Santos Ltd

Turnaround strategy starting to deliver:  The group’s second quarter production fell 1% to 14.7 mmboe (million barrels of oil equivalent) against the last quarter but this was in line with estimates. However, sales volumes and revenues were higher than previous quarter primarily due to the timing of three PNG LNG DES cargoes shipped late March but delivered in April, combined with higher domestic sales volumes and higher LNG prices. Sales volumes enhanced 16% to 21.5 mmboe as compared to first quarter of 2017 while sales revenues rose 12% to US$769 million driven by better LNG prices and the timing of liftings. As a result, Santos enhanced the production and sales volume for 2017 to 57-60 mmboe and 75-80 mmboe respectively. Meanwhile, Santos also enhanced their drilling activity in Cooper Basin as well as across its GLNG acreage and accordingly expects further wells to improve their gas production in the coming years. Santos controlled their net debt position by US$600 million to US$2.9 billion as compared to 2016-year end and expects a free cash flow breakeven for 2017 now sits at US$33 per barrel, well below the US$47 per barrel at the beginning of 2016.  Given the company’s focus and current progress on reducing costs, lowering net debt and robust asset portfolio that can generate moderate free cash flow in a lower oil price environment, we give a “Buy” recommendation on the stock at the current market price of $3.37

Australian Pharmaceutical Industries Ltd

Moderate performance despite sluggish retail conditions: During H1FY17, Australian Pharmaceutical Industries Limited (API) reported 15% yoy growth in NPAT at $29.1m for the six months to 28 February 2017. Reported NPAT was 27.2% up on the pcp, which included a $2.4m loss on the sale of API’s shareholding in CH2 in the previous year. The company has increased NPAT and returns to shareholders through organic growth in Priceline Pharmacy network, despite the sluggish retail conditions in 2017, while generating cash and sustainable returns through its pharmacy distribution business.  Return on equity had a compound annual growth rate of 19.1% since 1H15 and return on capital employed had a 13.0% increase in the same period. Further, working capital improved on all key metrics on the pcp and inventory returned to normal levels for the seasonal trading period. Reported net debt decreased $84.4m from the same time last year and is expected to decrease for the full year. On the back of long term strategic initiatives to increase the market share, while improving the operating margins, we give a “Buy” recommendation at the current price of $1.77

Platinum Asset Management Limited

During June 2017, Funds under Management declined by 6.9% month on month to $22.7 billion. Recently, the company announced new Exchange Traded Managed Funds (“ETMFs”) and changes to product fees. The group will launch two Exchange Traded Managed Funds (ETMFs) in August 2017 as part of the strategy to help investors to access Platinum’s International and Asian equity strategies via the ASX. The group has lowered the standard management costs on the Platinum Trust Funds and Platinum Global Fund from 1.5% to 1.35% pa to benefit clients with regards to channel choice and price options. However, the current fee and cost reductions will not have impact on 2017 revenues or profit as will not come into effect until on or about 3 July 2017, but are expected to lower PTM’s 2018 revenue.  However, given the company’s long-term focus on generating excess returns and cost efficiency initiatives, we reiterate a “Buy” recommendation on the stock at the current market price of $5.40

Telstra Corporation Ltd

Recently ACCC decided to regulate high-speed internet services supplied by non-NBN fixed line networks. ACCC’s announced to set wholesale prices and other terms and conditions which would lead customers with several options to choose from. Telstra has a huge first mover advantage as the group invested more than $8 billion in the last six years for building Australia’s major and best mobile network with 15% of this investment directed to cover the last 2% of Australia’s population. Telstra is further investing $1 billion to strengthen their regional mobile coverage and expanding their 4G coverage to reach 99 per cent of the population. For the coming years, the group would see a further 1.4 million square kilometers of 4G coverage for regional and rural Australia. As a result, over 600 base stations would be upgraded from 3G to 4G, enabling the Australian population access to world-leading 4G networks. As per ACCC, Telstra’s fiber network prices would be $16.03 per port per month (Zone 1) for 2017 to 2018 and $21.10 per port per month (Zone 2) and $29.27 per mbps per month for aggregation.Given the ongoing investments to increase the market share and favorable regulatory environment, we maintain a “Buy” recommendation on this 7.6% dividend yield stock at the current market price of $4.11

Mantra Group Ltd

The Commonwealth Games will be the largest sporting event that Australia will see this decade and is estimated to have a $2 billion of economic impact. The event is scheduled for April 2018, will see participation from 6,600 athletes and team officials from 70 nations. The group would benefit as it is the largest accommodation provider on the Gold Coast. Meanwhile, the group has completed 1,138 accommodation refurbishments, 10 hotel projects including 2 restaurants and 7 foyers. The 18 foyer and hotel guest spaces are currently underway and 5 major projects are to be completed in FY17. The shares of MTR have declined 15% in the last twelve months (as of July 28, 2017) owing to subdued performance in CBD segment. We expect the bullish momentum in the stock as the group is strengthening its leisure market while the CBD segment is performing rationally, and maintain a “Buy” recommendation on the stock at the current price of $3.01  

Beach Energy Ltd

Beach Energy Ltd (ASX:BPT) reported a 9% yoy growth in sales volumes at 11.8 MMboe in FY17, while quarterly sales volumes of 2,835 kboe were 7% higher than the prior period. For FY17, BPT posted total sales revenue of $649 million with $152 million during Q4FY17. The impact on revenue from lower Brent oil prices and lower oil sales volumes was mitigated by improved pricing terms of the renewed Crude Oil Sale and Purchase Agreements with the Cooper Basin JV. The average realized Australian dollar oil price increased by 1% to $69/bbl during the quarter, while it stood at $68.2/bbl for FY17. The average realized sales gas and ethane price of $6.21/GJ was in-line with the prior period. In FY18, BPT expects to connect more than 20 currently cased and suspended wells, undertake various optimization and expansion projects, and participate in up to 34 development wells. These activities are expected to offset natural field decline and sustain production levels in FY18. The company incurred a capital expenditure of $155 million for FY17, 16% lower than the prior year, and for FY18 is expected to be within the range of $220 - 260 million. BPT expects FY18 production to be 10.0 - 10.6 MMboe, and targeting >10 MMboe production in FY19 and FY20. We reiterate a “Buy” recommendation on the stock at the current market price of $0.67

Contango Microcap Ltd

Contango Microcap Ltd.’s (ASX: CTN) Net Tangible Assets (NTA) of investments before tax reached $1.016 as on 30 June 2017 as compared to $0.986 on 31 May 2017. NTA after tax reached $0.960 (ex-div) in June 2017 compared to $0.948 in May 2017. The group holds Net Assets after Tax of $161.6 million on 30 June 2017 against $159.8 million in May 2017. The Company’s portfolio is managed by Contango Asset Management Limited. Contango Asset Management use a unique top-down and bottom-up investment approach that has delivered strong returns since inception. However, the performance of the CTN portfolio was 1.7% versus the benchmark return of 2.0% resulting in underperformance of -0.3% for June month. The stock fell over 15% in the last six months (as on July 28, 2017), owing to under performance of its investment portfolio. However, given the 6.8% dividend yield and its long-term focus of outperforming the bench mark index, we give a “Buy” recommendation at the current price of $0.93

Netcomm Wireless Ltd

Recently, NetComm Wireless Limited (ASX: NTC) has updated on the USA Fixed Wireless contract. The company has confirmed that the initiative is with a subsidiary of AT&T Inc. (NYSE: T), one of the world's largest telecommunications holding companies, to supply the Outdoor Wireless Antennas needed to bring Fixed Wireless connectivity to select rural and underserved premises in parts of 18 states in the U.S. AT&T has successfully initiated coverage of the first wave of Fixed Wireless networks with services now available across Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North and South Carolina and Tennessee.  Importantly, NTC is positioning itself in the Wireless M2M, or Industrial IoT market which is forecasted to hit $11 trillion by 2025. The group also made a Frame Purchase Agreement with Nokia for supplying Fixed Wireless devices to Nokia related to their global FastMile initiative. The agreement represents a further milestone in the execution of NetComm Wireless’ global fixed wireless growth strategy, where external research shows the total addressable market to be US$80 billion. Based on the forgoing, positive prospects of NBN rollout in Australia and acceleration in Fixed Wireless orders from U.S, we give a “Buy” recommendation on the stock at the current price of $1.69

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