Davide Bosio

Director of corporate finance and WA state manager, Shaw and Partners

Cash is king, right?

Well, according to Bosio, it’s certainly had a good run in the sun.

Inflation, recessions and stifled economic growth have dominated investment fundamentals, sure – but given the swift increase of interest rates across ’23, Bosio reckons investors have been able to take advantage of cash as a genuine, no-risk investment class paying over 5% in some instances.

It’s the classic ‘parking funds’ scenario, but now there’s a whiff of lower rates in the air, Bosio says we may see investors adjust their asset allocation into higher risk/return sectors.

Beneficiaries? Bosio likes real estate investment trust funds (REITs) and listed investment companies (LICs) “who may have a funding cost (debt profile) which will improve in an environment where rates reduce”.

And because he’s dedicated a long, arduous life journey to being a gold bull, Bosio says the gold sector looks perfectly positioned for strength.

Here are his three picks for the Great Unwind:

RAMELIUS RESOURCES (ASX:RMS, $1.59, $1.8bn MC): “Strong balance sheet, new projects being developed to drive production and acquisitive team/management who have executed a consistent strategy to acquire targets whereby they can leverage discovery success and production ounces,” he says.

WAM CAPITAL (ASX:WAM, $1.53, $1.7bn MC): WAM is a listed investment company with a focus on small-to-medium sized businesses and a large, diversified portfolio.

“Weak performance in the current environment has resulted in a lower share price however the yield has been historically high and a significant attraction to income focused investors,” Bosio says.

CENTURIA CAPITAL GROUP (ASX:CNI, $1.72, $1.4bn MC): CNI is a real-estate investment trust fund with various listed alternatives including their Office and Industrial companies.

From Bosio’s point of view, CNI is a quality small cap property company with a strong track record of acquiring and managing assets.

Broker upgrades

Ord Minnett

Dropsuite (ASX:DSE, 28c, $194m): Founded in Singapore in 2011, Dropsuite is a cloud-based software platform offering backup, archiving, and recovery solutions for businesses.

The company specialises in protecting critical data used by Microsoft 365, Google Workspace, QuickBooks, and others. Its products are distributed via a network of around 4,000 IT reseller partners globally.

At the Inspire Conference 2023 in August, it copped a bit of a hit when Microsoft provided a first look at its 365 Backup and Archive solution. DSE’s price fell 22% on the day and has not recovered since.

Ord Minnett was not convinced.

“Based on our work and discussions with industry participants, we conclude that fears of any existential risk to DSE’s business are overblown. Accordingly, we believe the market’s scepticism is providing an opportunity,” it said.

It’s initiated a Buy rating on the stock with a price target of 33c, versus Thursday’s price of 28c, calling DSE “an undervalued, profitable growth story”.

Ord Minnett believes DSE operates at the intersection of three mega-trends – the rise of cybercrime; the migration of on-premise hosting to the cloud; and Managed Service Provider industry growth.

“These themes have long runways and will continue to act as positive tailwinds,” said the broker.

It’s also impressed with the fact DSE management has built a $150m business on just $43m of outside capital (of which only ~$18m has been spent), and delivered positive free cash flow in each of the past six quarters.

Taylor Collison

IPD Group (ASX:IPG, $4.66, $481m MC): A distributor of electrical infrastructure products to major construction and renewables projects nationwide, IPD “offers a ‘picks and shovel’ exposure to the booming electrical sector without taking on individual project or contract risks common to contractors and other listed players,” said Taylor Collison.

It’s an industry that’s booming, and Taylor Collison reckons there’s a strong argument we are still in early innings amidst a major infrastructure project upswing, as well as a transition toward renewable energy systems.

It’s put a 12-month price target of $4.80, versus Thursday’s share price of $4.69, noting recent expansions in supplier and customer bases, new product categories, and a material increase in market share.

Taylor also believes IPG’s management has an ambition to grow its share to multiples of the current level, and they are pursuing this with urgency.

“Their capital allocation record is excellent, and there’s a long runway to deploy capital to match the market leader’s offering. Shareholder alignment is high with management owning around 20% of the shares on issue.”

According to Taylor, IPD can grow rapidly through acquisitions.

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.