SUNDAY ROAST: The small caps that lit a fire under Stockhead’s experts this week
“There is not much that you can see and touch that doesn’t have a hydrocarbon fingerprint on it.”
Garimpeiro’s not yet sold on any idea that renewables and storage will end the hydrocarbon industry. Mainly because it’s not just all about combustion engines – “Hydrocarbons,” he says, “remain critical to industries like fertilisers, plastics, petrochemicals and so on.”
But one fact remains – oil and gas fields are depleting, because that’s what oil and gas fields do. And very little money is being spent on finding and developing more, in part because it’s just not cool.
Also hard to find is an ASX stock which still fits Barry’s bargain barrel mould, and yet is not weighed down with Australian government regulation and/or legislation issues.
But wait – Conrad Asia Energy (ASX:CRD), which IPOed in October last year at $1.46 a CDI (1:1 over fully shares in the Singaporean company), hit $1.54 on listing and has settled now at $1.31.
Conrad’s big ticket item is a gas discovery it calls Mako, which it owns 76.5% of, in Indonesia’s west Natuna sea, with billions of dollars’ worth of existing infrastructure already connected and sending gas to Singapore and Malaysia.
It’s in shallow water, a low development price of about US$275m, and a gas resource potentially worth some US$2.4 billion.
Most importantly, the Indonesian government approves, and there are two more potential projects to tap offshore Aceh.
Prime Value Asset Management
In a tough year for small cap stockpickers, Prime Value Asset Management stood out far enough to get the Australian Equities – Small Cap gong at the Zenith Fund Awards. Ivers and Younger showed a knack for “outperforming consistently in tough market conditions” and making the most of volatile conditions to pick up quality stocks while avoiding temptation to go all-out defensive.
You’re in good hands here.
Younger said the Prime Value Emerging Opportunities Fund has an historical track record of outperforming 83% of months when the index has fallen.
“Protecting capital comes back to stock selection. Picking resilient companies with strong cash flow, recurring revenues and low debt levels drives performance in good times but also insulates somewhat during bad times.”
So who’s he backing to get through the start of 2023? Well, promise Mike and Richard didn’t get a spot here for picking News Corp (ASX:NWS). They genuinely believe the possible sale of Move for US$3bn “could be a significant catalyst for the stock given there is little value for Move reflected in the NWS stock price”.
They’re expecting Helloworld (ASX:HLO) to show strong momentum in their result, and think Domain (ASX:DHG) “represents very attractive value on a longer term basis”. It’s also a bit vulnerable right now.
“If you’re willing to take a longer term view it represents very good value,” Ivers says.
“Employment data continues to be strong, and so we don’t expect companies to have yet felt a change in sentiment,” Younger says.
Senior investment advisor Shaw and Partners
Finally, four copper and tech stock picks that could be seen as going cheap, with tech still more than a bit beaten down, and the red metal so far failing to live up to the transition hype.
(Experts say the world is going to need 700 million tonnes of copper over the next 22 years. That’s the equivalent of all the copper ever mined in history.)
Sandfire (ASX:SFR): “Our number one pick in the (copper) space,” Dawes says.
He likes SFR’s new international focus on the MATSA copper complex in Spain, and a 36% drop in its share price from 2018 highs.
Xero (ASX:XRO): “It is the biggest tech business in Australia,” Dawes says. “No matter what the economy is doing, Xero will do well because that accounting software needs to be there.
“In 2021 the stock peaked at $150 but it now sits around $80.”
Fineos (ASX:FCL): “We expect a good second quarter cash flow for Fineos,” Dawes says. “Their total accessible market is roughly $2 billion in the US which is a big target for these guys.”
Readytech (ASX:RDY): “(It) recently ceased discussions with Pacific Equity Partners regarding a proposed takeover, allowing it to focus on its own growth strategy.
“This has created an attractive buying opportunity – our expectation is that the stock price will re-rate to a valuation multiple.”
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.