Latest Research

Paringa Resources (PNL) - Construction Underway

Paringa Resources LogoParinga Resources (PNL) has commenced construction at Poplar Grove, the first mine to be developed at the Buck Creek Thermal Coal Complex. Excavation of the boxcut is underway in preparation of the slope (decline) construction to access the WK No. 9 coal seam. First washed coal production is expected Q3 CY18. All major contracts have been signed on a fixed price basis which should mitigate price and timing overruns. The Company has achieved ~US$1.2m cost saving on the development capex to date. Argonaut maintains a BUY recommendation with a $1.66 target price.

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Micro Caps - Results Preview

Argonaut Limited LogoOne thing common to our microcap universe is that investors need to look beyond near term financial performance to appreciate the potential. However we expect investors to selectively do so, particularly given the capital flowing into the microcap space. Our picks in our universe are currently CLX and GRB. For logistics business CLX, we believe FY17 will prove to be the trough year and that mid-cycle earnings support a higher share price. And brewer GRB is successfully executing to date its strategy to sell more proprietary product. We are upbeat on the potential for OEC’s drone business, but worry about timing and the drag from REMSAFE in the near term. TPS and VLT are still in the process of proving their business models. The former turned the corner in the latest quarter, but both are still close enough to our valuations to warrant hold calls.
Note: we exclude from this preview earlier stage companies under coverage for which we do not have financial forecasts (AMN, BOT, HZR, OBJ, OCC and SO4).

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Small Caps - Results Preview

Argonaut Limited logoSmall caps (ex-mining services) under coverage offer exposure to attractive sectors. GCS and SXE have significantly increased their presence on the construction-rich east coast. PGC sells products and services into the acute and aged healthcare space. PPC has a large, low-cost, country-wide property development portfolio focused on growth corridors. ASB should benefit from increasing naval spend, and TOX has exposure to the defensive waste management sector. We think there is more value apparent in GCS, PGC and PPC, while ASB, SXE and TOX are closer to our valuations.

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Mining Services - Results Review

Argonaut Limited LogoMarkets are expecting big things from mining services companies this reporting season. With good reason; a number of companies in this space are likely to demonstrate solid momentum into FY18. However, whether performance will be strong enough to support recent share price gains is not as clear, and we are finding it difficult identifying value in the stocks we cover. We feel anything other than outperformance may disappoint. From an operational point of view we like both ASL and ANG; they will very likely post solid results and indicate good growth in FY18. However, from a valuation perspective we think this is already reflected in share prices. PEA is a reliable performer, but the emerging competition in this space gives us pause. We would still avoid MCE; it will take time to diversify away from offshore drilling. GNG is currently the best investment option – FY18 will be a record year and, on our numbers, will support a dividend yielding >7%.

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Paragon Care (PGC) - Strong Vital Signs

Paragon Care LogoA strong 2H17 meant PGC met or exceeded guidance and expectations for the full year. Vital signs are good; revenue growth, margin expansion, and strong operating cash flow are a healthy combination. Evidence suggests the strategy to consolidate a fragmented industry is well considered. Businesses are being successfully integrated onto the growing platform, synergies extracted, and cross-selling opportunities targeted. We have upped our valuation to $1.12 (prior $1.05) on the back of a solid FY17 and believe there is both organic and acquisitive growth upside. Buy maintained.

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