Stocks’ Details

Syrah Resources Limited

Increased demand from Anode Producers: Syrah Resources Limited (ASX: SYR) is a small-cap mining explorer company with the market capitalisation of circa $324.83 Mn as of 8 July 2019. Recently, the company, via a release, updated the market that the Vanguard Group, Inc. and its controlled entities have become an initial substantial holder of Syrah Resources Limited with voting power of 5.106% on 1^st July 2019. The company in its presentation dated 19^th June 2019 stated that Balama is a long-life asset with more than 50 years of mine life and production capability of 350kt per annum of graphite concentrate. The fines market growth has been fueled by demand from anode producers to support the increased capacity of lithium-ion factories and the objective to lower overall product costs.


Natural Graphite Demand (Source: Company Reports)

What to Expect: Syrah Resources Limited is anticipating the production to be in the ambit of 45kt – 50kt for Q2 FY19 in comparison to 48kt in Q1 FY19, because of later than planned results from the production improvement plan. The company expects cash position of around US$43 Mn at Q2 FY19 end.

Stock Recommendation:Syrah Resources Limited is continuing its focus on optimising production and sales volume and cost against price. On the stock’s performance front, the stock had generated a negative return of 21.46% and 34.22% in the time span of one month and three months, respectively.As per ASIC dated July 2, 2019, 18.93% of total product in issue has been reported as short positions.Hence, considering the above-stated facts and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.865 per share on 8^th July 2019.
 

Nufarm Limited

Key Personal Changes: Nufarm Limited (ASX: NUF) is a manufacturer and marketer of chemicals. The market capitalisation of the company stood at ~A$1.75 Bn as on 8^th July 2019. In the release dated 27^th June 2019, the company stated that Mr. Rod Heath ceased to be company Secretary, effective from 27^th June 2019. Adding to that, Ms. Fiona Smith has commenced the role of Group General Counsel and Company Secretary, effective from 27^th June 2019. The company’s strategies have reported CAGR growth of 6% in sales (FY 2014-FY 2018) and the company’s sales stood at $3,308 Mn in FY18.

Sales Growth (Source: Company Reports)

Future Aspects: Nufarm Limited has various growth platform such as portfolio, pipeline, partners, and acquisitions, etc. In terms of portfolio, it is growing its share in core geographies based on its existing portfolio. It is pursuing portfolio acquisitions that align with its strategy and enhance its offer to channel partners and growers. NUF is working in order to resolve its short-term issues and it has a strong record of profitable growth.

Stock Recommendation: Nufarm Limited is focused on reducing leverage in FY20 and beyond and making investments in new seed solutions and technologies. With respect to the stock’s past performance, it generated a return of 25.34% in the time span of one month. As per ASIC dated 2 July 2019, 16.86% of total product in issue has been reported as short positions. Based on the foregoing, we maintain our “Hold” recommendation on the stock at the current market price of A$4.540 per share (down 1.304% on 8^th July 2019).
 

Orocobre Limited

Change in Address: Orocobre Limited (ASX: ORE) is a small-cap mining company with the market capitalisation of ~A$719.61Mn as on 8^th July 2019. Recently, the company, via a release, updated the market about a change of address. The new address of the company is Riparian Plaza Level 35, 71 Eagle Street, Brisbane QLD 4000. The company has stated that it witnessed highest March quarter production to date despite rainfall exceeding same period in 2017 / 2018 as well as lower evaporation rates.It reported revenue of US$33.4 Mn on sales of 3,530 tonnes in the March quarter. The sales price in the March quarter witnessed a decline of 11% from December quarter because of direct and indirect impacts of China’s prolonged market softness.
    
Price Comparison (Source: Company Reports)

Future Aspects: The company’s Naraha Lithium Hydroxide Plant would be funded via a combination of JPY9.1 Bn of term / bridging loans and JPY1.0 Bn of shareholder equity. ORE would contribute JPY750 Mn equity and TTC would contribute JPY250 Mn. ORE hasfurther staged expansions for growing Olaroz production into the future.

Stock Recommendation: Orocobre Limited stated that global automakers have committed to an investment of US$300 Bn towards development and procurement of battery and EV-related technology. On the stock’s performance front, it had produced a return of -14.86% in the time span of six months. As per ASX, the stock is trading closer to 52-week lower levels of $2.710, indicating a decent opportunity for accumulation. As per ASIC dated 2 July 2019, 14.52% of total product in issue has been reported as short positions. Hence, considering the above stated-facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$2.790 per share (up 1.455% on 8^th July 2019).
 

JB Hi-Fi Limited

Low-Cost Operating Model: JB Hi-Fi Limited (ASX: JBH) is one of the Australia’s leading retailer of home consumer products. The market capitalisation of the company stood at ~A$3.1Bn as on 8^th July 2019. The company recently announced that Pendal Group Limited ceased to be a substantial holder of the company since 27^th June 2019. Furthermore, the company, via a release dated 18^th June 2019, announced that, it has re-appointed Cameron Trainor as Managing Director of the JB Hi-Fi business and appointed Lynda Blakely on the role of Group HR Director with responsibility for human resources throughout the JB Hi-Fi and The Good Guys businesses. The company has the lowest cost of doing business of 15.4% amongmajor listed Australian retailers and international consumer electronics retailers.

Cost of Doing Business (Source: Company Reports)

Future Prospects: The company reconfirmed the guidance for FY19, and it is expecting group sales of around $7.1Bn which comprises $4.73 Bn from JB HI-FI Australia, NZ$0.24Bn from JB HI-FI New Zealand, and $2.15Bn from The Good Guys.The company is anticipating the total net profit after tax to be in the range of $237Mn- $245Mn for FY19.

Stock Recommendation: The company has a capability to compete effectively with traditional competitors and new market entrants. On the stock’s performance front, it yielded a return of 10.24% and 28.25% in the time period of three months and six months, respectively. On the flip side, it produced a negative return of 1.82% in the past one month. Therefore, it can be assumed that the stock is quite volatile. As per ASIC dated 2 July 2019, 13.35% of total product in issue has been reported as short positions. Currently, the stock is trading slightly towards its 52-week lower level of $20.300 with PE multiple of 12.84x. Hence, considering the aforesaid facts and current trading level, we put our wait and watch stance on the stock at the current market price of A$26.880 per share (down 0.481% on 8^th July 2019).
 

Comparative Price Chart (Source: Thomson Reuters)     

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