Latest Research

Sandfire Resources (SFR) - September Q Results

Sandfire Resources LogoSandfire Resources (SFR) released September Q results with 15.3kt copper and 10.7koz gold in concentrate, down 11% and up 10% respectively QoQ. Production was impacted by planned outages and elevated talc in ore which affected copper recoveries. C1 cash costs remained low at US$0.95/lb. During the Q, development commenced on the Monty underground with the first cut into the decline and first ore from this mine is expected in ~12 months. Cash declined $10m to $117m after a ~$20m dividend payment during the Q. While SFR has strong tailwinds from rising copper prices, negligible debt and low capital commitments, we remain concerned with the lack of exploration success in the Doolgunna region and the limited mine life. Due to share price gain we downgrade to HOLD (from BUY) with a $6.10 target.

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GR Engineering (GNG) - Thunderbird(s) Are Go

GR Engineering LogoGNG has been appointed as preferred tenderer for Sheffield Resources Thunderbird Mineral Sands Project, possibly adding upwards of A$270m revenue and A$25m EBITDA over the next two years. Whilst progression of the project remains contingent on equity funding and a native title appeal in the Full Federal Court, it potentially represents GNG’s largest ever EPC undertaking. The project is not expected to impact our FY18 forecasts, but encouragingly would start to backfill FY19’s order book and underpin the Company’s minerals division for the next two years. BUY maintained.

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Ausdrill (ASL) - Banging The African Drum

Ausdrill Limited LogoNew equity of $100m, a largely undrawn debt facility of $200m, year-end cash of $167m and forthcoming operating cash inflow places ASL in an exceptional position to win work in Africa, where opportunities are at “unprecedented” levels. ASL enters this new growth period having rationalised the business, and we believe net earnings can double over the next two years. We expect FY18 newsflow to reflect the upbeat outlook commentary. Our unchanged blended valuation of $2.20 reflects current sector interest and multiples, and suggests upside from the current price. Upgrade to buy (prior hold).

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Global Construction (GCS) - Sale Of Equipment Hire Division

Global Construction Services LogoGCS has entered into a conditional agreement with Onsite Rental Group to sell part of its equipment hire division. The terms of the sale are as yet undisclosed, but GCS has stated that the sale will be greater than the $23m total asset written down value. With the sale of the higher margin equipment hire business, we expect EBITDA margins to reduce. However, the business will be less capital intensive and will carry less debt on the balance sheet. We believe this to be positive for GCS as lower depreciation and interest charges should more than offset the EBITDA impact. GCS expects to be in a net cash position of circa $30m on completion of the sale. Balance sheet strength and an increasingly capital light business underpin our BUY call on a revised $0.90 valuation (previously $0.80).

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Gage Roads (GRB) - Name In Lights

Gage Roads LogoEffective January 2018, GRB has been awarded an exclusive beer and cider supply contract with the new Perth Stadium, a deal which will ensure exceptional brand and product exposure. Meeting strategic goals requires quality product and sound marketing; in our view ongoing awards and significant new deals tick these boxes and reduce execution risk. We maintain a buy call on a revised valuation of $0.078 (prior $0.066).

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