Are these 4 Stocks ready to touch 2019 with substantial momentum – BHP, KDR, NEA, AMI?

Stocks’ Details
 

BHP Group Limited (BHP Billiton Limited)

 
Robust ROE’s and improving debt profile: BHP Billiton Limited (ASX: BHP) via a release stated that it has completed the buyback event amounting to US$5.20 Bn of BHP Group Limited shares (formerly BHP Billiton Limited). This has enabled the company to buy-back its circa 265.80 Mn of the company’s shares which constitutes around 8.30% of the issued capital of the BHP Group Limited. The final price of the off-market buyback has been set at A$27.64 per share. This price is at the discount to the market price of A$ 32.1387 per share.
               
Moreover, the company has determined to pay a fully franked special dividend of US$1.02 per share to all the BHP holders with an entitled registered holding as on 11 January 2019. The proceeds of this distribution shall come from the net proceeds of its Onshore US assets. In consonance with the above developments, the company has applied to the ASIC that it intends to apply for the cancellation of shares which have been bought back by it. The number of shares cancelled is 265,839,711 ordinary shares. These shares shall be cancelled from an early date of 17 December 2018. Hence, post this development the number of shares outstanding would be 294,585,1394 ordinary shares.
 

BHP’s cost optimization and unit costs (Source: Company Reports)
 
On the financial metrics front, the company has provided a ROE of 15.90% while the mining industry has a median ROE of 11.70%, which means that the company is more efficiently utilizing the shareholders’ funds. Moreover, the company has a strong balance sheet which is evident reducing YoY Debt-to-equity ratio which signifies that the firm has been able to optimize its debt profile over the year. Meanwhile, the stock price has risen by 2.35% over the past six months and trading close to a higher level. Hence considering the robust ROE’s & constantly improving debt profile, we maintain our “Hold” recommendation on the stock at the current market price of $33.50.
 

Kidman Resources Limited

Encouraging results from the Feasibility study:Kidman Resources Limited (ASX: KDR) has through a recent ASX release made an announcement stating that the Covalent Lithium, in which it has a 50% of the stake, has completed an integrated pre-feasibility study (IPFS) for the Mt Holland Lithium Project. The feasibility study has confirmed the compelling outcomes from the previous studies made. These studies were conducted on the Kwinana Lithium Refinery and the Mt Holland lithium Mine which gave a signal of highly attractive NPV of US$ 2.20 Bn and a robust IRR of 26.60%. Moreover, the company also announced that its joint venture partner in the Mt Holland Lithium Project, Sociedad Quimica y Minera de Chile S.A. (SQM), has now completed its milestone payments in respect of its earn in to the project. SQM has paid US$25 million directly to Kidman and has made a payment of US$60 million directly to the Covalent Lithium joint venture in which Kidman has a stake of 50%.

Forecasts of lithium demand correlated the application (Source: Company Reports)

Going Forth, it is believed that the Australian region has enormous potential to become a leader in the lithium space. The region is one of the major suppliers of lithium and spodumene production. Moreover, the growing investment will consolidate the region’s position in the global lithium market. Hence it is estimated that the lithium demand is expected to uplift by 20% per annum till the year 2025 on the back of increased production of electric vehicles. The firm is expected to capitalize on the favorable market dynamics and to exhibit promising growth in the coming quarters.

Meanwhile, the stock price has fallen by 28.57% over the past six months as on 17 December 2018 and was further down 9% on December 18, 2018 as investors were expecting a more stronger update. Nonetheless, the stock is trading at an attractive valuation.Hence considering the robust market outlook & the growing demand for lithium due to electrification of vehicles, we maintain our “Buy” recommendation on the stock at the current market price of $1.250.
 

Nearmap Limited

Strong traction seen in the geospatial mapping market: Nearmap Limited (ASX: NEA) posted its FY 2018 numbers whereby, the operating revenue for the FY 2018 came in at $ 54.1 Mn a rise of 32% over PCP. The above growth was on account of the ACV (Annualised contract revenue) portfolio of the Australian operations. The Australian ACV expanded by 22% so as to reach $48.8 Mn & simultaneously the US portfolio grew by an astounding 142% to reach at US$12.9 Mn.
The consolidated Net loss after tax came in at $11 Mn. This was due to the incremental capture cost that the company had to expand due to the rollout of “HyperCamera2” systems. Moreover, the technology & general operations as well as the Depreciation & amortization expenses escalated by 57% and 113% respectively over the previous fiscal.

 
NEA ‘s annualized contract value for FY 2017 & 2018 (Source: Company Reports)

Going further, the company is very well positioned for the long-term growth as the world market for the Geospatial mapping is expected to see expansion at a robust rate and hence is expected to reach $4.5 Bn by the end of 2025. During FY 2019, the company will continue to be the market leader in the 3D contents space aided by the tools available in the Map Browser. Also, the 3D experience will be enhanced with the introduction of “Hyper Camera”.

Meanwhile, the stock price has risen 56.04% in the past six months as on 17 December 2018. Hence, considering the strong traction seen in the geospatial mapping market & on the expectations that the company will reap the benefits of continued investments it is making its product more innovative, we reiterate our “Hold” recommendation on the stock at the current market price of $1.565 (down 3.096% on 18 December 2018).
 

Aurelia Metals Limited

Rising metal prices-Key catalyst: Aurelia Metals Limited (ASX: AMI) has via a recent release stated that the drilling in the areas of upper North Pod has resulted in high-grade polymetallic intercepts. This development has confirmed the opening of the lode. The results of the drilling at the Hebe Prospect, which is located southeast of Hera was also very encouraging. Moreover, the surface drilling has been started at the Dominion and Hera Main Southeast prospects.
The group revenue for the FY 2018 came in at $248.60 Mn, up by 127% over the year. This was mainly driven on account of the contribution from the peak mines which contributed $92.80 Mn of the total revenues and the rise across all the metal prices over the year.

 
AMI ‘s strong cash margins in comparison with other miners. (Source: Company Reports)

Going further, the company expects the group production for the FY 2019, to be in the range of 115-130 koz Au. The all-in sustaining cost for the FY2019 is expected to be A$900-A$1000 per Oz Au. Moreover, the company is expected to generate strong free cash flow for the stated fiscal. Meanwhile, the stock price has risen 31.25% in the past six months as on 17 December 2018 and trading at reasonable PE multiple of 4.74x. Hence, considering the traction seen in the metal prices & strong cash margins, we give “Hold” recommendation on the stock at the current market price of $0.720.
 

Stock price Comparative Chart (Source: Thomson Reuters)
 

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