unit cash costs will be at the upper end of original guidance, and nickel in concentrate production is expected to be lower than plan mainly due to lower feed grade, an increase in scats and mill throughput volume. Meanwhile, WSA stock has risen 7.52% in three months as on May 11, 2018. The nickel price is expected to remain at higher levels for some time. Nickel stockpiles have recently fallen in many years and this reflects positive outlook for the market. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 3.400.
 

FY18 Guidance (Source: Company Reports)
 

GWA Group Ltd

Sale of Door & Access Systems’ business: GWA Group Ltd.’s (ASX: GWA) stock rose 5.65% on May 14, 2018 after the company announced the sale of Door & Access Systems business to Allegion (Australia) Pty Ltd. The transaction is for a purchase price of $107 million including an upfront payment of $102 million, a contingent payment of $5 million, and is subject to meeting certain transitional arrangements and a standard post completion working capital adjustment. This transaction will enable strategic focus on superior solutions for water within GWA’s Bathrooms & Kitchens business, where GWA has strong market positions and has identified significant growth opportunities. The sale is expected to be completed shortly after GWA’s FY18 year-end, and is subject to conditions precedent usual for transaction of this nature. Meanwhile, GWA stock has risen 39.33% in three months as on May 11, 2018 and is trading at a relatively high P/E. As of now, we give an “Expensive” recommendation on the stock at the current price of $ 3.930.
 

Specialty Fashion Group Ltd

Sale of underperforming brands: Specialty Fashion Group Ltd (ASX: SFH) witnessed a whopping surge in stock price by about 57.89% on May 14, 2018, as the group announced about selling of its underperforming clothing brands to Noni B for a cash consideration of $31m. The brands include Katies, Rivers, Millers, Autograph and Crossroads. Post this, SFH will have its City Chic stores, the group’s profitable business. In fact, sale proceeds have been flagged for recapitalising SFH and strengthen the balance sheet, while creating growth prospects for City Chic. With this, SFH plans to remain listed on ASX and is considering reinitiating the dividend payments which were plugged off since 2014. This is a big positive for investors. However, at the moment and given the share price run-up, the stock looks touch “Expensive” at the current price of $ 0.600, while concerns on accounting and cost distribution seem to be brewing up.

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