Two stocks that fell – Santos and Sims Metal Management

• Positive drilling results: Santos Ltd (ASX: STO) stock fell about 5% on September 07, 2016 due to fall in commodity prices. The group’s operated drilling program along with Beach for South Australian Gas revealed that five?well appraisal and development campaign progressed on the central flank of the Big Lake field. The results have been found to be in line with pre?drill estimates. Further, the results confirmed down?flank extension of gas reservoirs.
• Recommendation: Given the exploration potential, we give a “Buy” recommendation on the stock at the current price of $4.20

• Cost control efforts:Sims Metal Management Ltd(ASX: SGM) fell over 3.3% on September 07, 2016 on the back of volatile commodity prices while it released its daily share buy-back notice. The stock fell over 5.12% in the last five days on the back of weak fiscal year of 2016 performance. The sales revenue fell over 26.3% yoy to $4,651.7 million in FY16 while underlying EBITDA declined over 29.8% yoy to $184.4 million. Underlying EBIT fell 59.1% to $58 million in FY16 due to falling prices and volumes. On the other hand, the group generated over $137 million in controllable costs savings during FY16 and is even improving efficiencies and accordingly cut headcount by 12%. The group cut volume break-even point by a further 17% to 7.8 million tonnes. SGM Strategic initiatives are on track which would deliver a better ROC in FY17 and FY18.
• Recommendation: We give a “Buy” recommendation on this dividend yield stock at the current price of $9.14

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