Stocks’ Details

Galaxy Resources Limited

Mt. Cattlin to benefit in 1Q19:Galaxy Resources Limited (ASX: GXY) is an Australian metal and mining company with lithium production facilities, hard rock mines, and brine assets in Australia, Canada, and Argentine. The company will be releasing its December quarter result at the market pre-open on 24 January 2019. It is expected to realize the optimization benefit over the Mt. Cattlin in 1Q19.


Lithium Prices (Source: Company Reports)

Over the past few years, the margins of the company have been fluctuating.It reported an EBITDA margin of 45.8% in 1H18 which was better than the industry median of 37.9%. The net margin of 13.0% in 1H18 was below the industry median of 13.8%. It reported a top line of $96.25 million in FY17 with a CAGR of 347.50% over the past five years.

During the past six months, the stock has generated a negative yield of 28.34% and is currently trading at a lower price level of $2.270. The Relative Strength Index is seen in a neutral position. As per the Australian Securities and Investment Commission (ASIC), as on 15 January 2019, the stock was shorted over 17.14%. With the stock trading close to lower level and the optimization benefit to be realized in 1Q19, we maintain our ‘Hold’ position on the stock at the current market price of $2.270.

Orocobre Limited

Progress over Olaroz Project:Orocobre Limited (ASX: ORE) is an Australian based metal and mining company. The company has started the drilling of well for Stage 2 primary liming plant at the Olaroz and is expected to complete it by 3Q19.


Olaroz Lithium Facility highlights (Source: Company Reports)

Over the past few years, the margins of the company have been fluctuating and are below the industry medians.It reported a lower operating and net margin of 11.0% each in FY18 as compared to the industry median of 19.0% and 12.5% respectively.

During the past six months, the stock has generated a negative yield of 35.11% and is currently trading at a lower price level of $3.420.As per the Australian Securities and Investment Commission (ASIC), as on 15 January 2019, the stock was shorted over 13.49%. With the stock trading close to lower level, progress over Olaroz Project and decent financials in FY18, we maintain our ‘Buy’ position on the stock at the current market price of $3.420.
 

JB Hi-Fi Limited

Updated FY19 earnings guidance:JB Hi-Fi Limited (ASX: JBH) is the parent company of two Australia’s best known and most trusted retail brands, JB Hi-Fi and The Good Guys together. The group’ sales guidance for FY19 reaffirmed as $7.1 billion comprising of Australian, New Zealand and Good Guys division in the proportion of $4.75 billion, $0.22 billion and $2.15 billion, respectively.


FY18 Financial highlights (Source: Company Reports)

Over the past 5 years, the margins of the company have marginally declined and were below the industry median. During FY18, the company reported an EBITDA and Net margin of 6.0% and 3.4% respectively which were below the industry median of 11.0% and 6.9% respectively. Whereas, it is generating better returns for its shareholders than its peers as the ROE of 25.9% is above the industry median of 12.6%.

During the past six months, the stock has generated a negative yield of 8.67% and is currently trading at a lower price level of $21.660. The Relative Strength Index is visible in a neutral position.As per the Australian Securities and Investment Commission (ASIC), as on 15 January 2019, the stock was shorted over 16.38%. With the stock trading close to lower level, better returns to shareholders, and reaffirmed sales guidance for FY19, we have a ‘wait and watch’ stance on the stock at the current market price of $21.660.

NEXTDC Limited

Planned acquisitions in pipeline:NEXTDC Limited (ASX: NXT) is an Australian based independent data centre operator. The company has planned to acquire three new sites in Australia to increase NXT’s future capacity to over 300MW.


FY18 Financial Highlights (Source: Company Reports)

Over the past 5 years, the EBITDA margin of 43.2% in FY18 has improved and is reported above the industry median of 28%. There were fluctuations in the Net margin over the past 5 years and was reported at 4.1% in FY18 which were below the industry median of 11.2%. It is also not able to generate better returns for its shareholders than its peers as the ROE of 0.9% is below the industry median of 11.3%.

During the past six months, the stock has generated a negative yield of 8.47% and is trading below the average of 52 weeks high and low level of $6.725.As per the Australian Securities and Investment Commission (ASIC), as on 15 January 2019, the stock was shorted over 12.25%. With the planned acquisitions in the pipeline, lower returns to shareholders, and bearish signal by the charts, we suggest to investors that they should ‘avoid’ the stock at the current market price of $6.680.

Syrah Resources Limited

Decent outlook:Syrah Resources Limited (ASX: SYR) is a metal and mining company engaged in supplying graphite through its Balama Graphite Project in Mozambique. The company recently announced the commercial production at its Balama facility with all revenue and operating cost to be reported with effect from 1 January 2019. The company achieved an average graphite recovery of 70% in 4Q18.


 
Balama production summary for 3Q18 (Source: Company Reports)

The companyreported negative margins along with negative ROE over the past few years. The company enjoys virtual debt-free status with the current ratio of 3.95x as on 30 June 2018.

During the past six months, the stock has generated a negative yield of 32.53% and is currently trading at 52-week lower level.As per Australian Securities and Investment Commission (ASIC), as on 15 January 2019, the stock was shorted over 17.11%. By looking at aforesaid facts and recent developments, and decent liquidity position, we, therefore, maintain our ‘Hold’ recommendation on the stock at the current market price of $1.930 (down 2.03% on 21 January 2019).


Stock Price Comparative Chart (Source: Thomson Reuters)  
 

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