Reece Limited

Highlights of AGM: Reece Limited (ASX: REH) is a leading distributor of HVAC-R, waterworks and plumbing products to residential and commercial customers in New Zealand, Australia, and the United States. The market capitalisation of the company stood at $5.55 billion as on 30^th October 2019. The company achieved a record sales revenue of $5.5 billion, up 103% on the prior year, which included a 12-month contribution from MORSCO. Normalised EBITDA amortisation was up by 38% to $522 million with normalised NPAT up 6% to $238 million.

In Australia and New Zealand, the company has continued to grow sales revenue in a more challenging environment where the housing market has come off record highs. Like for like sales were up by 3.2%, and the company believes that this is faster than the market. Sales revenue in the US was $2.6 billion, in-line with the budget and expectations.


Sales Revenue (Source: Company Reports)

Sales Update for Q1FY20: The company announced its sales update for Q1FY20. The company achieved sales revenue of $1,501m, up by 8.8% in the same period last year. On a constant currency basis, sales revenue grew by 4.9%. In ANZ, revenue increased to $738m, while in the US, MORSCO’s revenue grew to US$518m (A$763m). EBITDA for H1 FY20 is expected to be in-line with the same period last year.

Stock Recommendation:The total revenues of REH have witnessed a CAGR growth of 27.23% in the time span of previous FY 2015-FY 2019. Thus, it can be said that REH is possessing respectable capabilities to garner revenues which might support its long-term growth prospects. The company’s asset turnover ratio stood at 1.61x in FY 2019, which is above the industry median of 0.44x. REH’s current ratio stood at 2.47x in FY 2019, which is above the industry median of 1.61x; therefore, it looks like the REH might be able to meet its short-term obligations in an effective way. The stock has generated negative returns of 4.81% and 4.44% in the time period of three months and six months, respectively. Based on the mixed scenario, we put our watch stance on the stock at the current market price of $9.920 per share, up by 0.202% on 30^th October 2019 and suggest investors to wait for catalysts.
 

Flinders Mines Limited

Quarterly Activities for the Period Ending 30^th September 2019:Flinders Mines Limited (ASX: FMS) is an exploration and development company focusing on the commercialisation of its large, high-quality hematite resource- the Pilbara Iron Ore Project (PIOP). The market capitalisation of the company stood at $243.96 million as on 30^th October 2019.

The company continued to progress discussions with BBI Group Pty Ltd during the quarter around a potential infrastructure arrangement for the Pilbara Iron Ore Project. The company announced completion by PwC of an independent review of infrastructure alternatives, which concluded the Balla Balla Infrastructure Project (BBIG Project). It was the most favourable infrastructure option for the PIOP.

It also signed a non-binding terms sheet with BBIG, in relation to a farm-in and joint venture arrangement for the PIOP development, covering mining, transport and sale of the product.

The Company commenced a Board renewal process with the appointment of the Hon. Ms Cheryl Edwardes AM as an Independent Non-Executive Director and subsequently Deputy Chair. The Board, in consultation with the company’s minority shareholders, continued this process during the September 2019 quarter with the appointment of Mr James Gurry as an additional independent Non-Executive Director.

 

Tenement Schedule (Source: Company Reports)

Stock Recommendation:FMS’s current ratio stood at 3.22x in FY 2019, which is above the industry median of 1.75xtherefore, it looks like the FMSis in a good positiontofulfilits short-term obligations in an effective way. Currently, the stock is trading near52-week high. Moreover, the company informed the market that the Annual General Meeting would be held on 26^th November 2019 and we advise the market participants to keep a close track of the event. Hence, we advise investors to wait for AGM to be conducted and, thus, we have a watch stance on the stock at the current market price of $0.073per share, up 4.286% on 30^th October 2019 taking cues from the quarterly activities and cash flow report.

Argosy Minerals Limited

Quarterly Activities for the Period Ending 30^th September 2019:Argosy Minerals Limited (ASX: AGY) happens to be a mining exploration company which is having a market capitalisation of $73.12 million as on 30^th October 2019. The company has 77.5% interest in Rincon Lithium Project located in Argentina. The company executed a non-binding Heads of Agreement (or HOA) with Mitsubishi Corporation RtM Japan Ltd, for the supply of 2,000tpa of lithium carbonate product from Rincon Lithium Project to Mitsubishi RtM for a term of 3-years with an option to extend for a further 2-years. The HOA covers the essential commercial elements of the arrangements. The commencement of the sale and supply of product by Argosy to Mitsubishi RtM will be subject to fulfilment of general commercial conditions for an agreement of this nature.

During the quarter, the company commenced lithium carbonate production operations from the industrial scale pilot plant in July thus, joining the exclusive list of international lithium carbonate producers with product sales being delivered into the sales agreement executed with Mitsubishi Corporation RtM Japan in March 2019. The company continued the process for permitting/application works and awaiting regulatory approval for the development of the initial ~2,000tpa commercial module lithium carbonate processing plant and associated operations at the Rincon project site.


Location of Tonopah Lithium Project (Source: Company Reports)

Key Objectives for Next Quarter: The primary objective of the company for the next quarter will be to continue lithium processing operations to produce LCE product for delivery into the executed sales agreement. The company’s objectives also revolve around obtaining regulatory approval/permit to commence works for construction of the commercial ~2,000tpa lithium carbonate processing plant.

Stock Recommendation:The total revenues of AGY have witnessed a CAGR growth of 228.89% in the time span of previous FY 2014-FY 2018, which is extraordinary growth. Thus, it can be said that the company is possessing strong revenue-generation capabilities. The stock has generated negative returns of 27.27% and 8.86% in the time period of three months and six months, respectively. Considering the higher returns in the last three months, current trading levels, and other factors, we have watch stance on the stock at the current market price of $0.072 per share. 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.