Latest Research

Northern Star Resources (NST) - Pogo - Is It A Go-Go

Northern Star Resources (NST) - Pogo -Is It A Go-GoNorthern Star Resources (NST) has announced the acquisition of the Pogo Gold Mine in Alaska from Sumitomo Metals Mining Co., Ltd (Sumitomo) for US$260m (A$347m). Pogo has a non-JORC Resource of 4.1Moz @ 12.2g/t Au and a Reserve of 760koz at 11.9g/t Au. The acquisition will be funded 50/50 from existing cash and via a fully underwritten A$175m placement to institutional investors at an issue price of A$6.70ps. Pogo is forecast to produce 250-260koz Au in FY19 at an all-in sustaining cost (AISC) of A$1,175/oz). Pogo is a quality acquisition and we see value upside in not only mine life extension, but the application of NST’s rigorous cost template and aggressive investment in exploration. Importantly, NST is maintaining a significant cash balance post-deal suggesting further M&A could be in the pipeline short term. HOLD maintained and target price of $6.77ps.

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CTI Logistics (CLX) - FY18 Results

CTI Logistics LogoThe acquisition of Jayde helped CLX deliver underlying growth at both revenue ($183m, up 19%) and EBITDA ($16.2m, up 7%) lines. Margins were weaker than expected though (largely reflecting the slow pace of WA recovery), and this is captured in our now more conservative forecasts. Positively, CLX exhibits greater geographic diversity, while consolidation in WA positions the Company to benefit from an eventual turnaround here. Our blended valuation has dropped to $1.35 (prior $1.50), impacted negatively by earnings adjustments, but positively by lower valuation risking. Despite a pullback in forecasts, CLX is still trading on undemanding multiples and we maintain our BUY call.

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Austal (ASB) - Australasia To Drive FY19

Austal LogoUS shipbuilding margins have improved in each of the last 4 halves, and averaged 8.5% in FY18 (well ahead of ASB’s 6-8% target and FY17’s 6.8%). With 60% of group revenue from US ships, and another 15% (and growing) from Support work, we feel this helps underpin earnings. Meanwhile, investment in new designs and technology, and expanding capacity in Australasia, sets ASB up to take advantage of growing demand in the commercial ferry market. We expect a turnaround from FY18 losses in Australasia to help drive up EBIT by 15% in FY19. BUY maintained on a $2.25 blended valuation (prior $2.10).

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Southern Cross Electrical Engineering (SXE) - Transformed

SXE has transformed itself in recent years, substantially reducing exposure to resources, increasing its scale and diversity, and improving its earnings visibility. This was reflected in a strong FY18 outturn, which delivered $348m revenue and $19.0m normalised EBITDA. With $300m locked away for FY19 and a healthy tender book and pipeline, SXE’s target of >$400 revenue in FY19 is achievable. Medium-term growth potential and a less risky business model is a positive.

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Independence Group (IGO) - FY'18 Results - Increasing Cashflow

Independence Group LogoIndependence Group (IGO) released FY18 full year results with record sales revenue of $778m, record underlying EBITDA of $339m and NPAT of $53, up 85%, 125% and 210% respectively. Revenue was in line with Argonaut’s forecast, however EBITDA and NPAT were higher primarily driven by a lower than predicted D&A charges and the sale of a gold royalty. The YoY increase in was primarily driven by the Nova hitting commercial production. Nova contributed $349m to revenue and $46m to NPAT. Higher ounces (up 8%) and a 5% increase in the gold price raised Tropicana’s NPAT contribution by $28m YoY. Long and Jaguar contributed $31m lower EBITDA in FY18, with the former now placed on care and maintenance and the latter divested to Copperhem in May 2018. Net debt decreased from $168m at the start of FY18 to $4m at financial year end ($139m cash and $143m debt). IGO declared a fully franked 2¢/sh dividend.

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