Barry Fitzgerald

Garimpeiro Barry Fitzgerald says lithium exploration stocks continue to provide the lion’s share of excitement in the ASX junior mining and exploration sector.

“Come to think of it, make that the ASX generally,” Garimpeiro says.

Wildcat Resources (ASX:WC8) was the latest to feel the warm glow that comes from a surging share price in response to impressive lithium hits.

It rocketed 72% to 43c on Monday after reporting that latest drilling at its Tabba Tabba project in the Pilbara indicated the project had the makings of becoming a major discovery.

Now, it has to be said that the drilling program at Tabba Tabba was highly anticipated as being a success based on all of the preliminary reconnaissance and surface sampling that goes ahead of a rig being rolled up to drill a target.

So the stock has been on the march since Tabba Tabba was picked up in May. The 72% bump on Monday was the reward to those investors who read the early signals that Tabba Tabba could deliver in a big way.

Garimpeiro also spent the week looking for another lithium explorer and settled on Bulletin Resources (ASX:BNR) , which was trading mid-week at 8.2c for a light market cap of $24m.

A pending drilling program at Its Ravensthorpe lithium project in WA’s Great Southern region is highly anticipated all right. The project sits 12km southwest and along strike from Allkem (ASX:AKE) ageing Mt Cattlin mine, itself all of 2km from the town of Ravensthorpe.

On current planning, Mt Cattlin could come to an end in August 2027 unless life-extending resources are found to feed the existing 1.8mtpa processing plant. Bulletin’s project might well be the solution.

Yet Bulletin has to confirm the potential of its ground with the drill bit and establish a resource with the critical mass to support mine development.

But it is waiting on the final OK to start drilling. It has a granted exploration tenement, native title clearance, and independent flora and fauna advice that there would be no material impact from proposed drilling.

What’s missing at the moment is a ground clearance licence which is being held up while the EPA decides whether it will “assess’’ the project or hand it back to the Dept of Mines, Industry Regulation and Safety (DMIRS) to manage through the normal mining and exploration process.

Bulletin chair Paul Poli told Garimpeiro last week that the company thinks that when the EPA makes a decision, it will elect not to assess it, and it will hand it back to DMIRS to manage.

“And that is what we are waiting for with bated breath,’’ Poli said.

“We think that is not in the too distant future.’’


Goldman Sachs


Not quite small caps from Goldman Sachs this week but instead some interesting retail picks from the ASX.

Within the Australian discretionary retail space, Goldman Sachs continues to prefer Super Retail Group (ASX:SUL) over Premier Investments (ASX:PMV).

SUL is the owner of four brands: Supercheap Auto, rebel, BCF and Macpac. PMV meanwhile owns Just Group, and stakes in Breville and Myer.

Goldman Sachs believes SUL’s auto and outdoor categories are likely to be more resilient in demand when compared to mass-market apparel sold by PMV.

For JB HiFi (ASX:JBH) and Harvey Norman (ASX:HVN) meanwhile, the broker remains cautious on ongoing industry demand weakness, similar to the US.

Meanwhile, Goldman Sachs expects sales growth of the home improvement sector to remain largely stable, given home prices and transactions are resilient and the return of immigration should also help sustain demand.

Goldman Sachs says it like the looks of Bunnings, which is owned by Wesfarmers (ASX:WES) .

“That said, with already 60%+ market share in DIY, we believe that Commercial is the largest growth opportunity for Bunnings,” GS said.

“As such, for us to turn positive on WES (currently Neutral), we would like to better understand how Bunnings is building capability in Commercial to deliver consistent share gain,” the broker said in a note.

Onto global brands and Goldman Sachs says it’s encouraged by the effectiveness in successful innovation and newness stimulating sales – especially in mid-high end brands.

In this space, the broker continues to prefer Treasury Wine Estates (ASX:TWE)  and Breville (ASX:BRG) over A2 Milk (ASX:A2M) and Domino’s Pizza (ASX:DMP) – with both these latter stocks getting a Sell recommendation.

“TWE is focusing on brand and innovation including 19 Crimes rebranding, ONE by Penfolds, and multi-country of origin launches of Matua and Frank Family,” said the broker.

For Breville Group, brands like Barista Touch Impress, Vertuo Creatista, Joule Turbo Sous Vide and the Breville+ platform continue to shine, says GS.

“There continues to be strong demand and a penetration run-way for products that solve under-served demand, in less price-sensitive categories.

“In contrast, we expect A2 Milk to still be dragged by underwhelming demand in China and lower child births,” said the note out of GS.


David Wanis

Longwave Capital

Longwave are a quality-focused Investment Manager focusing on small caps. The firm’s approach combines human insight with information technology.

Chief investment officer, David Wanis, named Nanosonics (ASX:NAN) as a stock to watch.

“Nanosonics is a small-cap medical device company that specialise in disinfection of hospital devices,” Wanis said.

“The Trophon device is ‘their flagship’ product and that’s involved in disinfecting ultrasound probes in the hospital setting. It’s a classic razor and razor blade business model.

“Nanosonics sell the machine to the hospital but every year they’re selling consumables into that installed device. So over time they’ve had this very rapidly growing revenue base – product and consumables – that is recurring.

“This de-rating we are seeing of all stocks in small caps has presented opportunities to us in the repricing of high quality businesses.

“With Nanosonics we’re seeing an EBIT to sales multiple that approached 20 times now down closer to five times.

“With Trophon we can now see that in two years’ time that business should earn about $70 million of EBIT.”

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