Aconex Ltd

ACX Details
· Recovery after a heavy sell down: Aconex Ltd (ASX: ACX) stock recovered over 5.5% on February 03, 2017 after falling over 48% in the last five days alone (as at February 02, 2017). The heavy sell off in the stock is mainly due to weak UK and the Americas performance even though other regions performance was on track. Brexit impact slowed the buying decisions for group’s customers in UK and Europe hurting the business in the region. US Presidential election and the volatile conditions during the president transition impacted the sales performance in the US slowing the decision-making process by the clients. As a result, the group expects their revenue in the range of $76.5 million to $77.5 million during the first half of 2017 while EBITDA is expected to be in the range of $6.3 million to $7.3 million, which is lower than their earlier estimates. Accordingly, the full year of 2017 estimates were also downgraded with EBITDA expectation of $15 million to $18 million against their earlier guidance of $22 million to $25 million.

· Recommendation: Despite heavy crash in the stock, ACX is still trading at an unreasonable P/E. We give an “Expensive” recommendation on the stock at the current price of – $ 3.08

Fortescue Metals Group Ltd

FMG Details 
· Decent December quarter performance: Fortescue Metals Group Ltd (ASX: FMG) stock fell over 4.6% on February 03, 2017 due to volatility in commodity prices. On the other hand, the group reported a decent December 2016 quarter delivering shipments of 42.2 million tonnes of iron ore on track with guidance. Cash production costs (C1) fell 7% to US$12.54 per wet metric tonne (wmt) during the quarter against the September 2016 quarter and fell 21% as compared to the same period last year. FMG even repaid a further US$1.0 billion of debt, cutting their gross gearing to 36%.  Moody’s enhanced the group’s ratings to Ba1 from Ba2.

· Recommendation: FMG stock generated over 52.9% in the last six months and rallied over 325.2% in the last one year (as of February 02, 2017). We believe that the stock is “Expensive” at the current price of – $ 6.45

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