Syrah Resources Limited

Better flake size & grade expected from the Balama Project:Syrah Resources Limited (ASX: SYR) had earlier announced that its commercial production at the Balama Graphite Project has commenced.

For the quarter ended 30 Sep 2018, the company has achieved a production of 38.7kt over the Balama Graphite Operations which implies a growth of 83% versus Q2on account of increased recovery and production achieved due to the improvement plan undertaken by the company in July and August.

As per ASIC, as on 22 January 2019, the stock was shorted by more than 16.59%.
 
Further, the company has guided that it expects to achieve a production of 33kt of natural graphite for the Q4 2018 & 104kt for the full year of FY18 from the Balama Graphite Operations. The “weighted realized sale price” for the Q3 was ahead of the Q2, on account of the better Grade, flake size & product mix. Moreover, the Global electric vehicle sales grew phenomenally by 56% YoY during the Jan -Aug 2018 period and is expected to remain robust in the coming quarters.

The company enjoys virtual debt-free status with the current ratio of 3.95x as on 30 June 2018.

Li-Ion Battery demand trends (Source: Company Reports)
 
The stock price has fallen by 35.39% over the past six months as on 25 January 2019. However, as there is a growing opportunity in the electric vehicles segment & given the commercial production commencement at the Balama project with a debt-free status of the company, we maintain our “Hold” rating on the stock at the current market price of $2.010 (up 1.005% on January 29, 2019).

JB Hi-Fi Limited

Robust sales growth expected in FY19:JB Hi-Fi Limited (ASX: JBH) has provided its sales update for the Q1 FY 2019. The highest growth seen in their JB HI-FI Australia operations by 5.3%. It remained consistent with its earlier stated sales guidance of circa $7.1 Bn for the FY 2019. This would be contributed by its Australian, New Zealand and Good Guys division in the proportions of $4.75 Bn, $0.22 Bn & $2.15 Bn respectively.

For the FY 2018, the company’s sales grew by 21.8% to reach at $6.9 Bn on account of outperformance in their online platform, a full year contribution from the Good Guys, and robust hardware sales. The company’s EBIT was up by 14.50% on a YoY basis to reach at $350.60 Mn.

Going forth, for the FY 2019, the company has a target of opening five new JB Hi-Fi stores and two new good guy stores.
 
As per ASIC or Australian Securities and Investment Commission, as on 22 January 2019, JBH was shorted more than 16.24 %.
 
The company is trading at a TTM Price to cash flow multiple of around 9.20x, while the specialty retailer’s industry trades at 7.70x, which signifies that the company is trading at a premium.
 

JBH’s financial performance over the past 5 years (Source: Company Reports)
 
Meanwhile, the stock price has fallen over the past six months by 2.46% as on 25 January 2018 and is trading at reasonable PE multiple of 11.33x. Currently, it traded at close to 52-week low level. By looking at the trading level since past one year and consistent top-line growth over the past five years, we have a wait and watch view on the stock that trades at the current price of $22.29 (down 3.087% on 29 January 2019).
 

Metcash limited

Subdued operational performance due to challenging business environment: Metcash Limited (ASX: MTS) has disclosed its 2019 half year results for the period ended 31 October 2018. The group revenue rose by 2.20% & came in at $6.20 Bn. This marginal growth was witnessed on account of the sales expansion seen across all the pillars of the business offset by the subdued performance in the Supermarkets pillar due to challenging retail business environment.

The Underlying profit after tax was up 1.2% to $100.3m, this rise was seen on the back of increased synergies on account of the HTH acquisition which proved to be the key driver of the earnings in the Hardware pillar.

As per ASIC or Australian Securities and Investment Commission, as on 22 January 2019, the stock was shorted over 13.30 %.

Going forth, the company expects their food segment to witness the highly challenging environment for the rest of the year. The EBIT is anticipated to be hit by the ~8Mn of incremental investment in the supermarket segments directed towards the growth opportunities. The softening will continue in the hardware segment due to subdued construction activity.

 

MTS’s FY 2018 Financial Highlights (Source: Company Reports)
 
Meanwhile, the stock price has fallen by 3.45% in the past six months as on 25 January 2019. Thus, considering the subdued operational performance and the marginal improvements in the underlying profits on account of challenging environment, we believe to avoid the stock at the current market price of $2.47 (down 1.984% on 29 January 2019).
 
 

 
Orocobre Limited
Strong top-line growth backed by better product mix:Orocobre Limited (ASX: ORE) disclosed that a new Managing Director, Mr. Martín Pérez de Solay had taken the helm of affairs at the company, with effect from 18 January 2019. The appointment of Mr. Solay is on account of the retirement of outgoing Managing Director Mr. Richard Seville.
As per the quarterly report released for the period ended 31 December 2018, the Borax Argentina project, witnessed stellar production levels achieved during the period. Borax’s overall sales volume for the quarter rose by 14% to reach at 10,741 tonnes vis-a-vis the previous quarter. However, its sales have shown a negligible improvement due to a fall in the average price per tonne realised vis-à-vis the September quarter.
 
For the Olaroz facility, the company has posted sales of US$32 Mn for the quarter, down 20% from the previous corresponding period. This was on the back of a fall in the average price realization per tonne which came in at US$10,587/tonne on an FOB basis. Also, the gross cash margins came in at US$6,613/ tonne, down by 13% on pcp, on account of the lower average pricing realized.
 
As per ASIC or Australian Securities and Investment Commission, as on 22 January 2019, the stock was shorted over 13.25 %.
 

ORE’s sales Volumes (Source: Company Reports)
 
Meanwhile, the stock price has fallen over the past six months by 34.86% as on 25 January 2019 and is now looking attractive for accumulation in this price range. The Relative Strength Index is also visible in a positive territory with the price placed near the lower band of the Bollinger band. Thus, considering the top line expansion & the price trading at lower levels with the charts indicating a bullish scenario, we, therefore, maintain our “Buy” rating on the stock at the current market price of $3.180.
 

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