Stocks’ Details
 

Galaxy Resources Limited (ASX: GXY)

Strategic agreements and flagship project - Recently, Galaxy Resources Limited (ASX: GXY) and POSCO have come to an agreement as per which GXY would sell a package of tenements on the Northern basin Salar del Hombre Muerto. The agreement would earn GXY proceeds that would be used to fund its Sal de Vida project in Argentina. Particularly, a cash consideration of US$280m has been identified.

GXY generated negative year to date return of 28.42% in terms of stock price but we believe that there is an upside potential in the stock going ahead. The group has key assets including the flagship Mt Cattlin Project which are expected to be on track for the next stage.

We have seen the stock falling from the highs of $4.465 over the concerns that there is a bit of oversupply of lithium batteries in the market. As a result, price of raw materials and lithium carbonate has taken a hit. However, looking at the long-term chart of Galaxy, the stock looks quite strong, supporting the long term trendline. Among the momentum indicators, relative strength indicator does not show any significant divergence or sign of weakness in the stock. Another technical indicator, Bollinger band is shrinking, suggesting a possible breakout in the near term. We maintain our “HOLD” rating on the stock at the current price of $2.93, sighting the positive developments and price movement. The stock was up 5.8% as at August 28, 2018.

 

GXY Daily Chart (Source: Thomson Reuter)
 

South32 Limited (ASX: S32)

Decent Financial Performance - Robust results for the financial year 2018 and strong commodity demand in the aftermath of China following Blue Skies policy are expected to act as a catalyst in the growth of South32 Limited (ASX: S32). The biggest miner of the manganese in the world posted underlying earnings at $1.33 billion, an increase from previous year’s $1.15 billion. Profit after tax was up by 8% at $1,719 US$ million. The group has now forecasted an increase in metallurgical coal production from 3,165 tonnes to 4,900 tonnes in 2019 and this with reduction in unit costs from US$142/tonne to US$105, with FY20 forecast of production increase by 900t tonnes to 5,800t tonnes, may give rise to a single to double digit growth in profit in next couple of years.


Financial Performance (Source: Company Report)

We believe that a nominal fall this YTD of 2.59% would not alter the future growth prospects of the stock. The long-term value unlocking potential of the stock remains intact with the stock moving in the upward trajectory. After falling from the crucial support level of $3.5, the stock held its next support level of $3.22 and rebounded from that level. At current levels, we can see a falling wedge pattern building up in the stock with the tapering end indicating for a breakout. We recommend a “HOLD” on the stock at the current price of $3.50 and keep a close eye on the price movement.
 

S32 Daily Chart (Source: Thomson Reuter)
 

Nufarm Limited (ASX: NUF)

Green Signal from USDA - Recently, the United States Department of Agriculture announced deregulation of NUF’s subsidiary’s omega-3 canola for cultivation in the United States. Omega- 3 canola would be the first plant-based medium of long chain omega-3 fatty acids. According to Nufarm Limited (ASX:NUF), one hectare of omega-3 canola could provide omega-3 yield from 10,000 kilograms of wild caught fish. Improvement in organic business and expansion in Europe through acquisition of high margin products would help NUF to grow in the future. Meanwhile, revenue for the first half of 2018 came in at A$ 1,460 million, an increase of 7% from the previous year’s corresponding period while reported Net profit after tax came in at A$10.7 million.


1H FY18 Performance (Source: Company Report)

For full year ending July 31^st 2018, the company estimates EBIT to increase by 5% above the previous year. Nufarm shares are sinking lower in the wake of negative impact from the lawsuit between chemical giant Monsanto and respective plaintiff. Recent media attention to Glyphosate could also be one of the reasons for stock hitting grounds. We are expecting that the dust may settle with better developments announced by the group and a judgement that does not impact NUF.

Despite, massive fall from the highs of $9.6 recently and generating negative year to date return of -20.60%, the stock may trend better. NUF has respected its crucial support level of $6.14. After being in the oversold region lately, we believe that the stock can be considered a “HOLD” at the price of $6.91 as any positive development might unlock value for the investors.
 

NUF Daily Chart (Source: Thomson Reuter)
 

Eclipx Group Limited (ASX: ECX)

Low Profit Guidance - For the first half of the financial year 2018, Eclipx Group Limited (ASX: ECX) has reported the net operating income at AUD 159.3 million, an increase of 39% over the corresponding period. Group Net profit after tax and amortization surged 23% to $38.5 million. Last minute statements on guidance costed it 42% on share price but it would not be a major factor going forward.


Financial Performance (Source: Company Presentation)

Year to date, the stock has generated the negative return of 35%. A steep fall in the price of almost around 42% was witnessed after the company came out with the profit guidance cut. ECX, affected by the slow online auction activity and online brand GraysOnline, stated that NPATA for full year 2018 would range between 13% to 17%, a cut from the previous forecast of between 27% and 30%. The group has also rejected proposal from SG Fleet. While the stock has rebounded half way from the low levels, the divergence with the price movement is not expected for some time, and we keep an eye on key catalysts. We maintain “Hold” on the stock at the price of $2.57 given the entire interplay.
 

ECX Daily Chart (Source: Thomson Reuter)
 

Wam Research Limited (ASX: WAX)

Healthy portfolio performance: Wam Research Limited (ASX: WAX) has posted operating profit before tax at $28.9 million for full year ended 30 June 2018. This is an increase of 42.2% over previous year’s $20.3 million. Investment portfolio of the company expanded 14.5% outperforming the S&P/ASX.


Investment Portfolio Performance (Source: Company Report)

The company has benefitted from exposing its portfolio to the retail sector last month. Stocks that contributed positively in the portfolio included Pinnacle Investment Management (ASX: PNI), Noni B (ASX: NBL), Mayne Pharma Group (ASX: MYX) and PSC Insurance (ASX: PSI).

Year to date, the company has generated positive return of 8.55%.  The stock has given breakout from the falling wedge pattern this month and continues to move high on decent volume. RSI has already receded from the overbought zone and respected its rising trendline.

 A minor correction in the stock can be used to make fresh entry in the stock. Believing that the stock has a long way to go, fueled by profit margins and dividend yields, we recommend a ‘Speculative buy’ recommendation at the price of $ 1.655.
 

WAX Daily Chart (Source: Thomson Reuter)

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