Australian Agricultural Company
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AAC Details
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Rise in beef sales coupled with better margins drove the stock higher: Australian Agricultural Company Ltd (ASX: AAC) extended its rally even on June 01, 2016 and rose over 3.7%. The group reported an overall sales revenue rise to $489 million in fiscal year of 2016, as compared to $ 338 million in fiscal year of 2015, driven by better beef sales which now accounts 88% of the overall revenues, against 79% in fiscal year of 2015. Management reported that they were able to enhance revenue and margin on the back of sourcing more cattle internally as well as cutting number of external processing facilities. The group also consolidated external backgrounding and feedlot operations and even upgraded Pell Station logistics hub. AAC analytics deployment is also driving their herd management by decreasing non-wagyu trading cattle and by enhancing the quality and value of breeding herd. There has been improvement in EBITDA, NPAT and revenue over the previous year. AAC stock rallied well in the last three months.
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Recommendation:We put a “Hold” rating at the current price of $1.795
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Improving balance sheet metrics (Source: Company Reports)
Mineral Resources Limited
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MIN Details
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More Lithium offtake arrangements for Mt Marion drove the stock higher: Mineral Resources Limited (ASX: MIN) recently reported that they are improving their Lithium offtake arrangements with Mt Marion Project. As a result, the stock rallied over 3.4% on June 01, 2016. Initially, Ganfeng Lithium and Reed Industrial agreed to take-or-pay 100% of the 6% Li2O, chemical grade spodumene concentrate produced from the Mt Marion Project. Given the positive metallurgical test work outcome, additional spodumene product could be added by a flotation circuit to the current beneficiation plant. Accordingly, Ganfeng agreed to expand the scope of the offtake arrangement for a further 80,000 tpa of spodumene concentrate in the range of 4% and 6% Li2O content. On the other hand, the stock delivered an outstanding performance this year and delivered year to date returns of 104.5% (as of May 31, 2016) placing the stock at higher levels.
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Recommendation: We believe that the stock is “Expensive” at the current price of $8.48
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