South32 Ltd
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S32 Details
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Cost Management: South32 Ltd (ASX: S32) stock surged over 4.1% on June 21, 2016 even though there is no specific update from the group. On the other hand, the group’s earlier parent company, BHP Billiton reported today that they have been impacted by the challenging conditions in the Coal industry. This comment from BHP drove S32, as BHP comments further fortified South32’s decision to demerge from BHP. Although the stock faced challenges last year, the stock rallied over 48% during this year to date (as of June 20, 2016) driven by the group’s efforts to enhance its operational efficiency and recovering metal prices. Management recently reported that they would cut their controllable costs by US$300 million and capital expenditure by US $218 million for fiscal year of 2016. S32 has a cash position of US$18 million as of March 31, 2016.
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Recommendation: We remain bullish on the stock and give a “Buy” on the stock at the current price of $1.585
Production estimates for FY16 (Source: Company Reports)
Blackmores Limited
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BKL Details
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Higher levels: Blackmores Limited (ASX: BKL) stock surged over 3.7% on June 21, 2016 even though there is no specific update from the group. This increase could be due to the rally in the Chinese markets, which is the group’s major target market on easing Brexit fears. On the other hand, BKL has already rallied over 73.8% (as of June 20, 2016) in the last one year and has been correcting by 38.5% during this year to date. The recent Chinese regulations on the infant formula suppliers have also added to the dampened sentiment. The group is facing tight competition from other infant formula producers like A2 Milk who are aggressively expanding in the Chinese markets, leading to fight for market share. Despite the correction in the stock, BKL is still trading at a higher P/E and has a low dividend yield.
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Recommendation:We give an “Expensive” recommendation on the stock at the current price of $135.77
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