Galaxy Resources Limited

Improving fundamentals:Galaxy Resources Limited (ASX: GXY) is a metal and mining company with its assets in Australia, Canada and Germany. The company is currently operating on Mt. Cattlin mine in Australia producing spodumene and tantalum and the James Bay lithium project in Canada and is advancing towards the Sal de Vida lithium and potash brine project in Argentina.

The sales grew by 681.96% and stood at $88.44 million in 1H18 as compared to $11.31 million in 1H17. The net income also soared and stood at $11.5 million as compared to a loss in 1H17. Over the years, the margins of the company have improved. During 1H18, the company reported an EBITDA margin of 45.8% which was above the industry median of 37.9%. Whereas the ROE of 2.6% and net margins of 13% were below the industry median of 6.9% and 13.8% respectively.

The company has ~407.52 million shares outstanding with the market cap of $896.55 million and a beta of 2.01x.


6-months chart (Source: Thomson Reuters)

During the past one year, the stock has generated a negative yield of 45.41%. Today, the stock was up by 2.727% as compared to the previous close, currently trading at the price of level $2.260. The Relative Strength Index along with the Bollinger bands are visible in a neutral position.As per Australian Securities and Investment Commission (ASIC), as on 31 December 2018, the stock was shorted over 16.97%. With a decent fundamental outlook and current short-term selling pressures, we suggest to investors that they should “Hold” the stock at the current market price of $ 2.260.
 

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. On 31 December 2018, the company announced the results of its first production at its Battery Anode Material (BAM) facility in Louisiana, USA which stated the completion of installation of 5 ktpa milling equipment at the site along with the installation and purification equipment for batch processing.
The company reported a sale of $0.57 million in 1H18 and a net loss of $8.34 million which were below the 1H17 values. Further, the company reported negative margins along with negative ROE over the past few years. The company has ~343.6 million shares outstanding with the market cap of $527.43 million and a beta of 1.4x.


3-months chart (Source: Thomson Reuters)

During the past one year, the stock has generated a negative yield of 67.34% and is trading close to 52-week lower level. But today, the stock was up by 9.772% as compared to the previous close, currently trading at the price of level $1.685, The Relative Strength Index along with the Bollinger bands are visible in a negative position. As per ASIC, as on 31 December 2018, the stock was shorted around 13.25%. By looking at aforesaid facts and recent developments such as binding term sales agreement with Qingdao Langruite Graphite Co. limited which will support further diversification of Balama graphite sales across a range of end uses and provides flexibility in product delivery, we maintain our “Hold’ recommendation on the stock at the current market price of $1.685.
 

JB HI-FI Limited

Consistent performance along with bullish indication through charts: 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 company has a total of 311 stores in Australia and New Zealand. The group’ sales guidance for FY 2019 reaffirmed as $7.1 billion comprising of Australian, New Zealand and Good Guys division in the proportion of $4.75 Bn, $0.22 Bn & $2.15 Bn, respectively.
Over the past 5 years, the margins of the company have been consistent. During FY18, the company reported an EBITDA, Operating and Net margin of 6.0%, 4.9% and 3.4% respectively which were below the industry median of 11.0%, 9.6% and 6.9% respectively. Whereas the ROE of 25.9% and asset turnover ratio of 2.77x were above the industry median of 12.6% and 1.14% respectively showing a positive side.

The company has ~114.88 million shares outstanding with the market cap of $2.35 billion and a beta of 0.32x. It also reported a lower EV/EBITDA of 6.7x as compared to the industry median of 7.5x showing that the stock is undervalued.


3-months chart (Source: Thomson Reuters)

During the past one year, the stock has generated a negative yield of 20.08%. But today, the stock was up by 3.134% as compared to the previous close, currently trading at the price of level $21.060. The Relative Strength Index along with the Bollinger bands are visible in a positive position.As per ASIC, as on 31 December 2018, the stock was shorted over 17.32%. 
With better multiples, consistent performance fundamentally but current short-term selling pressures exhibits a watch position on the stock at the current market price of $ 21.060.
 

Metcash Limited

Lower than industry margins:Metcash Limited (ASX: MTS) is a leading wholesale marketing and distribution company based out in Australia. It has recently declared its 1H19 results with an increase in sale by 202% reported at $6.2 billion. The EBIT and Profit after tax were also up by 1.2% and 3% respectively reported at $158.1 million and $95.8 million respectively.


Profit and Loss Statement (Source: Company Reports)

Over the years,the margins of the company have been very low and consistent. During 1H19, the company reported an EBITDA and Net margin of 2.8% and 1.9% respectively which were below the industry median of 6.0% and 2.9% respectively. Whereas the ROE of 7.6% was in line with the industry median of 7.7%.

The company has ~909.26 million shares outstanding with the market cap of $2.07 billion and a beta of 1.24x.

During the past one year, the stock has generated a negative yield of 27.16%. But today, the stock was up by 3.509% as compared to the previous close, currently trading at the price of level $2.360. The Relative Strength Index along with the Bollinger bands are visible in a neutral position.As per ASIC, as on 31 December 2018, the stock was shorted over 17.32%. With lower margins and neutral position exhibited by the charts, we maintain our “Expensive” rating on the stock at the current market price of $2.360 per share.
 

InvoCare Limited

Decent Performance in H1 2018: InvoCare Limited (ASX: IVC) had stated in H1 2018 results presentation that the acquisitions as well as “Protect & Grow” are expected to support the company in witnessing growth moving forward. They had also stated that the results of Protect and Grow have been exceeding the expectations. They had also stated that the acquisitions have been ramping up. As demonstrated by H1 2018 results presentation, the company had done six acquisitions in the Australian region and the New Zealand region saw three acquisitions.
 

Income Statement (Source: Company Reports)

The company happens to be in decent position from the perspective of the gross margins. At the end of June 2018, the company had gross margins of 74.1% which implies the rise of 1% on the YoY basis.
Stock Analysis and Outlook: As depicted by InvoCare Limited’s 1H 2018 results presentation, the company had stated that it would be maintain the focus towards the management of capital as well as acquisitions. As per the technical chart, the company happens to have the recent support at $10.220. According to Australian Securities and Investments Commission, the stock of InvoCare Limited was shorted over 12.5% as on December 31, 2018. Hence, we maintain our “Expensive” rating on the stock at the current market price of $10.510 per share.
 

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