Two stocks on the upswing - Iluka Resources Limited and FlexiGroup Limited

• Expanding resource base:Iluka Resources Limited(ASX: ILU) stock surged over 6.9% on September 23, 2016 which seems to be driven by potential zircon demand to some extent. The group acquired Sierra Rutile Limited for a cash consideration of £215 million (A$380 million) plus A$80 million debt to strengthen their portfolio. While both the parties are cooperating for German Antitrust Authority’s review regarding the Merger during the Phase II Proceedings. ILU is conducting a pre-feasibility assessment for its Sri Lanka based Puttalam mineral sands deposits in the country. Initial investment is expected to be $540 million for this while the project might start by 2019. Iluka is conducting a pre-feasibility study over a two-year period. On the other hand, ILU stock fell over 15.8% in the last four weeks as the group reported a net loss after tax of $20.9 million for the first half of 2016 due to lower Mining Area C receipts and more resource development expenditure than planned coupled with lower prices for zircon.
• Recommendation: We believe long term investors could leverage the stock’s position, as we give a “Buy” at the current price of $6.48

• Revamping efforts paying well: FlexiGroup Limited (ASX: FXL) stock surged over 4.4% on September 23, 2016. The boost may be partially coming in from the growing demand for green bond market. Australian issuers like FlexiGroup and Westpac are seeking efforts to leverage the green bond market. The group reported a cash NPAT rise of 8% year on year (yoy) to $97.0m for FY16 while venturing into NZ Cards market via strategic acquisition of Fisher & Paykel Finance. The group’s Cards business is gaining pace via a further contract signed with Flight Centre Group. FXL is offloading their non-core businesses to focus on organic growth and accordingly the group’s revamp efforts of their Commercial finance business is showing better than estimated results. As a result, the shares of FXL rallied over 19% in the last three months (as at September 23, 2016).
• Recommendation: We give a “Speculative Buy” recommendation on the stock at the current price of $2.33

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