MoneyTalks: Here are 3 ASX under-the-radar green energy plays set to ride the wave
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MoneyTalks is Stockhead’s regular recap of the ASX stocks and sectors that fund managers and analysts are looking at right now, and in this edition we’re looking at green energy.
Today we hear from Nic Brownbill, director at Perth-based JP Equity Partners.
One trend and ASX sector JP Equity Partners has focused on is the so-called green energy sector.
“We think the inevitable transition from scarce non-renewable resources is a significant mega-trend which is offering some clear potential for this year and beyond,” Brownbill told Stockhead.
While many ASX investors intrigued by green energy have focused heavily on hydrogen, Brownbill noted rare earths elements are important too, as are pure play renewable energy companies.
“Rare earth elements are critical to the transition to a cleaner future and now electric vehicle so we’ve been focused on companies that fit that profile,” he said.
“We’re of the strong belief that clean energy and demand for rare earths elements is a strong trend for the future, not a short term fad.”
Brownbill pointed to initiatives taken by several governments ranging from the US rejoining the Paris Accord to the NSW government investing $750 million in emission reduction measures over the next decade.
He says measures such as these will be the kickstarter for many green energy technologies and companies – including on the ASX.
“We see that as a real kickstarter to the sector and we see a number of companies that are set to benefit or potentially benefit from government pushes in that area.”
This company distributes power solutions including solar farms and battery energy storage systems.
Brownbill notes they’ve been increasing their footprint in recent months, just in parallel with the broader green energy sector on the ASX and around the world.
“Those guys have got a successful track record in delivering projects across Australia with blue chip corporate customers,” he said.
“They’re in a really good position, certainly in the right sector and there’s a long term opportunity in the clean/green energy sector.”
Brownbill pointed out MPower is aiming for an initial portfolio of 20 solar farm sites in coming years with an aggregate capacity of 100MWac of power which would deliver an estimate value of $150 million.
“We’re pretty excited about that company, they’re in the right sector, they’ve got track record of delivery, a very tight capital structure as well – the top 20 shareholders owning around 78 per cent of the company – so they’re certainly well positioned to have a very big 2021 and beyond,” he said.
“And with government grants and funding flowing into the sector companies like MPower are in the box seat to receive some of those government grants.”
Tao is a rare earths and mineral sands player which owns a titanium-zircon project in the USA. The purchase has seen shares surge over five times – from 12 cents to 80 cents – in the last six months.
An ASX titanium explorer may not stand out as a green energy play. But titanium is an important element in renewable technologies particularly wind and geothermal energy.
Brownbill noted the USA is the second largest consumer of titanium users globally and Tao’s project is just 15km from one of the largest pigment plants in the world, owned by NYSE-listed Chemours (NYSE:CC).
“The USA has undergone fast-paced growth in the electric vehicle and renewable sectors which requires rare earths for magnets and motor generators,” he said.
Brownbill says shareholders have a lot to look forward to the next few months. Upcoming catalysts include the outcome of offtake discussions and Phase III drilling results which will lead to a maiden JORC resource.
“There’ll be no shortage of news flow from these guys, they’re in the right space, they have the right board to lift the project as well and there’s only around 100 million shares on issue so it’s very tightly held and cashed up,” he said.
“They’ve got a great platform to go out and grow the market value of the company.”
ASX-listed Helix is in the copper space, a commodity not as obvious a candidate for the green energy boom as lithium but nonetheless important.
“The continued move towards electric vehicles is a huge copper driver,” Brownbill told Stockhead.
“In electric vehicles copper is a major component used in the batteries, wiring and charging stations – an average electric vehicle contains four times as much copper as regular vehicles.”
So, it goes without saying the electric vehicle boom will require a lot more copper. But with dozens of copper explorers on the ASX what makes Helix stand out to pounce on the green energy boom?
“These guys have a market cap of $10 million, [it] recently raised $3 million so the company is cashed out to explore its Australian project,” Brownbill said.
“They have a focus on their Collerina copper project in NSW. They’ve got an existing mineral resource of 2 million tonnes at 2 per cent (copper) and are currently exploring and ramping up their exploration program which is why they raised money recently.
“They’ve had Yandal Investments on the vehicle – so Mark Creasy is a shareholder.
“We think these guys are in the right sector, they’ve got an attractive valuation, an Australian project and directly leveraged to that copper thematic and relevance to the electric vehicle market.”
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.