Caraxes knew he had this one in the bag at the weigh-in. Picture: Getty Images
Experts
It’s a new month and while there’s not much of a sound technical basis for it, it’s still a good marker to take a minute and, as they say in the classics, compare the market.
Also, there is a thing called momentum trading, so maybe it’s not altogether pointless.
For example, if you’d checked out the biggest risers on the ASX in October, you’d have struggled to miss a circa 700% pop for (formerly) tiny WA explorer WA1 Resources (ASX:WA1).
On October 26, WA1 reported it had hit a big chunk of niobium. Niobium makes steel better, but has growing uses in lithium-ion batteries, intelligent glass, solar panels, 5G tech, and nuclear energy.
And even if you’d come to the party later and got in on WA1 on November 1, you could have still enjoyed another 84% rise before it topped out on the 3rd.
So who’s got momentum longer term right now? I’m glad you asked, because Nadine McGrath has had a look at ASX stocks that hit high 52-week highs in October. That’s WA1 for one, obviously.
Parabellum Resources (ASX:PBL) entered the rare earths sector with an acquisition in August and released a positive update on its NSW exploration programs in early October. At an ATH of 51c, it’s up more than 150% since listing in December.
Battery-focused Syrah Resources (ASX:SYR) had a stellar October, as a $220m beneficiary of US President Joe Biden’s grants for companies working to deliver downstream lithium and graphite materials for US-made EV batteries. At $2.45, it’s up almost exactly 100% on this time last year. (What downturn?)
$62bn market cap Woodside Energy (ASX:WDS) is on a 12-month roll, at ATH and up 62% for the year, as well as Polymetals Resources (ASX:POL, up 42%) and Monadelphous Group (ASX:MND, up 39%).
But save your applause – unless they rescheduled your holiday – for the Flying Kangaroo, which on October 20 hit $6.02. The last time Qantas (ASX:QAN) soared to those heady heights was February 24… 2020.
RM Corporate Finance
This is a little complicated, but the best ones often are, so stay with us.
Venus Metals Corporation (ASX:VMC) has been dragged down in recent years, but Guy Le Page reckons that has a lot to do with its 30% interest in the Youanmi Gold Mine. For starters, it’s not been a great time for the sector.
But a recent Scoping Study of the project published by 70% partner Rox (ASX:RXL) didn’t help either. Punters were unimpressed with a pre-tax NPV of just over $300 million, but Le Page – a former geologist – reckons those punters failed to notice the study did not incorporate the unmined potential of the project.
Regardless, the important thing to note, according to Le Page, is that NPV of $300m converts to an after tax NPV of 35 cents per share for VMC (currently trading at 15c). Promising, right?
Even so, VMC “might be about to spice things up”. Le Page says it’s awaiting results from surface sampling from its 100% owned Mangaroon North project – potassium, thorium, and uranium – wedged between rare earths success stories Hastings Rare Metals (ASX: HAS) and Dreadnought Resources (ASX: DRE).
A rare earths explorer with a profitable goldie on the side? RM Corporate Finance likes it so much, it took a $2.1m placement, thank you.
Portfolio manager, Merewether Capital
‘Tis the season for M&A activity. Winchester said the big theme he’s seeing right now is takeovers among ASX tech stocks, with bids for beaten-down companies coming in almost daily.
Xref (ASX:XF1): The HR software’s core product is an automated reference-checking module but it is also expanding into other verticals and growing internationally.
“XF1 could find themselves as a strategic target for a larger HR software peer to flesh out their modules if they don’t have adequate reference checking or look to acquire XF1’s blue-chip customer base to potentially cross-sell other services too,” Winchester said.
Prophecy International (ASX:PRO): Two software solutions under one corporate banner – Snare, a cyber security monitoring and logging software, very topical thanks to Medibank Private (ASX:MPL). And call centre analytics software eMite, which saw a sharp spike in business when Covid-19 hit.
Winchester said PRO is recurring revenue and $18m ARR on a $55m market cap, so it “looks cheap”, especially given the growth and tailwinds.
8Common (ASX:8CO): an expense management software recently awarded more than $2 million worth of tenders under a Federal Government program.
The company has designed a Whole of Australian Government (WoAG) template, specifically for the GovERP program to provide greater functionality for Federal Government agencies.
“A bit different to the other two where I think even a generic private equity buyer would see the appeal in the valuation and growth,” Winchester said.
“That contract and relationship with the Federal Government could be seen as very strategically appealing, not just for peers in the expense management space, but any IT managed services business who work alongside the Government and is looking to offer more proprietary solutions.”
“With a $21m market cap, 8CO’s current ARR is not large at ~$3.5m but with the Federal Government contract in hand it likely grows to $7-8m in the next few years.”
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
Mining
IPO Watch
